Loblaw Companies Limited (L.TO)

loblaws is a digusting company taking advantage of Canadians.

its time for Trudeau to fine them to price gauging during Covid.

the fine should be in the billions.

secondly, Canadians desperately need ALDI and LIDL supermarkets to come to Canada.

everywhere ALDI and LIDL go prices fall by a lot.

Trudeau should fund their entry into Canada.

one day Loblaws will get what is coming to them.

Listening to the 2020 Q4 Shareholders call here are three items I picked up on.

1. CEO mentions they kept costs of groceries low and unchanged due to the pandemic. They will most likely start to hike up prices due to vaccine rollout/recovery and inflation with all the fed spending. This will affect the bottom line for sure.

2. CEO mentions spending a "significant amount of free cashflow for share repurchases". This will pump up the EPS in a big way.

3.CAPEX to make their retail segment safe is essentially done. So it will not affect the bottom line as drastically as it did in 2020.

Also the CEO predicts EPS growth for 2021 in the low double-digits. That's massive for a company like Loblaw. All great things.

My understanding of key highlights from the Q4 / 2020 year end reporting. These are just my opinions and interpretations, not any recommendations or verified facts (so do your research and make your own decisions):

In 2020, they paid out $180 million in increases COVID compensation, plus a $25 million bonus to store and DC employees! (I’m so thankful for the dedication and hard work of the front line staff to keep us fed and looked after!). COVID related costs were high for 2020 - totalling $445 million for the year. Yet financial results were strong. Good price/sales ratio, good price/cashflow ratio, decent P/E ratio, management is conservative in estimates, is realistic, and accomplished what they set out to do.

Q4 Net earnings per share increase of 25.7% over 2019 ($0.88 vs $0.70).

Adjusted EPS in 2020 was $4.26 vs. $4.12 in 2019. 2020 was a longer year - 53 weeks instead of the typical 52 weeks. However, even on the same 52 week results, EPS was $4.17 for 2020 (vs $4.12 for 2019). This is significant, considering the additional costs that were incurred through the year. As a retail small-businesses-owner myself, I know the great challenges and costs COVID presented.

In 2020, they repurchased, for cancellation, 13.3 million common shares at a cost of $888 million.

From the call - I was typing really fast, so verify against the transcript.:

Has the systems in place to administer 1 million vaccines per week once supplies are available. Ontario & Quebec are currently off the table, but those provinces may open in the future and it is anticipated that this is not a short-life-cycle vaccination program.

PC Optimum named one top 10 Canadian brands based on engagement.

Discount retail is growing (vs. conventional shopping). This means promotions are driving traffic more, rather than consumers make one, large, weekly trip).

Expect COVID costs to reduce and shopping to normalize as vaccine rollouts continue. Expect growth in beauty shopping as shopping trends normalize. Will continue share buyback program.

PC Card payment rates are strong and have higher confidence in repayments going forward - that losses won’t be as high as expected. And significant savings are being pursued through technology (automation in systems, price tags, self checkout). However, a significant increase in automated order picking is not expected in 2021.

They won’t give a figure, but are striving for low double-digit EPS growth (10-15%) in 2021 through cost reductions, share buybacks, continued trajectory of normalized shopping trends, use of loyalty data. However, there is uncertainty due to COVID.

Huge increase in e-commerce in 2020, but doesn’t expect to see that same rate of growth in 2021. However, e-commerce will continue to grow and be a significant part of future trends. They will work on increasing online cart sizes through suggested complimentary products.

Launched PC Health App in September 2020 to be a first, one-stop location for healthcare & pharmacy. Has been positive and expect growth in this area.

Very strong earnings....surprised this has been selling off last few months:
- 4th quarter revenue +7.1%
- e-commerce up 160% (full year 178%)
- Net Earnings +22%
- $350m of shares were bought back....more to come
- absorbed $450M of covid expenses
- Linited forward visibility due to covid but they did say they expect forward EPS would grow “low double digits”. (I will take that!!)
Looking forward to hearing more about their vision for connected heat care (massive opp) and how they leverage PC optimum and PC financial going forward....

I got in at 63.52. Now let me explain. Yes this stocks momentum is pretty non existent right now. Its going between 63-65 over and over. Now thats not always a bad thing. A stock that doenst move much but pays a dividend is pretty safe in terms of appreciation/depreciation. I like this stock now and long term. Im not a fan of how the price is not gaining in a while but i still love i get dividends in the mean time. I see this stock as a safe haven for a dividend, with lots of upside to going back to 70+. Now day traders wont like this stock as its not a big mover. But to real investors and people who like to beat inflation, this is a great stock aka savings account to park some money.

I think this company is pretty smart with offering world elite mastercard with no annual fee and great loyalty system. I’m one of the customers who switched to PC Optimum with their credit card and I think its great. I don’t have to wait a whole year to use up points and you gain points pretty quick. Shoppers opens late so I can get meds late too which is really convenient. Super store has a lot of neat products other than just food which is really nice. I think they’re spending a lot of money and resources to fight off Amazon when they get bigger with groceries in Canada. I was also contacted from Loblaws for a pilot program with monthly or yearly subscription like Amazon Prime. It offers many cool benefits including $99 credit a year from PC Travel if you subscribe yearly (also $99). If you want to travel every year, that alone might be worth it as there are other benefits like free grocery pickup, more points for organic food, baby products, etc. Overall I really think Loblaws is one of the more competitive grocery chain in Canada and I think personally they can fight off Amazon.

It wouldn’t surprise me if there’s a bit of a pullback in the price of the stock in the next few weeks, before it continues to surge ahead. 

However there is lots of great potential in the future of this company.

1.  Shoppers Drug Mart - vaccinations, medical cannabis, a growing trend of higher margin sale items like beauty.

2. Automation (to reduce costs, e-commerce, Growing trend of a return to discount retailers, share buyback program, lower/stabilized Covid expenses in 2021, management that has a history of accomplishing what they say they’re going to - all giving a positive benefit to EPS.

3. PC optimum rewards program, PC health app, PC financial - all strengthening customer loyalty and engagement.

Great investment and defensive foundation in the portfolio, in my opinion. Haven’t heard from @i like your money or @ Mr. Bro in a while...