Canadian grocery giant Loblaw (TSE:L) recently brought out its earnings, and with it, brought a surprising win. Loblaw managed to beat first-quarter revenue and earnings figures, but even this was not enough to drive investor interest. Shares of Loblaw were down fractionally in Wednesday morning’s trading.
It is no secret that Canadian households have reined in their spending, given the ongoing trade war with the United States and the resulting tariffs that followed. The uncertainty is making Canadian households gunshy about spending unnecessarily. But this is an opportunity for Loblaw to shine; people still need to eat regardless of economic conditions, and Loblaw has, pretty much, all the food a Canadian could ask for.
Thus, Loblaw’s lower-priced alternatives made headway with shoppers. Revenue came in at C$14.14 billion, which was up 4.1% against the previous year’s figures. That also beat analyst expectations, which came in at C$14.07 billion. Earnings also beat expectations, if only just: Loblaw brought in C$1.88 per share, which edged out predictions calling for C$1.87 per share.
Mostly Bad News on Shelves
Only days ago, Loblaw brought out a list of items that were likely to see price hikes as a result of tariffs. The good news in all this was that olive oil prices—which were apparently proving troublesome—were on the decline. They had been on the decline for the last year. The bad news, though, was that, apparently, everything one might choose to cook in olive oil was going to be more expensive.
Loblaw’s latest food inflation report that a wide range of staple goods—eggs, coffee, chicken breasts, pork, beef, and more—were all higher than they were this time last year. However, on a kind of positive note, the prices were apparently down from what they were three months ago in the previous quarter. This is likely small relief to Canadian households just looking to get a meal, but any relief is better than none.
Is Loblaw a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:L stock based on six Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 43.6% rally in its share price over the past year, the average TSE:L price target of C$209.86 per share implies 3.43% downside risk.
