Canadian Food Retailers

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The following article details how to invest in Canada's grocery store market

Canadian grocery industry is dominated by three big players with several new immerging competitors. Loblaws, Sobeys and Metro make up the majority of Canadian grocery store competition.

There are several ways to invest in this market. Metro, the third biggest of the trio is traded on the TSX with the symbol MRU.A. Sobeys is, unfortunately, a private enterprise and cannot be bought as shares on any exchange. Loblaws, the biggest food retailer is also available on the TSX.

Loblaws trades under the symbol L. It's parent company the George Westoin company is also available on the Toronto Stock exchange under the label WN. Both Weston & Loblaws have preferred share offerings. Loblaws has one series of preferreds (A) and Weston has several. In addition to the majors and their preferred share counterparts, there are really few other options.

The Great Atlantic & Pacific Tea Co (A&P) was bought out recently by Metro and has been rebranded as such. Walmart is making a serious push into the Canadian food services area, but Walmart is a mammoth multi-national full service retailer and purchasing shares of WMT is not the best exposure to Canadian food retail as it would only be a tiny fraction of their core business.

The author is personally invested and interested in the shares of Weston and Loblaws preferred. I was in L-A recently, but have recently exchanged these shares for shares of Weston Preferred. Below is a tabular comparison of the two preferred series (data is current as of Aug 2010)

sym/name L.PR Loblaw Pref WN.PR.D Weston Pref
Dividend 5.6 6.04
Payout Ratio 42% 22%
stock price 26 24.1
voume avg 7.8k
mkt cap 9.75 b 8.9 B
% down from 2007 50% (2005) TSE: L 40% ish 2005
% up from 2009 low 23% 21%
recent high n/a N/A
Tangible Book Value 5.185 B 5622
revenue 30 bln 32 bln approx
profit margin
p/b  tangible 1.88  1.58
p/e (2009 thus far) 14 24????
p/e with best recent

The author is long Weston Preferred (oct 2010)