Loblaw Cos. Ltd.

The stable outlook on Loblaw reflects S&P Global Ratings' expectation that consolidated adjusted debt-to-EBITDA will be in the low-to-mid 3x area for parent George Weston Ltd. (GWL) over the next two years, supported by Loblaw's steady profitability. Our rating on Loblaw, which is considered a core member of the GWL group, is limited by our assessment of GWL's group credit profile that is determined by the consolidated business and financial risk assessments. We expect Loblaw to maintain debt-to-EBITDA at about 2.75x over the next two years, on a stand-alone basis. We could lower our rating on Loblaw within the next two years if we lower our issuer credit rating on GWL. We could revise downward our stand-alone credit profile (SACP)

...Largest food retailer in Canada with a good portfolio of stores. With 1,085 corporate and franchise food retail stores along with about 1,335 associate-owned Shoppers Drug Mart stores, Loblaw Cos. Ltd. has significant geographic diversity with about 30% of Canadian food market share. At the same time, with the well-recognized banners and food retail stores catering to both discount and premium customers, Loblaw is able to service the full spectrum of customers. Despite strong competition, EBITDA margins remain stable. Similar to the U.S., competition in the Canadian food retail market is intense. Not only are U.S. players grabbing market share (Walmart Canada Corp., Costco Wholesale Corp., Amazon's Whole Foods) but industry headwinds (including minimum wage increases and freight increases) are also pressuring topline and EBITDA growth. However, S&P Global Ratings project Loblaw to increase EBITDA in the low single digits and maintain margins....

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