LOBLAW INVESTS IN NONFOOD CATEGORIES TO GROW SALES

BRIAN DUNN

TORONTO (FNS) -- Loblaw Cos. is expanding its product offerings across Canada with plans to sell gas, hardware and other household goods and electronics as part of its effort to grow sales by 8% to 9% a year over the next five years.

As the country's dominant grocer with sales of $13.7 billion ($21.5 billion Canadian) last year, Loblaw can't grow much further with food, Chairman Galen Weston told shareholders at the company's annual meeting here this month.

"We're first and foremost a food company," Loblaw President John Lederer added. "But we continue to expand our definition of everyday household needs."

Loblaw already has 90 gas stations in western Canada and plans to open four to six in Ontario this year. Nonfood items already account for 35% of Loblaw's sales in the western provinces. It plans a rollout of 30 nonfood items in a few weeks and a total of 100 by year-end.

Lederer said Loblaw will continue to spend $700,000 a year opening new stores and expanding existing ones. It plans to open six superstores in Ontario this year, two in the Atlantic provinces and one in Quebec.

For its first quarter ended March 23, Loblaw earned $80.6 million, or 30 cents a share, compared to $60 million, or 22 cents share, a year earlier. Sales rose to $3.2 billion from $2.8 billion. Weston said the latest period was the company's best quarter ever.

First-quarter results were well beyond expectations with same-store sales up 5%, according to food analyst Perry Caicco, CIBC World Markets, Toronto.

"Certainly, a major part of the overachievement is the long-awaited recovery in the Quebec business as Maxi began to turn around, adding strength to the soaring Loblaw banner in that province.

"As well, we are told that Ontario had a remarkable quarter, particularly in the first two months, with same-store sales apparently up over 6% at the Loblaw banner and even better at Zehrs."

Although Wal-Mart Canada continues to be the fastest-growing grocery operator in Canada with food sales expected to reach $1.3 billion this year vs. $1 billion in 2001, Caicco doesn't feel Wal-Mart is a threat to Canadian grocers at its current growth pace.

"As long as Wal-Mart contains their grocery business to 7,000-square-foot pantries in their discount stores, Canadian supermarkets can breathe easily."