Loblaws Gets a New CEO: What to Know

With Galen Weston stepping back as chief executive, senior equity analyst Dan Wasiolek shares his thoughts on Loblaw stock now. 

Dan Wasiolek 18 April, 2023 | 2:16PM
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No-moat Loblaw (L)’s search for its future CEO has concluded with the hiring of Per Bank, who will take the helm by early 2024. We think Bank is a great fit and don’t expect any dramatic changes to capital allocation, with ongoing investment in growth areas, including connected health, e-commerce, loyalty, and private label. Our sanguine stance is supported by Bank’s experience in his current role as CEO at Salling Group, which he has held since 2012. Like Loblaw, Denmark-based Salling is both the leading grocery chain in its home country and family-owned. Further, Salling has been investing beyond traditional grocery, as it has expanded into e-commerce, loyalty, and sustainability.

We have confidence that Loblaw will continue similar investment plans with the hiring of Bank, something we see as prudent. We like its expenditures in digital capabilities, as we believe this helps drive traffic. We also have a favourable view on Loblaw's moves toward expanding its pharmaceutical practice. From our vantage point, recently acquired Lifemark Health Group and walk-in clinics utilizing excess space within its superstores dovetail well with Loblaw's existing services in drug retail and should drive further foot traffic. We are maintaining our CAD 106 fair value estimate, leaving shares slightly overvalued. We plan to maintain our Standard capital allocation rating.

bulls Bulls Say

  • Being Canada’s largest grocery retailer, scale benefits accrue to Loblaw, which include advantageous procurement and more control over its distribution apparatus.
  • Shoppers Drug Mart gives the firm exposure to favorable urban population dynamics and adjacent opportunities, such as pharmacist-led health clinics.
  • With the PC Optimum Loyalty Program and PC Financial Mastercard, the firm is building a formidable digital ecosystem that should facilitate deeper customer engagement, as well as analytical insights to reinforce its positioning.

bears Bears Say

  • We believe Loblaw’s private-label program has required material investment, which should continue to be the case as it continues to strive for differentiation.
  • With a predominantly unionized labor force, risks of increased wage pressure will likely remain ubiquitous across the firm’s territories.
  • Despite being less exposed than peers, Loblaw's further push into the pharmaceutical space raises greater regulatory risks.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
George Weston Ltd140.26 USD-2.01
Loblaw Companies Ltd154.64 CAD-0.26Rating

About Author

Dan Wasiolek

Dan Wasiolek  Dan Wasiolek is a senior equity analyst for Morningstar.

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