Loblaw Earnings: Profit Growth on Value Focus and Expense Discipline, Despite Labor Cost Pressure

We don’t plan any material changes to our CAD 124 fair value estimate after absorbing no-moat grocer Loblaw’s solid first-quarter results, with sales and adjusted earnings per share up 5% and 11%, respectively. The update reaffirms our view that Loblaw remains well-positioned to capture grocery and drugstore spending amid consumer belt-tightening in Canada. This is thanks to its popular discount banners, strong private-label offerings, and precision marketing via its PC Optimum loyalty program. We see no need to change our 2024 estimates for sales and adjusted EPS to increase by 4% and 10%, respectively. Our 10-year forecasts for a 3% sales compound annual growth rate and operating margins averaging 5.2% remain. Shares look overvalued.