Aug 7/26: Loblaw & George Weston

ummary

• Loblaw (L.TO) declined 4.3%, closing August 7 at C$62.96.
• George Weston (WN.TO) declined 3.4%, closing at C$101.21.
• Both companies fell despite solid Q2 earnings because food same-store sales growth slowed and the positive results were largely reflected in their valuations.
• Weston followed Loblaw lower because Loblaw is its principal operating investment.
• Rotation away from defensive consumer-staples shares also contributed; TTCS fell approximately 1.6% while the TSX Composite gained 3.3%.

Weekly Performance

Date	Loblaw close	Daily change	George Weston close	Daily change
July 31	C$65.81	—	C$104.77	—
August 4	C$65.31	−0.76%	C$103.23	−1.47%
August 5	C$64.09	−1.87%	C$101.99	−1.20%
August 6	C$63.30	−1.23%	C$102.12	+0.13%
August 7	C$62.96	−0.54%	C$101.21	−0.89%
Weekly change		−4.33%		−3.40%

Loblaw: Why the Shares Declined

Loblaw’s Q2 operating results were positive:

Q2 2026 measure	Result
Revenue	C$15.27 billion, +4.1% YoY
Retail sales	C$15.05 billion, +4.1%
Adjusted EBITDA	+5.1%
Adjusted diluted EPS	+11.9%
E-commerce sales	+19.3%
Food same-store sales	+1.6%
Drug retail same-store sales	+4.6%

Despite the earnings growth, three factors likely pressured the shares.

1. Food same-store growth slowed

Food same-store sales increased only 1.6%, compared with 3.5% a year earlier. New stores helped total sales growth, but the slower comparable-store result raised questions about underlying organic growth.

Discount banners such as No Frills and Maxi continued to perform well, but conventional grocery operations faced more modest growth.

2. “Sell-the-news” reaction

Loblaw entered the week following a strong period and solid Q2 expectations. Adjusted EPS beat estimates by only about 2%, while revenue was broadly in line. The results were good, but apparently not strong enough to support further immediate valuation expansion.

Analysts raised targets after the release—including reported targets of C$73 from BMO and C$72 from Desjardins—but this did not prevent short-term profit-taking.

3. Defensive-sector rotation

Investors moved toward mining, real estate and other economically sensitive sectors after weaker U.S. employment data reduced expectations of a Federal Reserve rate increase. The broader TSX gained 3.3%, while consumer staples declined.

This relative-performance gap indicates that part of Loblaw’s decline was sector rotation, not deterioration in its core business.

George Weston: Why It Followed Loblaw Lower

George Weston’s principal assets are:

• its controlling ownership position in Loblaw; and
• its interest in Choice Properties REIT.

Consequently, changes in Loblaw’s valuation materially affect WN’s share price.

George Weston reported:

Q2 2026 measure	Result
Revenue	C$15.20 billion, +4.1% YoY
Adjusted EBITDA	C$1.94 billion, +6.1%
Adjusted net earnings	C$436 million, +9.8%
Adjusted diluted EPS	C$1.14, +12.9%

However, reported net earnings fell approximately 48%, primarily because of unfavourable fair-value adjustments. These are largely accounting-related rather than evidence of a comparable operating decline, but they may have added headline pressure.

WN declined slightly less than Loblaw because its Choice Properties exposure provided some diversification and real estate performed relatively well during the week.

Interpretation

The week’s decline appears to be a valuation and positioning adjustment, rather than a clear breakdown in operating performance.

Positive fundamentals included:

• double-digit adjusted EPS growth;
• strong pharmacy and healthcare sales;
• 19.3% e-commerce growth;
• continued strength at discount grocery banners; and
• increased planned share repurchases.

The main concern was that 1.6% food same-store growth does not fully support an expanding valuation multiple without continued margin improvement and share repurchases.

Key Levels and Scenarios

Company	Initial support	Resistance	Base interpretation
Loblaw	C$61–62	C$65–67	Consolidation after earnings
George Weston	C$99–100	C$104–106	Tracks Loblaw with partial REIT diversification

Scenario	Likely development
Bull	Food comparable sales accelerate and margins remain firm
Base	EPS grows through margins, new stores and buybacks while shares consolidate
Bear	Same-store sales slow further or margin pressure offsets revenue growth

The positive thesis would weaken if food same-store growth remains below inflation for several quarters or if adjusted earnings stop growing faster than revenue.