Loblaw Companies - CEO, Galen Weston
CEO, Galen Weston
Source: Arrell Food Institute
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  • Loblaw Companies (TSX:L) has withdrawn its outlook for 2020, despite reporting a spike in sales during March
  • Loblaw is Canada’s largest retailer
  • The company said that demand for essential items was significantly increased as a result of COVID-19
  • As a result, Loblaw ramped up its investments across its major operational areas
  • Loblaw Companies (L) is currently down 0.46 per cent to $74.35 per share, with a market cap of $26.85 billion

Loblaw Companies (TSX:L) has withdrawn its outlook for 2020, despite reporting a spike in sales during March.

As Canada’s largest retailer, the company provides groceries, pharmaceuticals, apparel, and financial and wireless mobile services across the country. It employs approximately 200,000 full and part-time staff through over 2,400 locations nation-wide.

According to a news release dated December 20, 2019, Loblaw was looking to invest approximately C$1.1 billion in capital expenditures during 2020.

At the time, the key focus was on continued incremental investments in infrastructure and support for its strategic growth areas. Loblaw also said that it would work on delivering process and efficiency improvements in order to offset increasing costs.

A “significant portion” of free cash flow was also pledged to return capital to the company’s shareholders via a share repurchase plan.

However, citing the continued impact of COVID-19 and the subsequent market volatility, Loblaw has withdrawn this guidance.

Galen Weston, Executive Chairman of Loblaw Companies, said it is difficult to predict how the business will perform over the rest of the year.

“In light of the uncertainty about the duration and impacts of the COVID-19 pandemic on the Canadian economy, we can expect the volatility in our business to continue.

“Shopping behaviours continue to evolve, as does the demand for the types of products and services we provide,” he added.

The decision comes after Loblaw reported a substantial increase in sales from the beginning of March.

With the outbreak of COVID-19, demand for essential items soared while customers moved away from non-essential and discretionary products.

As a result, the company ramped up its investments in four key areas. These included enhancing customer convenience by increasing staff numbers, temporarily increasing pay for employees, increasing sanitisation and security, and providing financial support to communities and customers.

“These investments bring both increased benefits and costs, and they are making a positive difference in helping our customers and colleagues meet the enormous challenges of COVID- 19,” Galen concluded.

Loblaw Companies (L) is currently down 0.46 per cent to $74.35 per share at 9:53am EST.

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