Loblaw Plans 43 Store Closings

JON SPRINGER

TORONTO — Loblaw Cos. here will close 19 stores under the Provigo banner and 24 cash-and-carry wholesale outlets as part of a “formula for growth” outlined by its new management team in a quarterly conference call last week.

Loblaw also said it would expand 44 of its grocery stores in Ontario to its Real Canadian Superstore concept.

The changes, which will result in combined charges of $112 million to $130 million, were among a number of initiatives discussed by the new management team at Loblaw, installed as the retailer encountered struggles to reshape itself for the future.

Galen Weston, executive chairman of Loblaw, said the company was 41 days into a 100-day review of all key strategies at the retailer, which began when he assumed his new role Sept. 20.

“We have developed a framework for thinking about the business as we go forward,” Weston said in a conference call. “Three words drive that framework: simplify, innovate and grow.”

The Provigo stores marked for closure are all located in Quebec and were described as “underperforming” by officials. Loblaw will take charges of between $35 million and $40 million (U.S.) to cover closing expenses and employee termination costs. The cash-and-carry stores marked for closure were affected by the loss of tobacco sales as the result of supplier changes, Loblaw said. Those closures will cost the company between $11 million and $13 million.

Agreement on a new labor contract, reached last month, will allow Loblaw to convert 44 grocery stores to its expanded Real Canadian Superstore banner, officials said. This move will help Loblaw better compete over the long term and generate significant savings, but will require one-time costs of between $66 million and $70 million, officials said.

Loblaw's ongoing supply chain re-engineering project “is getting gradually better all the time,” according to Mark Foote, the newly named president and chief marketing officer.

During the fiscal third quarter that ended Oct. 7, Loblaw reported earnings of $178 million on sales of $7.9 billion. Sales increased by 4.6% overall, and same-store sales increased by 2%. Loblaw said the announced initiatives would contribute to yearly earnings below its previous forecast of flat to 5% below 2005 earnings.