Loblaw
Canada’s largest supermarket chain says it plans to invest more money in its conventional food stores in Ontario, hire 1,000 new people to improve service, and assign more buyers to add local produce, instead of purchasing everything centrally from head office.
Loblaw Cos. Ltd. also said it is roughly "six to nine months" behind schedule on its three to five-year turnaround plan, which it now expects will take more like five years to complete, executive chairman Galen G. Weston said.
In his first conference call since becoming Loblaw’s president last week, British retailing executive Allan Leighton, outlined "five key adjustments to our road map."
They include:
- Significant investments in "a great food program" in Ontario, where the company’s attempts to transplant its successful western Canadian superstores concept have floundered.
- Refurbishing 25 Real Canadian SuperStores in western Canada, where competitor Wal-Mart Canada Corp. has begun opening stores that carry fresh food as well as general merchandise. Loblaw also plans to launch more No Frills stores in western Canada, a small discount format that has worked well for it Ontario.
- More local sourcing, with up to 15 per cent of products being purchased outside the central buying team based in Brampton.
- Upgrading its warehouse and distribution system.
- Investing in its President’s Choice private label brand.
Many of the moves appear to be a reversal of its previous strategy of centralizing its opeartions, and opening more larger stores that carry both food and general merchandise.
"We think we’re still on the right road," Leighton told analysts on a conference call today. However, the road map needs some "key adjustments" to make the company more successful.
Leighton, who helped turnaround British supermarket chain Asda before it was sold to Wal-mart, also said Loblaw needs to focus more on becoming a "selling machine."
"We feel we should be getting more sales growth," Leighton told analysts after the company reported what it described as disappointing results.
Profit at Canada’s largest supermarket chain grew 14.8 per cent to $62 million, or 23 cents a share, mainly due to lower one-time charges for restructuring costs and stock-based compensation, the company said payday loans.
Excluding those one-time items, operating income was lower than the comparable year earlier period. while sales edged up 2.8 per cent to $6.5 billion, the company said.
Sales at stores open more than a year, a key measure of retail performance, grew 2.8 per cent, versus 2.4 per cent in the year earlier period, as the company opened fewer new stores.
One-time charges against earnings to pay for restructuring costs were $3 million, or one cent per share, in the first quarter this year, versus $89 million in the first quarter last year, the company said.
Charges related to stock-based compensation and equity forwards were $25 million, or 10 cents a share, versus $12 million a year ago.
Excluding those one-time charges, operating income was lower than a year ago, the company said.
"Performance in the first quarter was challenging," said Weston, 35, whose family are Loblaw’s majority shareholders through their stake in parent company, George Weston Ltd."The company continues to make progress on its turnaround plan. However, over one year into our turnaround we are not where we need to be."
Weston said the company "lags behind as a effective selling organization" despite a newly centralized structure aimed at delivering the benefits of cost management, better buying and operational discipline.
"Last week, we took action to address this by changing the senior executive team," Weston added.
He was referring to the decision to name Leighton as president, replacing Mark Foote, who left the company. An executive vice-president in charge of food, Pietro Satriano, also left Loblaw last week.
"Our new structure will provide the clarity and focus that is required to execute the next phase of our strategy," Weston said.
The company is holding its annual general meeting at the Metro Convention Centre today.