The Canadian retail scene has been not only resilient amid consumer-facing pressures, lingering inflation on food, and more Trump tariff trouble ahead (will he really impose a whopping 35% tariff next week?), some names have actually been a source of TSX Index-beating gains.
Indeed, Canadian grocery retailers Loblaw (TSX: L) and Dollarama (TSX: DOL) have pretty much been the best Canadian retail stocks to stash away. It may be a bit hard to believe, but Dollarama shares have more than doubled in the last two years. Loblaw shares weren’t too far behind, either, nearly doubling with a 92% gain posted in the same timespan.
Furthermore, they could side-step the next tech-driven correction if you’re one of those investors who believe we’ve entered an AI bubble. It’s hard to tell how the multi-year AI surge ends. Could it be just one or two AI chipmakers that flop on earnings to turn the lights out on the AI trade?
Nobody knows. In any case, defensive growth is where many investors should look to if they’re overexposed to tech. But is it better to go with a discount retailer or a grocery giant that’s also doubling down on lower-cost, higher-value options amid Canada’s affordability woes? Let’s find out.
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Loblaw
Loblaw’s business model is pretty easy to understand and get behind, as the firm keeps putting up strong results quarter after quarter. It’s a go-to grocery for many Canadian consumers looking to get good deals on their weekly hauls. The stock is on an incredible run, and with a 27.8 times trailing price-to-earnings (P/E) multiple, the easy-to-understand grocery firm isn’t all that expensive, especially when you consider its digital innovations and expansion plan.
For the second half, Loblaw will open a lot of stores, many of which will draw large crowds as consumers continue to flock to the grocery to take advantage of the deals. As Loblaw expands with its value-conscious banners in mind, I think L stock has all the makings of a winner that’ll win for years to come.
With excellent management and robust momentum, perhaps it’s time to ring the register in tech to pick up a few more shares of one of Canada’s preferred grocers. Apart from Loblaw’s expansion plan, which I think will be a hit, the firm has also done a great job of making it all too easy for Canadians to buy Canadian amid this tariff war. So, if you’re worried about 35% tariffs, L stock is a name that could make for a good night’s sleep.
Dollarama
Dollarama is another terrific retail stock that always seems to find a way higher. Despite the hefty 42.9 times trailing P/E ratio, I do find the firm’s low-risk expansion plans warrant such a premium.
Personally, I think Dollarama is North America’s best-run discount retailer, given its ability to pass the value on to customers. With a big 8.2% sales surge in the first quarter, in the books, I think it’s time to punch a ticket, even if the relatively hefty valuation has you inclined to hold off.
At the end of the day, defensive growth is a place that has staying power, especially if the trade war spirals further in this second half. Whether it’s 35% tariffs or something more absurd like 50%, DOL stock is poised to do well as management strives to offer consumers the best possible deals. Now, DOL is not a cheap stock. But given the stage is set for more growth, I wouldn’t be so quick to take profits on this winner.
If I had to choose between DOL and L, though, I’d go with the latter due to its cheaper price tag.
