Loblaw Companies (TSX:L) has been on quite the wild ride over the last few years. From the pandemic and subsequent climb, to the rise of inflation and interest rates followed by a fall, it can be hard to know what to make of the stock.
That’s especially true since Loblaw stock is now about where it was at this time last year. So with shares back to where they were, what should investors be thinking about this stock?
A Canada-wide company
Loblaw stock tends to be the first stop for investors interested in grocery chains in Canada. Why? Because it’s the largest of the batch. The retail company spans across Canada, with the grocer holding a number of companies under its banner. From Shoppers Drug Mart to No Frills, you can find a Loblaw company in pretty much any city.
What’s more, since the acquisition of Shoppers, Loblaw stock has been adapting to what its consumers want and need out of a retail and grocery stock. Instead of just food, it now supplies practically everything you’ll need for a home. From pharmacies and food to clothes and home supplies, these are lucrative means of bringing in revenue.
Yet, key to the company’s future will be creating value. Loblaw stock isn’t known to be a cheap place to shop. And if you go to a No Frills or Shoppers, you’ll find their focused on their banner options. Food at No Frills, pharmaceutical products at Shoppers, with perhaps a smattering of other stuff available. And honestly, you can still find cheaper options elsewhere.
Renewed focus
These expensive options led to many Canadians choosing to shop elsewhere instead of Loblaw stores over the years. Canadians are conscious about what’s in their wallets, and it’s going to lead Loblaw to hopefully change their price focus. Instead of creating a place where shoppers want to stay, they’ll need to create a place where shoppers want to shop for the best deal.
This could also lead Loblaw, however, to make more investments in services that will also be needed by Canadians in the near future. This could include primary care, rehab services and more, according to analysts. These revenue streams would prop up the company as a onestop shop for health, wellness, and everyday needs.
Furthermore, the company has the chance to seriously up its game in terms of its omnichannel capabilities. Its loyalty program has been a strong place to do this, with an online portal and mobile app providing support and click-and-collect services. Add in that the company could still expand more out in the west of Canada. There could be some strong growth still to come.
What’s next
The biggest challenge in the near future is going to be for Loblaw stock to adapt to what is needed by its consumers. Furthermore, there is a big question mark surrounding what the new chief executive officer is going to change.
Even so, Loblaw is a strong stock that isn’t going anywhere. Yet, is it a deal? As the largest retailer in Canada, with shares only growing over the last few decades, it does look to be a deal trading back where it was last year at this time. And should it be able to make a strong shift to value for its customers, more growth should be on the way quite soon.
And with a strong loyalty program and expanding locations, Loblaw stock does indeed seem like it could be a deal on the TSX today. Especially while trading at 18.2 times earnings as of writing, and a dividend yield at 1.6% to boot.
