The 50 stores Sobeys plans to close include units acquired from Safeway as well as locations that carry some of the chain’s existing banners, the company told investors Thursday.
“It’s not only Safeway and Sobeys,” Marc Poulin, president and CEO of Sobeys, said during a fourth-quarter earnings call.
Stores being closed also operate under the IGA, Cash and Carry and Foodland banners, he noted. All 50 are under-performing, including at least 15 that are fairly small — in the range of 20,000 square feet or less — Poulin said.
Thirty of the 50 stores are in Western Canada, he pointed out, where Sobeys acquired 213 Safeways in mid-2013.
The closures are designed to have a positive impact on same-store sales at nearby Sobeys and Safeways, he added. Asked about realigning banners in Western Canada, Poulin said,
“Clearly the first priority and the one we’re focusing on right now is the integration of the systems. Until that milestone is achieved, we will not work on integrating the commercial offer of the two programs we’re running out West.
“But that’s when the appropriate decision-making around our banner strategy will occur.”
The decision to close the 50 stores followed an assessment of all assets, Poulin said. “We thought it made sense to re-look at our business across Canada, market-by-market, [to determine] which assets were performing and which were not performing to expectations,” he explained.
“We looked strategically at what needed to be done to achieve our long-term [goals], so what you’re seeing is the conclusion on stores that have been consistently underperforming versus expectations and that we determined would not fit in the long-term desired outcome in terms of strategy.”
“We really looked at every single one of the assets we owned or had a lease on,” Francois Vimard, CEO of Empire, Sobeys parent company, added.
According to Poulin, the assessment involved “a question of focus for the operation. Retail stores that are underperforming require an awful lot of management attention, and for a store that doesn’t have a future, management attention was not being put to its proper use. Closing those stores will allow us to focus attention on stores with more potential.”
The strategic assessment also impacted Sobeys’ real estate plans, Poulin added, “since after an acquisition such as Safeway, we had toa totally new and different real estate strategy because there are stores that we acquired that obviously fitted very well in our overall portfolio and therefore we will not have to seek new locations in those markets.”
Asked about business at the acquired Safeway stores, Poulin said the trend has been fairly stable during the last six months. “Business came to us with a little bit less momentum than we would have liked, and our team has been putting together plans to reverse that trend,” including new pricing “to improve the perception of the value we offer customers,” he explained.
The early results are positive, he noted.
Vimard told investors it will be more difficult in the future to discuss Safeway as a separate entity, “because starting in the first quarter their numbers will be integrated with our numbers, so that’s not something we’re going to disclose separately going forward.”
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