Loblaw Earnings: Strategic Investments Support Growth Amid Promotional Environment; Shares Rich

No-moat Loblaw's fiscal 2024 fourth-quarter results were mixed, as sales of $14.9 billion lagged our $15.3 billion assumption, but $2.20 in adjusted earnings per share exceeded our $2.13 forecast. Factoring in these results, along with guidance that corroborates our high-single-digit percentage increase for fiscal 2025 adjusted EPS growth, we don't plan any material changes to our CAD 135 fair value estimate but continue to view shares as overvalued. While we acknowledge Loblaw's extensive footprint and strong value appeal position it well to attract consumers, we believe investors may be overestimating its profit trajectory. We surmise fierce price competition will constrain gross margin expansion, while ongoing investment will be necessary to remain competitive in an industry with no switching costs, underpinning our no moat rating.