Loblaw Cos. Ltd.

Overview Key strengths Key risks Largest Canadian grocery retailer, with significant exposure to discount format Mature and commoditized grocery industry in Canada Well-diversified mix of retail banners and private-label brands support business strength Inflationary environment and supply-chain disruptions could pressure profitability margins Stable EBITDA and strong free operating cash flow (FOCF) support credit metrics Large shareholder distributions limits prospects for deleveraging Loblaw Cos. Ltd. is the largest Canadian food retailer, with a market share of 23%-27% (based on Statistics Canada data). With consumer mobility increasing this year, S&P Global Ratings expects consumer shopping patterns will normalize, with food-at-home trends reverting to lower levels, but still above pre-pandemic levels as people resume both dining out as they return to work and

...In spite of increased customer mobility and food away from home trends, Loblaw's operating performance should remain robust post-pandemic. Loblaw Cos. Ltd. is the largest Canadian food retailer, with a market share of 23%-27% (based on Statistics Canada data). With consumer mobility increasing this year, S&P Global Ratings expects consumer shopping patterns will normalize, with food-at-home trends reverting to lower levels, but still above pre-pandemic levels as people resume both dining out as they return to work and school. With two-year stacked same-store sales (SSS) at a modest 2.2%, we note an increase in traffic offset by drop in basket size as the grocery demand from COVID-19 pandemic abates; however, we note that discount banners benefited post- pandemic as restrictions have lifted and consumers return to multiple grocery trips. In addition, higher levels of food inflation (about 7.7% in first-quarter 2022 and 9.7% in April based on Statistics Canada) is likely to persist through...

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