TSX Listed Consumer Staples Stocks Amid Rising Inflation –   WN & MRU

Section 1: Introduction

• Inflation is the gradual loss in purchasing power, primarily due to an increase in the price levels of goods and services over a given period.
• The Consumer Price Index (CPI) increased by 2.6% year over year in February, following a 1.9% rise in January. While the overall price growth in February was broad-based, the end of the goods and services tax (GST)/harmonized sales tax (HST) break midway through the month significantly pushed up prices for eligible products. With the federal tax break ended on February 15, 2025, the GST and HST were reinstated on eligible products, which led to upward pressure on consumer prices for selected items, as taxes paid by consumers are included in the CPI. As a result, prices for food purchased from restaurants decreased at a slower pace year over year in February (-1.4%) compared to January (-5.1%). Restaurant food prices were the largest contributor to the acceleration in the all-items CPI in February. Similarly, alcoholic beverages purchased from stores declined by 1.4% on a yearly basis in February, following a 3.6% decrease in January.
• On a monthly basis, the CPI rose 1.1% in February. On a seasonally adjusted monthly basis, the CPI rose 0.7%.  
• There are two types of inflationary trends - high and low inflation. The cycles of high and low inflation mainly depend on policy action by the Government to balance the demand and growth of the country.

• George Weston Limited (TSX: WN) is a holding company that operates through two subsidiaries encompassing retail and real estate. The first is Loblaw, the largest grocer in Canada, in which it has a 53% controlling stake. The second is Choice Properties, an open-ended real estate investment trust, where George Weston's ownership sits close to 62%. The company sold Weston Foods, a North American bakery, which the firm had previously wholly owned. While the two remaining entities are separate, they operate under a contractual, as well as tacit, framework of strategic business partnerships.
• Metro Inc. (TSX: MRU) is one of the largest grocery retailers in Canada. With its 2018 acquisition of Jean Coutu, it also boasts a meaningful drugstore footprint. Noteworthy grocery banners include Metro, Metro Plus, Super C, and Food Basics, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. Since George Weston Limited and Metro Inc. are catering into consumer staples products, which consumers can’t deter or defer buying, showcasing lower beta stocks, hence, these consumer staples stocks will remain mostly indifferent and have potential to generate good returns even in rising Inflation Scenario.

George Weston Limited

Section 2: Company Overview

George Weston Limited (TSX: WN) is a holding company that operates through two subsidiaries encompassing retail and real estate. The first is Loblaw, the largest grocer in Canada, in which it has a 53% controlling stake. The second is Choice Properties, an open-ended real estate investment trust, where George Weston's ownership sits close to 62%. The company sold Weston Foods, a North American bakery, which the firm had previously wholly owned. While the two remaining entities are separate, they operate under a contractual, as well as tacit, framework of strategic business partnerships. Kalkine’s Inflation Report covers the Investment Highlights, Key Financial Metrics, Risks, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock. 

2.1 The Key Positives, Negatives, Investment Highlights, and Risks

Section 3:  Financial Highlights

 3.1 Key Financial Highlights

Section 4:  Key Metrics

Below chart depicts the change in Quick Ratio, Current Ratio, EBITDA Margin and Gross Margin of the Company for the last five reported quarters.

Section 5:  Stock Recommendation Summary

5.1 Valuation Methodology Illustrative EV to Sales Based

5.2 Price Performance and Stock Recommendation

The stock has witnessed an upside of ~5.51% in 1 month and of ~3.68% over the last 3 months. Moreover, the stock is trading above the average of the 52-week high price of CAD 240.43 and the 52-week low price of CAD 174.30, providing an opportunity to ride the trend.

5.3 One-Year Technical Price Chart

 One-Year Technical Price Chart (as of March 20, 2025). Source: REFINITIV, Analysis: Kalkine Group

5.4 Technical Summary

Metro Inc.

Section 1: Company Overview

Metro Inc. (TSX: MRU) is one of the largest grocery retailers in Canada. With its 2018 acquisition of Jean Coutu, it also boasts a meaningful drugstore footprint. Noteworthy grocery banners include Metro, Metro Plus, Super C, and Food Basics, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. It utilizes an array of business models, but it most frequently acts as either a retailer, operating individual stores, or a franchiser, licensing its trademarks and supplying merchandise to franchisees. The firm also acts as a distributor, leveraging its supply chain capabilities to service smaller neighborhood grocery stores. The preponderance of its operations is in Quebec, which houses over 70% of its owned and franchised food and drug outlets. Kalkine’s Inflation Report covers the Investment Highlights, Key Financial Metrics, Risks, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

1.1 The Key Positives, Negatives, Investment Highlights, and Risks

Section2:  Financial Highlights

2.1 Key Financial Highlights

Section 3:  Key Metrics

Below chart depicts the change in Quick Ratio, Current Ratio, EBITDA Margin and Gross Margin of the Company for the last five reported quarters.

Section 4:  Stock Recommendation Summary

4.1 Valuation Methodology Illustrative EV to Sales Based

 4.2 Price Performance and Stock Recommendation

The stock has witnessed an upside of ~2.59% in 1 month and an upside of ~3.54% over the last 3 months. Moreover, the stock is trading above the average of 52-week high price of CAD 97.25 and 52-week low price of CAD 69.19, providing an opportunity to ride the trend.

4.3 One-Year Technical Price Chart

 One-Year Technical Price Chart (as of March 20, 2025). Source: REFINITIV, Analysis: Kalkine Group

4.4 Technical Summary

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 20, 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.   

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’  

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.