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According to Google finance, the P/E ration for Loblaw is 575.15 as of today. I don't understand why this stock is has climbed so much over the last year (> 50%). Their net profit margin was 2.16% last quarter.

Is this high valuation because they're sacrificing profits in an attempt to agressively gain market share, or are investors just crazy?
 

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According to Google finance, the P/E ration for Loblaw is 575.15 as of today. I don't understand why this stock is has climbed so much over the last year (> 50%). Their net profit margin was 2.16% last quarter.

Is this high valuation because they're sacrificing profits in an attempt to agressively gain market share, or are investors just crazy?
I believe it is just some of the write downs and one time charges due to the acquisition of Shoppers. http://www.ctvnews.ca/mobile/business/loblaw-focusing-on-what-shoppers-want-as-company-posts-q2-earnings-loss-1.1929430
 

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I got in L.T yesterday as I think their earnings being released shortly will beat the street.

They have huge potential with Joe Fresh now being worldwide

Shoppers Drug Marts are always busy in my area.
...And for the same reason I bought Dollarama a few months ago; Canadians are in debt and are looking for places to save $$.
...Loblaws is such a place.
 

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I was looking at L a month ago but they've had 3 consecutive years of negative net income growth / negative EPS ( culminating in -90% in 2014). They keep raising their dividend as well (currently yield is like 1.5%) with a payout ratio of 295% (which seems crazy; number according to TDW). It makes me think it's not sustainable, even with the low yield.

I decided to pass as i) it was expensive and ii) have had at least 3 years negative growth. Perhaps though the negative income for 2014 related to the Shoppers acquisition, it'll interesting to see what their most recent earnings say.
 

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You probably should be looking at EBIT performance/free cash flow. Looking at net income can be misleading. The big write off of acquisition-related expenses is skewing the ratios currently.
 

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On an adjusted basis, P/E is around 18-19. Expensive, but at least better than EMP.A or MRU. Probably one of the cheaper consumer staples, but it traded well below an adjusted P/E of 15 for years and years; anyone buying now is definitely paying a premium for a company with very low underlying growth and very low margins that can disappear in a heartbeat.
 

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I know the superstores by my house are way less busy than they were 5-10 years ago, I get the feeling Costco and Walmart are taking a lot of their business. I can see them contracting rather than expanding over the next few years.
 

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Actually. .. they are the fastest groqing grocery chain in canada.. spending over a billion this year on new stores and currently have 50 scheduled to open.


http://www.theglobeandmail.com/report-on-business/loblaw-to-open-50-new-grocery-stores-as-part-of-12-billion-investment/article23354211/



I much prefer their parent company WN.TO (George Weston ltd) as they own loblaws, choice reits and Weston foods making them much more risk adverse to the CPG space.
Just because they are growing, that doesnt mean its a good thing. Just looking at their debt it has been significantly increasing since 2012. Actually more then doubled in two years. They did spend alot of money on Shoppers, but there is so much competition out there. I feel their grocery stores are quite expensive, and dont personally shop there. Good luck either way.
 

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Statistically they are the cheapest grocery store next to walmart in all available tracking metrics.

To each his own but personally id rather grow then the opposite..
 

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yes L has been good to my non registered holdings. Bought in nearly 13. It and a few other consumer staples are aimed to be about 10% of my holdings in this account, and recently I sold about 40% of my L holdings to take profits, and buy into other sectors to balance up.
 

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Loblaws just got caught dressing up outdated food and selling as new food.

Don't know if the revelations will hurt Loblaw sales much. Likely it isn't just Loblaws, but they are the ones in the headlines.
 

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I worked for Loblaw's once upon a time. This comes as no surprise. I don't know about others in this space but this is just one of many tricks. My favorite one was when they would turn the freezers off at night to save on power. Sometimes the ice cream would be soft and customers would complain. The reason given was it just got off the truck and was being put in the cooler.

Cheers
 

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We bought Loblaws many years ago at about $71.00. Never sold, watched it plummet and just collected small dividend. Finally it came back! Not making any money, but not losing much either. Expecting it to do quite well if our local stores are any guide. Walmart store is a disaster. Loblaws is much better. And they of course have SDM and No Frills for budget minded. I recently had my eyes tested and a flu hot while shopping at Loblaws! One stop shopping!
 

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Loblaw is now back at 2015 price levels. I was considering starting a position. I'm curious what holders of L think about its prospects.
 

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Groceries is not that lucrative of a business. Even if everything goes their way, it's not like they can rake in the profits. There is upwards wage pressure across many jurisdictions. There is some potential to a Amazon / online ordering disruption of the traditional business, but Loblaw is also trying out this space themselves. Potential drug pricing laws or government intervention (Ontario pharmacare or national pharmacare) can erode the pharmacy business profits. We own a small position mainly for diversification, without the expectation for any significant capital gains.
 

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Groceries is not that lucrative of a business. Even if everything goes their way, it's not like they can rake in the profits. There is upwards wage pressure across many jurisdictions. There is some potential to a Amazon / online ordering disruption of the traditional business, but Loblaw is also trying out this space themselves. Potential drug pricing laws or government intervention (Ontario pharmacare or national pharmacare) can erode the pharmacy business profits. We own a small position mainly for diversification, without the expectation for any significant capital gains.
Would them being tied in with Shoppers hold any value. Seeing as Shoppers and the Cannabis market may be closely tied for cannabis distribution. Or will this have zero effect on Loblaws?
 

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I think they have publicly said they want to participate in the medical cannabis retail market. They haven't given any intentions of going for recreational retail. Even if the total cannabis market is on the order of 8 - 10 billion dollars, when you consider how much of it will remain underground, will be grown personally, and the rest divided among so many channels, I wouldn't say cannabis retail is a game changer at all.
 

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In Ontario, the current government has said that they intend to keep the retail cannabis business to themselves. If they cut out private retailers across Ontario, that is a pretty big slice of the national market not accessible to Loblaw at all. I certainly hope that the liberals don't go through with their plans for a govt retailer -- but it is entirely likely. Even the PCs haven't distanced themselves from the policy very enthusiastically. I suspect all the parties are looking at it as a revenue windfall that they have to grab onto and keep the private sector out of -- like the LCBO.
 
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