Amidst Calls for Fair Pricing, Loblaw Drops Billions on Share Buybacks

A day after the Canadian federal government announced it has reached an agreement with five major grocers in the country to reduce food prices, Loblaw Companies (TSX: L) has taken action.. by implementing an automatic share purchase plan for share buybacks.

Loblaw revealed that it has entered an agreement with a broker to facilitate repurchases of its common shares under a previously approved normal course issuer bid, which is more commonly referred to as a share buyback program. The program will see the company repurchase up to 16.1 million shares, or 5% of the total figure outstanding, between May 5, 2023 and May 4, 2024.

At current prices, if all shares were to be repurchased it would amount to an estimated $1.88 billion. At a time when consumers are struggling to purchase even the essentials.

READ: How Loblaws’ Galen Weston Doubled His Wealth At Your Expense

The company, under its previous share buyback plan, repurchased 14.3 million common shares at an average price of $116.57 per share, or roughly $1.67 billion.

Canada’s plan to stabilize food prices

In a recent declaration that seemed more theatrical than practical, Industry Minister François-Philippe Champagne unveiled plans to stabilize food prices from Canada’s largest grocery chains. The grand announcement came following a meeting last month with the CEOs of Loblaw, Sobeys, Metro, Costco, and Walmart, where the federal government allegedly pressured these behemoths to implement strategies by Thanksgiving.

The presented solutions? More discounts, price freezes, and price-matching campaigns. While on the surface, these initiatives might sound like a win for Canadians, it’s crucial to delve deeper.

Champagne’s optimistic statement that “Canadians should expect to see grocers start rolling out these plans ‘within days'” seems more like a soundbite than a genuine assurance. Especially when one considers the alarming statistic from August: food prices rose by 6.9% compared to the previous year. Though it’s a decline from a staggering 11% high, it’s still almost double the general inflation rate of 4%.

It’s noteworthy that the Competition Bureau flagged the lack of competition in the grocery sector as recently as June. With Loblaw, Sobeys, and Metro recognized as dominating the landscape, it seems almost naïve to believe that the proposed “solutions” will introduce any genuine competitive element to the market.

Furthermore, Metro’s admission to CBC News that annual price freezes between November and February are already an “industry practice” raises the question: is the government merely repackaging old wine in a new bottle?

When pressed by reporters, Champagne’s justification that the September meeting marked the first instance of gathering all five grocery CEOs under one roof was hardly reassuring. His assertion that this would serve as a “catalyst for more measures, faster measures, and long-lasting measures” remains to be seen. However, for now, it appears more a matter of optics than a genuine commitment to solving the root problems facing Canadian consumers.

Information for this briefing was found via Sedar+, Reuters, Globe and Mail, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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