Loblaws Companies Ltd.
Canada Research
Published by Raymond James Ltd
January 16, 2012
Loblaw Companies Ltd.
L-TSX
Company Report - Initiation of Coverage
Kenric S. Tyghe MBA | 416.777.7188 | kenric.tyghe@raymondjames.ca
Sara Kohbodi CFA (Associate) | 416.777.4916 | sara.kohbodi@raymondjames.ca
Rating & Target
Consumer Products & Retail
Loblaw’s Loyalty Target(s)
Event
We are initiating coverage of Loblaw Companies (L-TSX) with an Outperform rating and a $44.00 target price.
Action
We recommend investors accumulate shares of Loblaw at current levels.
Analysis
Loblaw, the market leader in the increasingly competitive and concentrated
Canadian grocery retail space has, in our opinion, been competing with one hand tied behind its back, as a function of its massive and ongoing restructuring initiatives. These initiatives are (finally) nearing completion, and Loblaw will have its first store go live in late 2012, with the rollout completed by 2014.
The scheduled completion of this critical but arduous journey dovetails with a step-function change in the competitive dynamics of the Canadian retail landscape (of a magnitude not seen since the arrival of Wal-Mart) that is the
2013 arrival of Target. The Loblaw of tomorrow (not a day too soon) is, in our opinion, better positioned and will be better able to make a target of Target rather than simply be a target, than at any point in its history.
Within an ever more voraciously competitive landscape, every basis point of market share necessarily counts, highlighting the strategic imperative that, we believe, is a complete rethink (not simply refresh) of Loblaw’s loyalty offering.
The reality, in our opinion, is that not only is Loblaw a distinct laggard in the
Canadian grocery loyalty space, but also that despite recent competitor launches, the Canadian grocery loyalty space remains in the dark ages (relative to the industry leaders in the UK (Sainsbury’s) and Europe (DIA)). The opportunity for
Published by Raymond James Ltd
January 16, 2012
Loblaw Companies Ltd.
L-TSX
Company Report - Initiation of Coverage
Kenric S. Tyghe MBA | 416.777.7188 | kenric.tyghe@raymondjames.ca
Sara Kohbodi CFA (Associate) | 416.777.4916 | sara.kohbodi@raymondjames.ca
Rating & Target
Consumer Products & Retail
Loblaw’s Loyalty Target(s)
Event
We are initiating coverage of Loblaw Companies (L-TSX) with an Outperform rating and a $44.00 target price.
Action
We recommend investors accumulate shares of Loblaw at current levels.
Analysis
Loblaw, the market leader in the increasingly competitive and concentrated
Canadian grocery retail space has, in our opinion, been competing with one hand tied behind its back, as a function of its massive and ongoing restructuring initiatives. These initiatives are (finally) nearing completion, and Loblaw will have its first store go live in late 2012, with the rollout completed by 2014.
The scheduled completion of this critical but arduous journey dovetails with a step-function change in the competitive dynamics of the Canadian retail landscape (of a magnitude not seen since the arrival of Wal-Mart) that is the
2013 arrival of Target. The Loblaw of tomorrow (not a day too soon) is, in our opinion, better positioned and will be better able to make a target of Target rather than simply be a target, than at any point in its history.
Within an ever more voraciously competitive landscape, every basis point of market share necessarily counts, highlighting the strategic imperative that, we believe, is a complete rethink (not simply refresh) of Loblaw’s loyalty offering.
The reality, in our opinion, is that not only is Loblaw a distinct laggard in the
Canadian grocery loyalty space, but also that despite recent competitor launches, the Canadian grocery loyalty space remains in the dark ages (relative to the industry leaders in the UK (Sainsbury’s) and Europe (DIA)). The opportunity for