Loblaw Companies Grows Profit by 10% in Q1 2025

Loblaw recently reported earnings, and let’s go over how they look, what they mean for the stock, and if it’s a good buy.

Earnings Remain Solid and Outlook Is Promising

Q1 ended on March 22, and the company’s sales totaled $14.1 billion, which was an increase of 4.1% year over year. What was of key importance was its same-store sales growth rate in its food business – that was up 2.2%. Same-store numbers tell you its organic growth, how well its operations are grow when comparing just the stores that were open a year ago, so it excludes the impact of new locations or acquisitions. At 2.2%, that’s a decent rate for a grocery retailer.

What was also solid was its net earnings, which totaled $503 million. That was up nearly 10%.

It was a good quarter, but what about the outlook, what does Loblaw see ahead? Despite the uncertainty with tariffs and a trade war with the U.S., Loblaw still expects its adjusted EPS to grow in the high single-digits this year. That’s a good sign. The company has some exposure to tariffs but it can adjust supply and focus on more Canadian-made products in order to adapt. And even if the economy is under worse conditions, people still have to eat, they still have to buy groceries. That’s why Loblaw is what you’d call a defensive stock, it’s a fairly safe investment to hang on to, even if the market may not be in such great shape. And that’s why while you may have been seeing the markets crash in the U.S., Loblaw stock is actually up 18% this year. It’s doing more than fine.

“Buy Canadian” Trends May Not Persist

One thing that’s helping Loblaw these days is the “Buy Canadian” movement with many consumers focusing on local products, as a way to help the economy and not support American-made products. But Loblaw’s CEO isn’t convinced this trend is going to last. While the company has been highlighting domestic products and making it easier for consumers to find Canadian products, he believes that it’ll ultimately come down to price and quality. And while supporting Canadian products may be ideal, if it costs a lot more, it can be difficult for that trend to stick. But, regardless of what consumers are buying, Loblaw is likely going to pass on price increases due to tariffs onto customers, so it’s not going to be a huge issue for the company one way or the other. As long as they are spending their money, the grocer is going to be just fine.

It obviously sells more than just groceries though, and a decline in an type of discretionary spending could still be problematic. That said, Loblaw, because it’s primarily in the grocery business, it’s going to be in a bit of a safer position than other retailers will be.

Is Loblaw Stock a Good Buy?

As mentioned, it’s been doing well. But here’s one thing I don’t like about it. It’s trading at 32 times its trailing earnings. That’s well above its five-year average of less than 22. You can see there was a big spike in value this year, likely due to investors looking for safe investments to hide into due to the tariff risk. And Loblaw hit off a lot of those checkmarks. It’s safe, it’s not a volatile investment, and it even pays a dividend that yields right around 1%.

The problem with buying a stock at a high valuation is that it may be due for a decline later on. Paying more than 30 times earnings for a retailer which is generating modest growth doesn’t look like a great option. The stock is trading not just at a 52-week high but also an all-time high. You’d have to be very bullish about its growth prospects to believe that it’s still a good buy at this level. People are hiding out in the stock for safety but I don’t think that’s going to last for long.

At some point worries about the valuation are going to kick in. There are also many other high-yielding stocks out to choose from than Loblaw, that pay much more than just 1% in dividends. At such a low yield, you’d have to invest six figures to collect $1,000 in dividends per year. It’s just not much of a compelling buy. If you want a safe investment, then go with something like the Vanguard FTSE Canadian High Dividend Yield – it pays 4%. Another option is iShares Canadian Select Dividend Index – it pays around 4.3%. ETFs give you a lot more diversification than just one stock.

Loblaw’s business should be just fine but there’s nothing terribly exciting to make this stock a must buy right now, or to justify its high valuation.