Grocery and retail giant Loblaw Companies Limited (TSX:L) reported its first-quarter earnings last week. It was a fairly strong quarter with sales totaling $14.1 billion, up 4.1% year over year. Same-store food sales rose 2.2%, signaling steady organic growth. Net earnings climbed nearly 10% to $503 million, and the outlook remains encouraging as management expects adjusted EPS to grow in the high single digits for the full year. These results highlight Loblaw’s resilience as a solid defensive play in an uncertain market, especially as consumers continue spending on essential goods like groceries.
The company has benefited from the broader “Buy Canadian” sentiment, although its CEO remains skeptical about the longevity of that trend. While Loblaw emphasizes Canadian-made products, leadership believes price and quality will ultimately dictate consumer choices. The company is also prepared to adapt its supply chain to mitigate tariff impacts, likely passing on higher costs to customers without significantly affecting demand. As a grocery-heavy retailer, Loblaw remains in a safer position than peers exposed to more discretionary spending.'
Despite strong fundamentals, the stock itself looks expensive. It currently trades at 31 times trailing earnings, well above its five-year average of under 22. That premium valuation reflects investors crowding into safe-haven stocks amid economic uncertainty, but it may not be sustainable. Loblaw’s dividend yield sits around 1%, far below other income-generating options. While the business remains solid, paying such a high multiple for modest growth and low income potential limits the stock’s appeal.
Loblaw is well-suited for conservative investors seeking a defensive holding, but growth or income-focused investors may find better value elsewhere.
