5 TSX retail stocks to buy as industry rebounds

Highlights

  • One of the retail companies mentioned below is the largest alcohol retailer in Canada, covering more than 170 locations.
  • The highest ROE posted by the companies in this list was 70.88 per cent
  • Four of these companies are expected to pay dividends, while the highest five-year dividend growth was 13.86 per cent.

As the Canadian retail industry is gradually returning to normalcy after the disastrous effect of the pandemic, another emerging threat looms over the retail industry. Some market analysts have voiced their opinion that products coming from China and Vietnam are imported at a much cheaper price than the ones produced in the domestic market of Canada.

This being a worrisome factor, the Retail Council of Canada intervened in the matter, imposing a tariff and duties of a whopping 204 per cent with regards to furniture. This move was to protect the Canadian manufacturers and the retail industry already wounded by the loss in sales and temporary shutdowns due to COVID 19.

On that note, let us discuss some of the retail stocks of Canadian companies.

  1. Maple Leaf Foods Inc. (TSX: MFI)

This consumer retail company produces and prepares meals from pork and poultry products. Maple Leaf Foods sells its products in countries like Canada, Japan, China, etc.

At the market close of September 3, 2021, the stocks of Maple Leaf Food were priced at C$ 27.14 apiece. On March 24, 2021, stocks reached their 52-week high of C$ 29.46.

Over the past year, stocks dipped four per cent. However, in the last six months, it returned nearly three percent.

Maple Leaf is scheduled to pay quarterly dividends of C$ 0.18 per share on September 29, 2021, and the five-year dividend growth stood at 13.86 per cent. The company posted a return on equity (ROE) of 7.56 per cent, and a price-to-earning (P/E) ratio was 22.6.

The company posted total sales of C$ 1.16 billion in the second quarter of the fiscal year 2021, up 5.9 per cent Year-over-Year (YoY).

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  1. MTY Food Group Inc. (TSX: MTY)

The company with a C$ 1.7 billion market cap on September 7, 2021, runs as a franchiser of mostly company-owned restaurants and sells retail products. MTY Food Group caters to the casual dining and quick-service industry operating in the US, Canada, and other international locations.

The stock price of MTY Food Group closed at C$ 69.13 on September 3, 2021, and traded close to 111 per cent above its 52-week low of C$ 32.79 on this day. The stock price returned roughly 82 per cent over the past year.

The shareholders of this food company earned their latest quarterly dividends of C$ 0.185 on August 13, 2021. The dividend yield was 1.07 per cent on September 7.

On the valuation front, it held earnings per share (EPS) of 3.21, ROE of 13.81 per cent and return on assets (ROA) of 3.93 per cent.

In Q2 FY21, the adjusted EBITDA of MTY Food Group was C$ 43.5 million. The company reported a temporary closure of 321 restaurants at the beginning and 359 restaurants by the end of the quarter.  

Also Read: 5 best TSX retail stocks to buy as COVID restrictions ease

  1. Gildan Activewear Inc. (TSX: GIL)

The clothing brand manufactures and designs apparel ranging from T-shirts, undergarments, and hosiery. This C$ 9.93 billion company sells through retail and other consumer channels.

Gildan is expected to pay a quarterly dividend of US$ 0.154 per share on September 20, 2021, to its shareholders. Its ROE was 22.03 per cent, and ROA was 11.39 per cent posted by the company. Moreover, the company had a debt-to-equity (D/E) ratio of 0.37.

Despite constraints faced on the supply chain network, Gildan posted sales of US$ 747.2 million in Q2 FY21, up 225.3 per cent YoY. Its operating margin was 21.4 per cent in the same quarter.

The stock price increased by close to 41 per cent on a year-to-date (YTD) basis, and it expanded by nearly 90 per cent over the past year. On September 3, the stock price closed at C$ 50.05. It reached its 52-week high of C$ 50.19 on September 2.

Also Read: Which Are The 5 Best Retail Stocks

  1. Loblaw Companies Limited (TSX: L)

Loblaw is a retailer of groceries and general merchandise and also sells pharmaceutical products in Canada. The retail company is set to pay a quarterly dividend of C$ 0.365 per share on October 1, 2021. On a five-year average, the dividends grew by 5.31 per cent, and the dividend yield was 1.62 per cent.

On September 2, the stock price of Loblaw reached its 52-week high of C$ 90.21 and closed at C$ 89.81 on September 3. The stock price surged by close to 43 per cent on a YTD basis.

As per the valuation metrics, the retail brand held an EPS of 3.95, ROE of 13.05 per cent, and ROA of 4.01 per cent (at the time of writing).

Loblaw posted an adjusted EBITDA of C$ 1.4 billion in Q2 FY21. Its adjusted net earnings available to common shareholders was C$ 464 million in Q2 FY21.

  1. Alcanna Inc. (TSX: CLIQ)

Alcanna is the largest alcohol retailer in Canada in terms of the number of stores the brand operates and is spread across 170 locations in Canada. The company also is a retailer of cannabis, running over 50 stores.

The stock price of Alcanna increased by close to six per cent on a quarter-to-date (QTD) basis, but the one-year stock price return was 61 per cent. On September 3, 2021, the stock price closed at C$ 7.07 apiece.

In Q2 FY21, Alcanna posted same-store sales of C$ 158.9 million and incurred a net loss of C$ 5.7 million. The management of the company believes that same-store sales growth will be on a higher trend due to the expansion of its retail division.

The C$ 256.79 million market cap company also posted an ROE of 70.88 percent, ROA of 19.7 percent, while the company's price-to-book (P/B) ratio was 1.52.

Bottom line:

The pandemic outbreak in early 2020 generally affected the normal functioning of retail brands and the industry, temporarily halting and closing down stores. The managements of some of these companies believe that these companies can grow faster than the pre-pandemic level soon with a strategy in place.

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