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Key Takeaways for George Weston Stock
- Loblaws faces rising food and labour costs and fierce competition
- George Weston is also an investment in a symbiotic relationship between Loblaws and real estate with Choice Properties
- We see this as a no-moat business, although Loblaws still maintains the most expansive retail network in Canada
Andrew Willis: Recently, we’d talked about how high grocery prices didn’t necessarily mean grocery store stocks made great investments at the moment. Investing in Loblaw stock, for example, meant more direct exposure to rising food and labour costs…
But investing in the most expansive retail store network in Canada, in addition to properties that house dollar stores, restaurants and apartments that benefit from a relationship with Loblaws, is a different matter - and it’s led to higher earnings per share since 2021.
Invest in Grocery Stores and Leverage the Land
Investing in George Weston stock (WN) versus Loblaws stock is more like investing in Loblaws and its wider ecosystem with Choice Properties. Senior equity analyst Dan Wasiolek did point out that Choice Properties has made a concerted effort to diversify outside of that ecosystem, with industrial and commercial properties… although Loblaws probably makes for a great tenant.
For Morningstar, I’m Andrew Willis.
George Weston Bulls Say
- Loblaw’s scale as Canada’s largest grocer confers procurement advantages and also bolsters the firm’s digital strategy through greater transactions and volume.
- Choice benefits from stable tenancy and cash flows at Loblaw, which enhances its financial flexibility to further diversify its real estate footprint, supporting its industrial property endeavors.
- The sale of Weston Foods provided George Weston with CAD 1.5 billion to return to shareholders.
George Weston Bears Say
- Loblaw competes in a commoditized industry that necessitates persistent reinvestment.
- As Choice seeks to expand to other areas of commercial real estate, it may experience lower occupancy rates that could hamper margins.
- The company is exposed to supply chain and inflation headwinds that linger from the pandemic and the humanitarian crisis in Ukraine.