Loblaw Companies (L.TO) remains on a good footing to deliver against its financial framework of 8% to 10% EPS growth, writes National Bank analyst Vishal Shreedhar after meeting with Loblaw management including with chief financial officer Richard Dufresne.
Management is confident in its ability to navigate the current macro backdrop, as second-quarter trends so far appear to be stable q/q (top and bottom line) and the consumer backdrop seems resilient.
Loblaw also expressed confidence in its real estate growth plans, suggesting it is gaining market share, particularly in the discount grocery segment. T&T, whose stores in the U.S. are beating expectations, is said to have a long growth runway.
In Shoppers Drug Mart, generic versions of semaglutide, commonly known under the brand name Ozempic, are expected to be positive (higher gross margin rate and higher volumes to offset lower prices). Loblaw also aims to roll out a new store concept for Shoppers with focus on mid-tier beauty.
Shreedhar is keeping an outperform rating and $67.00 price target on the shares of Loblaw. "Given an uncertain macro backdrop, we favour proven staples such as L to add resiliency to portfolios."