PROVIGO SETS FOCUS ON ONTARIO

MONTREAL (FNS) -- Having sold its money-losing California operations, Provigo here said it will focus on the Ontario market for future expansion.

The company has only 26 of its 112 Loeb stores in the heavily populated southern Ontario market and sees growth potential in an area largely dominated by Loblaw and A&P Canada, both based in Toronto.

"We see an enormous opportunity around the Golden Horseshoe [from Windsor, Ontario, across the river from Detroit, to Oshawa on Lake Ontario east of Toronto]," Pierre Mignault, Provigo president and chief executive officer, told SN following the company's annual meeting here. "But we need to develop good sites."

Mignault said he's not too concerned about the presence of Sobeys in the Quebec market, because the Nova Scotia-based chain has only one store in a province where Provigo has an estimated 37% share of the market. Sobeys has purchased a site in Sept Iles, Quebec, where it plans to open its second store in the province.

Mignault suggested that Sobeys is looking toward Quebec for expansion because of fierce competition from Loblaw in Sobeys' core market of Atlantic Canada (comprised of Newfoundland and the three Maritime provinces: Nova Scotia, New Brunswick and Prince Edward Island).

Sobeys could not be reached for comment.

Both David and Donald Sobey, chairman of Sobeys and chairman of holding company Empire Co., respectively, resigned from the Provigo board last year. However, Sobeys still controls 24% of Provigo. After accumulating losses of $104 million ($145 million Canadian) during the last six years at its California subsidiary, Provigo sold the division at the end of last year to New York investment firm Kohlberg & Co. for a total write-off of $105 million, as reported.

The company also sold its Sports Experts sporting goods chain and its Top Valu gas marts in order to concentrate on its core food business.

Following losses of more than $144 million during the last two years, Provigo reported a profit of $9.6 million for the first quarter ended April 22 -- a 30% improvement over the year-earlier period. Sales increased 2.3% to $900 million.

Figures were converted at the exchange rate of $1.39 Canadian equal $1 U.S.

Provigo closed 16 stores and two distribution centers last fiscal year. It also converted all its Heritage discount stores to Maxi outlets.

Mignault told shareholders that sales in stores renovated last fall have increased 15%. Based on that success, the company is spending $180 million over the next three years to open 30 new stores in Quebec and Ontario and to renovate 140 others, he said.