Sobeys Sees Potential in FreshCo Format

STELLARTON, Nova Scotia — Sobeys here said last week it sees potential for its FreshCo discount format outside of Ontario but has no plans to expand the format beyond the single province at this time.

“We see real reason to be optimistic for more growth from FreshCo,” Bill McEwan, president and chief executive officer, told analysts.

“We’re very pleased with the customer response and with the sales and margin trends, and now that we’ve cut through the very heavy conversion process and our concentration is back on the business, we expect to be able to turn sales leverage into margin improvements, which means good upside on the bottom line and continued growth on the top line.”

FreshCo is a format Sobeys unveiled in mid-2010 that includes an expanded selection of perishables at discount prices that doesn’t require customers to compromise on quality for price.

The company operates 39 FreshCo stores, with plans to open three more during the fourth quarter, McEwan said.

He made his remarks during a conference call with industry analysts to discuss financial results for the third quarter and 39 weeks that ended Feb. 4.

During the 13-week quarter net income for Sobeys after minority interests fell 12% to $73.7 million (U.S.), while sales rose 2.9% to $4 billion and same-store sales were up 1.2%, with aggregate inflation of 1.5%. For the 39 weeks net earnings rose 0.7% to $225.5 million, while sales rose 3.2% to $12.2 billion.

McEwan said the difference between comp sales and inflation did not mean Sobeys was losing market share despite a drop in tonnage. “The entire industry is under pressure, and the ebbs and flows do not indicate any reason for concern or alarm.

“We were very satisfied that the business continued to grow in line with the kind of tonnage and transaction size and traffic [the industry is experiencing].”