Food staples recap: is "Buy Canada" having an impact?
The Canadian grocers and food manufacturers are largely done with earnings season, posting pretty solid results across the board.
| Company | Actual | Consensus |
|---|---|---|
| 🇨🇦 Loblaw (L) | 2.20 | 2.21 |
| 🇨🇦 Metro (MRU) | 1.10 | 1.09 |
| 🇨🇦 Empire (EMP-A) | 0.62 | 0.62 |
| 🇨🇦 Maple Leaf (MFI) | 0.38 | 0.24 |
| 🇨🇦 Saputo (SAP) | 0.39 | 0.40 |
| 🇨🇦 Premium Brands (PBH) | 1.05 | 0.95 |
| 🇨🇦 High Liner (HLF) | 0.41 | 0.22 |
| 🇨🇦 Rogers Sugar (RSI) | 0.15 | 0.15 |
The group gave investors a chance to sharpen their pencils on the impact of the “Buy Canada” movement, which varied based on which management team was asked.
Grocers: stable, but more capacity coming
Results out of the grocers have been stable, with consistent mid-single digit EPS growth despite some variation at the company level.
Loblaw (L) has been the most stable of the group, likely owing to its higher exposure to discount retail and pharmacy - segments that tend to show more resilience to economic weakness than traditional food retail.
A theme investors may be worried about within the grocer universe is capacity expansion, with each grocer planning to add square footage in the near-term.
Company | Expansion Plan |
|---|---|
Loblaw (L) | 80 new food & drug stores, 100 new pharmacist clinics (2025) |
Metro (MRU) | 12 new food & drug stores, 12 pharmacy expansions (2025) |
Empire (EMP-A) | 1.5% square footage growth (2026) |
The grocers highlight the coming capacity buildout is to catch up with previous population expansion - but a weaker immigration backdrop combined with this new supply could pressure same store sales growth.
Producers: a more challenging outlook
The producers, while posting solid results this quarter, face a more challenging outlook than the grocers do. Given how different each company is from one another, a deeper look is warranted to sift through potential winners and losers.
Tariffs are an obvious headwind that seem to be somewhat under control, with exposed companies all highlighting they have mitigation strategies in place.
Company | Tariff Exposure |
|---|---|
Maple Leaf (MFI) | 7-8% |
Premium Brands (PBH) | 4-5% |
High Liner (HLF) | <10% |
The group is at different stages of capacity investment, with Maple Leaf Foods (MFI) and Saputo (SAP) now out of their large CapEx cycles, Lassonde (LAS-A) just starting to ramp up their U.S. expansion plans, and Premium Brands (PBH) maintaining high M&A spend.
In a potentially challenging macro backdrop, filling demand for these ongoing capacity investments could be a challenge.
The tougher outlook is evident in NTM P/E multiples between manufacturers and grocers, which have decoupled significantly over the past year.
Is Buy Canada a sustainable tailwind?
Are people buying Canadian? Management teams noted an uptick in sales of Canadian food products in-store, though producers highlighted a less optimistic outlook for the theme.
I don’t have last week’s number, but I have the week before, and it was approximately a 10% uplift in Canadian product… so we will probably see a further uplift there when it comes to that.
At this point, again, there is certainly that noise. There’s been inquiries. I wouldn’t say we’ve noticed anything materially different, but yes, there’s a lot of talk about Canadians buying made in Canada products. But again, nothing material that we can talk about.
On the other hand, the Buy Canadian movement really seems to be taking hold. The duration of that emotion and energy in the market, I think, is a bit of a to be determined.
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