Foote Faces Turnaround Challenge at Loblaw

CHRISTINA VEIDERS

NAME:
Mark Foote

TITLE:
President and chief merchandising officer, Loblaw Cos.

CHALLENGE:
Leverage new systems for greater efficiencies while learning the ropes of food retailing.

TORONTO — In one sudden leap, Mark Foote, president and chief merchandising officer of Loblaw Cos. here, went from selling hockey skates to food.

The announcement last year that after 27 years Foote was leaving Canadian Tire, the venerable hard goods retailer known for its auto supplies and sporting goods, to become Loblaw's executive vice president of general merchandise came as a surprise to many analysts. They had believed Foote, who was president of Canadian Tire Retail, was next in line to become the company's chief executive officer.

“Although Canadian Tire won't acknowledge it now, he was likely to take over the top job there,” said John Chamberlain, retail analyst, DBRS, Toronto. Within two weeks after Foote's departure, Canadian Tire's CEO announced his retirement.

Most analysts considered Foote's defection a win for Loblaw at a time when the food retailer was trying to stop the bleeding from the integration of a new IT system and warehouse consolidation that proved disruptive to the supply chain and resulted in empty shelves and untimely deliveries on seasonal merchandise.

Foote, 46, an MBA graduate of the University of Toronto, is considered a seasoned retail executive. He was once named one of Canada's All-Star Executives by Canadian Business magazine, primarily for his efforts to expand Canadian Tire's store base and for growing the “20/20” store concept, which consisted of 20% more retail space and a goal of producing 20% more sales.

In overseeing general merchandise at Loblaw, Foote was responsible for all procurement and merchandising in nonfood, including gasoline. Within six months of assuming that post, he was elevated to president and took over many of the duties of John Lederer, who stepped down as president in a management shake-up after three decades at the chain.

Foote, who is now responsible for all food and general merchandise sourcing, procurement, merchandising, information systems and supply chain activities, is part of a new management team at Loblaw led by Galen G. Weston, executive chairman.

FIRST 100 DAYS

The team said it plans this week to announce a new strategic plan, the results of a 100-day evaluation on how to turn Loblaw around.

Foote faces a number of immediate challenges at Loblaw. First and foremost, he needs to learn the food business, said Perry Caicco, an analyst with CIBC World Markets, Toronto. He is not alone on that front, as others who have joined the team have either department store or general merchandise backgrounds.

“It's an entirely new industry, although there is some resemblance to his previous experience with stores and customers. The supermarket business has its own set of challenges and its own dynamics, flows and supplier relationships, and those take a while to figure out,” Caicco said.

While Loblaw's investment in IT and supply chain systems initially negatively impacted the business, Caicco said the kinks have been worked out and progress is being made on making the systems cost-effective and efficient. “The supply chain is heading in the right direction now,” Caicco noted. “Foote will steward that toward greater efficiencies.”

Prior Loblaw leadership invested heavily in general merchandise to prepare for Wal-Mart Stores' rollout of supercenters in Canada, three of which debuted in Ontario last year. However, as Caicco pointed out in a research report on Loblaw, there has been a direct relationship between the rise of general-merchandise offerings at Loblaw and the deterioration of operating and capital performance.

According to Caicco, Foote will have to rethink Loblaw's general-merchandise strategy from square one. While it's difficult to say exactly what will be done, Caicco says he expects to see a change in categories and how they will be marketed.

“They may streamline and might not be in as many categories as they were before,” he said. “They haven't yet said this, but I think they may have less emphasis on big-ticket goods.”

Another hurdle for Foote is to help Loblaw regain its image as a premier food retailer. “For the longest time, Loblaw was seen as the place to shop as a high-end, value-added food store. Their public perception slipped,” said Chamberlain, adding Loblaw needs to reestablish ownership on the food side.

BROADENING THE BASE

Foote can apply what he learned in reengineering Canadian Tire's stores to pull in more food shoppers. The Canadian Tire experience had been largely geared to male shoppers. Foote was able to move that experience to a shopping experience for couples that appealed to females as well with the addition of home decor items, Chamberlain said.

Canadian Tire stores were merchandised closer to what a Sears should be, he said. Under Foote, “there was a dramatic change in the way the stores operated, and it changed the basket size and frequency of shopping,” he added.

Loblaw will look to expand its customer base by attracting not only the Wal-Mart shoppers, but also high-end food consumers, said Chamberlain. “Foote is the guy with that kind of feel” to position the stores to attract a broader shopper base, he said.

As always, there is the challenge of the competition. As Loblaw focused on gearing up for Wal-Mart and got bogged down on the supply side, the competition — Safeway, Metro and Sobeys — were getting better by fine-tuning their offerings, especially in perishables. As Chamberlain noted, “You no longer had to drive to a Loblaw to get a good apple.”

A STRONG LEADER

While Loblaw remains a compelling challenge for Foote, analysts are betting on his business retail smarts, his team leadership skills and his overall disciplined approach to processes to turn things around.

“The company is going through quite a transition right now in terms of management and strategy,” Caicco said. “I'd say Foote would be perceived to be a beacon of strength in that environment because of his senior-role experience, his steadiness and discipline. I'd think he'd bring a dose of reality and maturity into the management group.”

“As much as anything, Foote is very much a team leader,” Chamberlain said. “People will gravitate to go to work for him. That will be his key strength. It isn't so much he knows exactly what item to put on the shelf, but he knows how to get the right people on the team that will know how to get the right item and promote it.”

While there are big challenges ahead for Foote, Chamberlain is betting that five years from now Foote's move to Loblaw will pay off, with some valuable assists from the new management team. “I really believe they will be successful over the medium term.”