Statistics Canada recently revealed that inflation hit 8.1% in the month of June. As in previous months,
rising gasoline prices were the most significant driver. However, food prices have also played a big role
in the surging inflation rate. This environment has been hard on consumers, but grocery retailers have
been able to gorge on sales growth.
Loblaw Companies (TSX:L) is the largest grocery retailer in Canada. Its shares have climbed 16% in 2022
as of close on July 28. The stock has shot up 42% in the year-over-year period.
This company released its second quarter 2022 earnings on July 27. Loblaws delivered revenue growth
of 2.9% to $12.8 billion. Meanwhile, adjusted EBITDA climbed 9.3% year-over-year to $1.49 billion.
Moreover, adjusted net earnings were reported at $566 million or $1.69 per diluted share – up 22% and
25%, respectively, from the previous year.
Chairman and President Galen Weston recently stated that food price inflation was showing signs of
stabilization in the middle of the summer season. That is good news for consumers and retailers alike as
sky-high inflation rates could contribute to considerable instability. On the other hand, the Bank of
Canada (BoC) has warned Canadians to expect inflation around 8% for at least a few months.
Shares of Loblaws currently possess a favourable price-to-earnings ratio of 20. The stock still offers a
quarterly dividend of $0.405 per share. That represents a modest 1.3% yield. Loblaws still has room to
run in this inflationary environment.
