Loblaw Plans Technology Investments, Asset Review

ELLIOT ZWIEBACH

TORONTO — Loblaw Cos. here expects to invest heavily over the next two to three years to improve its infrastructure, Allan L. Leighton, president and deputy chairman, said last week at an investor conference here sponsored by Scotia Capital.

Having already centralized procurement, upgraded its supply chain and improved its balance sheet, the chain was moving ahead on investing in information technology when the recession hit, Leighton noted.

“Our IT is probably the world's worst among food retailers of our scale,” he said, “and I often tell the story, which is true, that we sometimes have bought parts for bits of our IT off eBay.”

He acknowledged that Loblaw's infrastructure has not kept pace with the rest of the business, “and you cannot run a business of this scale if you don't have a great IT infrastructure.

“We have started to improve it, but it's a big program and very costly. But it needs to be done, and it's probably going to take us another two or three years to get to where we need to be.”

Once those systems are in place, the chain's merchandising and operational consistency should improve, Leighton said, as the company provides employees with the right tools. “Sorting the infrastructure out isn't just about having great information — the biggest win you get is that it makes it easy for people to do their jobs,” he explained.

Loblaw also needs to eliminate some of its “dead cats” — what Leighton described as parts of the business that Loblaw needs to discard before they stink.

Among those dead cats, he said, are banners “where I don't think we're very clear as to what we actually do with them. We've got to have some clarity over each of our banners.

“For example, our Superstore business in Ontario has not been successful. We've invested a huge amount of money in it and aren't really getting a return for it, so we've got to find a solution for that.

“And in Quebec, the Loblaw banner has been a hybrid. We picked a lot of bad sites for those stores, and we've got to address that — probably by converting them to Maxi & Co. [a price-oriented banner] because that would match up better with the demographics.”

Leighton said he's very bearish on Loblaw's future “because we're keeping the business very, very focused, and we're halfway through [the process of getting] to where we need to be, though getting there will take another couple of years.

“We're doing all the right things as we try to trade the business for today and build it for tomorrow. And actually we see this whole recession as a bit of an opportunity because we've got firepower that other people don't have.”

The next 12 months are going to be very tough on retailers in terms of top-line sales, Leighton predicted.

He said he believes the move from recession to recovery will resemble a duck's head — continuing to move downward for a while like a duck's neck, then bottoming out and rising gradually like a duck's back.