George Weston Earnings: Focus on Value Offering Fuels Top Line; Little Room for More Price Increases

We don’t plan any material changes to our CAD 168 fair value estimate for no-moat George Weston after absorbing mixed 2023 results, with sales growth of 5.4% edging our estimate (5.2%), but the adjusted EBITDA increase of 6.1% missing our 8.5% projection. We think main subsidiary no-moat Loblaw (over 90% of George Weston sales and EBITDA) has preserved its competitive standing in grocery and pharmacy retail by focusing on private-label offerings, discount formats, and wellness-focused products and services while investing prudently in digital marketing, loyalty programs, and e-commerce capabilities. Meanwhile, the disciplined approach of its other subsidiary, Choice Properties, in maintaining a high-quality client base of necessity-based retailers and logistics providers has helped maintain steady revenue and income growth despite a soft macro backdrop. We see no need to change our 10-year projections for low-single-digit sales compound annual growth rate and a 6% adjusted operating margin on average and view shares as overvalued.