STELLARTON, Nova Scotia -- Sobeys here said it's been able to protect its position in the Atlantic Canada market despite heavy competitive pressure following the conversion last year of 30 stores to the Price Chopper banner.
According to Bill McEwan, president and chief executive officer, the decision to convert 30 Sobeys, Lo-Food and Foodland stores to the discount banner in its Atlantic Canada region resulted in a flurry of competitive activity that didn't ease up until after Christmas.
"But we did a good job protecting our market position," he said.
The company also converted 17 Garden Market IGA stores in Ontario to the Sobeys banner and 47 Green Gables convenience stores to the Needs banner in Atlantic Canada, McEwan pointed out.
He said Sobeys is considering rationalizing its base of 28 distribution centers, though he declined to provide details.
McEwan made his remarks during a conference call with securities analysts to discuss Sobeys' financial results for the third quarter and 39 weeks ended Feb. 1.
Sales rose 6.5% to $1.8 billion (U.S.) for the 13-week third quarter and 7.4% to $5.3 billion for the 39-week period, while comparable-store sales, excluding store expansions, rose 2.5% for the quarter and 1.5% for the year to date, and net income rose 26.9% to $31.1 million for the quarter and 32.3% to $94 million for the year to date.
McEwan said he attributed the weakness in comp sales to Sobeys' decision to open new stores close to existing stores. "We know we're eating our lunch as we add square footage because it pushes comps down in existing stores in the area of 70 to 100 basis points," he said.
McEwan said Sobeys remains on track to achieve its financial objectives for the fiscal year, with sales through the first nine months of the year up 7.4%, in line with expectations of 6% to 8% growth for the year, and operating earnings growth up 16.7% for the nine months, exceeding the 12% to 16% growth rate projected.
It is achieving those results because of a series of programs and disciplines imposed at the beginning of the year, he said, including the following:
More customer-centered activity. Sobeys is six months into its "Ready to Serve" program -- a series of initiatives at its Sobeys-banner stores in Atlantic Canada and Ontario involving more emphasis on fresh products, enhanced customer service and improved store layouts and design, McEwan said.
"We did extensive research to validate and challenge our marketing assumptions, and we will make further refinements going forward," he told the analysts.
The company is also offering similar programs in Ontario, where it introduced a new marketing theme -- The Smart Choice -- for its Price Chopper stores, as well as in Western Canada, where it is stressing customer service and freshness at its Garden Market IGA stores, McEwan said.
More emphasis on personnel development. Sobeys has extended deferred profit-sharing to its employees, with payouts totalling $5 million (U.S.) during the past year -- double the payout a year ago, McEwan said.
Greater attention to cost management disciplines. McEwan said Sobeys is on target to reduce selling, general and administrative costs by $17.1 million (U.S.) by the end of the fiscal year in April through implementation of 18 efficiency initiatives.
Aggressive store investments. Sobeys is continuing to modernize its store base, McEwan said, with 12 new corporate or franchised stores opened or replaced and five stores expanded during the quarter for a total of 31 new units and 11 expansions for the year to date.