George Weston Earnings: Consumers Stock Up Their Baskets With Value Items at Loblaw; Shares Cheap

After digesting no-moat George Weston's fiscal 2023 second-quarter results with little to unpack—as Loblaw's results (99% of sales) were announced last week—we don't plan a material change to our CAD 179 fair value estimate beyond time value. With shares sliding nearly 15% since its first-quarter earnings (May 9)—which strikes us as curious, given Loblaw's continued strength in both its retail and drug arms—we see opportunities for investors to stock up on this name. Despite the competitive landscape of the Canadian grocery space, we believe Loblaw's robust private label and personalized loyalty benefits, along with the operator's ongoing efforts to optimize its store network and distribution centers, should help it maintain its market-leading position. Thus, our long-term prospects for low-single-digit average top-line growth and mid-single-digit operating margins remain intact.