Summary

The company has shifted towards a private label strategy that has proven to decrease costs and increase customer options.

The company operates a variety of retail and financial services products that result in a highly diversified portfolio.

We have witnessed improved profitability due to positive strategic changes.

We are currently bullish on Loblaw (OTCPK :OTCPK:LBLCF) due to its effective strategic pivot towards heavy focus in private label brands, diversified retail operations, and continuously improving profitability. This article will discuss these three factors as well as some risks associated with this investment.

Thesis 1: Strong Control Brand Program
One of the reasons we love this stock is the company’s solid control brand program that has helped meet the needs of customers in an effective and efficient manner. This strategic plan has been especially effective as it not only helped the company in improving its customer loyalty, but it has also allowed them to keep competitive prices. Currently, Loblaws has over 5,000 private label products across the apparel, health, beauty, and food categories. These products are listed under the brands President’s Choice, no name, PC Black Label collection, T&T and many more. The company has also used their private brands to branch off and provide financial services to its clients that include insurance and credit card services. We think this is a move in a positive strategic direction as it provides the company with full control of its loyalty program. The PC plus program has been a driver in maintaining customer loyalty as it is one of the most robust systems in the country, For example, the PC Plus app allows customer to receive personalized point offers based on the items they buy the most and allows them to link the Passbook to enable a scan and go system. We believe that this continued emphasis on private label brands will continue to drive customer growth and loyalty, which we view as a positive.

Thesis 2: Diversified Retail Operations
Another factor that attracts us to the company is the diversified set of retailers that the company operates. Loblaw is one of the largest food retailers in Canada with a market cap of $31.12 Billion, operating a variety of drugstores, food retailers, gas bars, apparel stores, and financial products. Additionally, the company operates its 591 corporate stores, 525 franchised stores, and 1313 associate-owned shoppers drug-mart stores through a two-divisional business framework. Essentially, the company classifies its stores into conventional and discount stores which allows it to target a…