Good times, bad times, it doesn't matter. We still have to eat.
We can forego that new car, postpone the home renovations, or even cancel the cable TV. But eliminating the trip to the supermarket is not an option. Sure, we may have to buy hamburger instead of steak but the grocery bags still have to be filled.
That's why it's a good idea to own some companies that cater to that basic need. George Weston Ltd. (TSX:WN, Financial)(OTC: WNGRF) is one of the best.
The company was founded in 1882. Its main business is food processing and distribution - it owns a 46% position in Loblaw Companies. It is now also in the retail pharmacy industry through Loblaw's ownership of Shoppers Drug Mart, which was acquired in 2014 for $12.4 billion.
George Weston has a history of stable growth and the share price has been on the rise since mid-2012.
The company recently reported second-quarter results for fiscal 2015. Adjusted net earnings attributable to common shareholders came in at $180 million ($1.33 per share), up from $169 million ($1.25 per share) in the previous year. For the first half, adjusted earnings were $342 million ($2.52 per share) compared to $293 million ($2.14 per share) in the same period of 2014. That's an improvement of 17.8% on a per share basis.
Sales for the second quarter were about $10.6 billion, up 2.4% over the previous year. Most of that came from the Loblaw segment. For the first half of 2015, Loblaw generated almost $20.6 billion worth of business, up 17% from last year due to the Shoppers acquisition.
The company has invested millions of dollars in recent years to upgrade the Loblaw shopping experience and that process is continuing. Capital expenditures this year will be in the $1.2 billion range, most of which will come in the second half. As a result, the company expects a decline in adjusted operating income in the next six months, which it predicts will be partially offset by the positive impact of pricing, volume growth, and productivity improvements. It also expects to achieve net synergies on the order of $200 million relating to the integration of Shoppers.
I know there's nothing very exciting about selling Corn Flakes or filling prescriptions but it's a steady, stable business and Loblaw has been very effective at increasing same store sales. The fact the shares lost less than 3% during last week's sell-off is a testament to the strength of this company.
Weston shares pay a quarterly dividend of $0.425 ($1.70 a year) to yield 1.5% at the current price.
Action now: Buy George Weston Ltd. at the current price. The shares closed on Friday at C$110.55, US$83.73.
