LOBLAW: STREAMLINING INFRASTRUCTURE ON TRACK

ELLIOT ZWIEBACH

TORONTO - Loblaw Cos. is on schedule to begin executing more effectively by the end of the second quarter and stemming the escalating costs that resulted last year from a series of restructuring initiatives, said John Lederer, president, speaking at the CIBC World Markets retail conference here.

"One of our pillar principles is executing flawlessly, and we failed to do that last year, which is not acceptable," Lederer said. "It will be very challenging going forward, but we learned from last year's experience and now it's a matter of implementation."

Lederer said the initiatives - involving changes in supply chain, back-end systems, procurement and replenishment, primarily for nonfood categories - are designed to transform Loblaw from a group of separate banners, each with its own infrastructures, to a multiformat company with a single infrastructure.

"We determined we couldn't be cost-effective operating the way we had for 10 or 15 years in a marketplace in which hard discounters account for more than 30% of the business," he explained. "Historically, we ran separate operations in each region, but going forward, we need to be successful with each format, not just with one or two of them, given the unsustainable amount of square footage growth in Canada."

Lederer said Loblaw is "watching capital carefully because we need to get better usage from our existing footage, and we're not going to add footage unless it's productive."