Loblaw Bites New York

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Loblaw (TSE:L) through its Joe Fresh brand is expanding into New York New York. If you can make it here you can make it anywhere. To most investors Loblaw is a grocery store. Low margins needing high turnover. If an investor wants grocery store exposure in the portfolio then go look at Loblaw, do your home work and take it from there.

Now they are confusing the risk weighting by ramping up apparel which is a completely different business. They skirt around financial governance issues and regulatory compliance by announcing the venture as a brand. Most product launches or new divisions interest investors when you can discuss earnings and when they become accretive. Not one word of mention about money. How will the investor track benefits? Where does this stand in wealth creation for shareholders.

Club Monaco expansion into NY NY is cited as an influence. If I have the story right Polo Ralph Lauren eventually bought it out and the boys made some money. Is Joe Fresh being primed for a quick flip? Will Loblaw eventually remove it from their corporate financial body to unlock value and then sell it later for big bucks? Will the Loblaw shareholder be compensated for supporting the new venture?

Loblaw is a public company with a controlling shareholder of George Weston Limited. If you follow the corporate tree you find the Galen Weston Family and Holt Renfrew a high-end Canadian Fashion retailer. Listen for things that make noise in the back room. Then listen and wonder why its very quiet.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.