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Industry NewsRBC raises price target on grocers, Loblaw ‘best positioned’

RBC raises price target on grocers, Loblaw ‘best positioned’

RBC Capital Markets reportedly raised its price target on four Canadian grocery companies on Monday. Analyst Irene Nattel increased her target on Empire Co. Ltd. (EMP-A.TO) to $50 from $48, George Weston Ltd. (WN.TO) to $219 from $214, Loblaw Cos. Ltd. (L.TO) to $174 from $169, and Metro Inc. (MRU.TO) to $84 from $82.

Empire and Metro are rated Sector Perform. George Weston and Loblaw are rated Outperform.

“Central industry theme of value-oriented consumer behaviour continues in Q3, with reallocation of household budget that favours food at home, category trade down, and the discount channel,” Nattel says in a note to clients.

“Looking ahead, even as inflation begins to moderate, the outlook for household spending is muddled at best as pandemic-era mortgage loans begin to reset at higher rates, likely to further entrench consumer behaviour,” the analyst says.

“Against this backdrop, we reiterate our view that Loblaw is best positioned to benefit from the secular shift in purchasing patterns,” she continues.

“The combination of Loblaw’s discount-heavy store network, strong and leading share in private label offering, and unparalleled household penetration of its loyalty program should work in its favour as consumers seek value and relevant promotions to offset higher prices. In our view, this outlook is not appropriately reflected in relative valuations.”

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