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BRAMPTON, Ontario — Loblaw Cos. announced last month that it would shutter 52 underperforming stores across a range of banners and formats over the next 12 months.
Loblaw Cos. announced last month that it would shutter 52 underperforming stores across a range of banners and formats over the next 12 months.
The company, Canada’s largest supermarket operator, has 2,300 stores doing business under such banners as Shoppers Drug Mart, Joe Fresh, No Frills, T&T and Fortinos.
The closures are expected to save the company up to $35 million (Canadian) in annual operating income, while reducing annual sales by about $300 million as the company seeks efficiencies to offset slower growth.
Company executives explained that the decision to close the stores was made following a review of operations subsequent to last year’s Shoppers Drug Mart (SDM) acquisition, a deal that allowed Loblaw to sell more groceries in the SDM drug store locations while adding more pharmacy items in its food outlets.
Loblaw noted that the stores to be closed represent about 1% of the company’s total square footage, and remarked that the closures do not represent a departure from its plans to invest and expand its store network.
Earlier this year, Loblaw announced that it would build 50 stores under a variety of banners in 2015 as part of $1.2 billion capital budget that called for store renovations at 100 or more locations across the nation as the company invests in upgrades after years of bankrolling behind-the-scenes improvements in infrastructure as well as information technology.
Periodic store upgrades are viewed as critical in Canada’s hypercompetitive retail market, where Walmart has been adding Supercenters and Sobeys Inc. significantly enlarged its footprint two years ago through its acquisition of the Canadian assets of Safeway.
The announcement on the Loblaw store closings was made as the company reported its financial results for the second quarter. Loblaw showed a profit of $185 million, or 45 cents per share, in the period through June 20, in contrast to a loss of $456 million, or $1.13 per share, a year earlier. The year-earlier quarter included costs related to the SDM acquisition.
Loblaw remarked that revenue grew to $10.5 billion in the quarter, from $10.3 billion in the prior-year period.
Same-store sales rose 4.2% in groceries and 3.9% at SDM stores in the second quarter.
"I am pleased with our overall performance in the second quarter, as we continued to execute well against our strategic framework," commented Galen Weston, executive chairman and president of Loblaw.
"Looking ahead, the grocery industry remains highly competitive and health care reform continues to put pressure on our pharmacy business. We are well positioned to achieve earnings growth through a stable trading platform, incremental efficiencies, synergies and a stronger balance sheet."
