An election can change the name on the premier’s office. Quebec’s latest one changed considerably more than that.
The Parti Québécois returned to power with 59 seats, forming a minority government after the Coalition Avenir Québec was wiped out of the legislature. The result also puts sovereignty back into the national conversation. PQ leader Paul St-Pierre Plamondon pledged another independence referendum during his mandate, although not before U.S. President Donald Trump leaves office.
That gives Canadians well outside Quebec a reason to pay attention. Quebec has more than nine million residents and produces roughly one-fifth of Canada’s economic output. Its government will also have a major voice in federal-provincial fights over immigration, infrastructure, trade, and national unity just as Canada is trying to manage U.S. tariffs and diversify its economy.
Why every Canadian should care
Politics can’t magically refill a household budget after groceries, housing, and everything else have taken their turn. Quebec’s real economy grew just 0.2% in the second quarter, following 0.4% growth in the first. That’s still growth, not recession. Yet the slowdown means the new government inherits an economy where consumers are already becoming more careful with their money.
For investors across Canada, that creates a useful distinction. The election could produce national headlines for years. Household spending decisions are happening right now. That’s exactly when defensive businesses get interesting.
Follow the grocery cart
A defensive stock isn’t one whose sales never decline. It’s a company selling things customers have difficulty removing from the budget. Groceries and prescriptions qualify rather nicely.
Consumers can trade restaurant meals for groceries, premium products for private labels or full-service supermarkets for discount banners. That means an economic slowdown can shift spending without making it disappear.
Loblaw (TSX: L) has exposure across those choices through grocery, discount and pharmacy businesses, including Maxi in Quebec. That gives investors a way to participate in consumer spending without requiring Quebec’s economy to suddenly boom.
The customer is still spending
Loblaw’s second-quarter retail revenue increased 4.1% to $15.1 billion. Food same-store sales rose a more modest 1.6%, while Shoppers Drug Mart same-store sales climbed 4.6%. Pharmacy and healthcare services were particularly strong, rising 7.5%.
E-commerce sales jumped 19.3%. Those numbers aren’t spectacular enough to require fireworks. That’s the whole point. Loblaw also expects roughly $2.1 billion of share repurchases this year. Buying back shares can increase each remaining share’s claim on future earnings, provided management doesn’t overpay.
That combination makes Loblaw interesting among Canadian blue-chip stocks. It offers essential spending today, with buybacks helping per-share growth tomorrow.
Considerations
Here’s where I’d be picky, however. Loblaw recently traded around $61.54. With trailing earnings per share around $2.26, that’s roughly 27 times earnings. That’s a healthy valuation for a grocery and pharmacy business. Investors are already paying for resilience. What’s more, it’s not like you’re getting some enormous dividend while you wait.
Regulation is another risk. Grocery prices attract enormous political attention, while stronger competition or food-cost inflation could pressure margins. Consumers might need groceries, but they still notice when the bill becomes offensive.
That’s why I’d rather buy Loblaw gradually than treat defensive demand as permission to pay any price. Investors buying stocks in Canada still need growth to justify the multiple.
Bottom line
Quebec’s slower growth makes consumer essentials more appealing, not because households stop feeling pressure but because groceries and prescriptions remain difficult to avoid.
Loblaw’s latest results show growth across food, pharmacy and e-commerce, while buybacks can add to per-share earnings over time. I’d consider the stock on weakness. A defensive business can survive a softer economy. The better investment comes when the purchase price provides some defence too.