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Winnipeg Free Press - PRINT EDITION

Loblaw Co. slashing hundreds of office jobs

By: Hugh McKenna

Posted: 10/17/2012 1:00 AM | Comments: 0

TORONTO -- Loblaw Co. Ltd. (TSX:L) is cutting hundreds of mostly head-office jobs as Canada's largest supermarket chain continues a makeover aimed at making it more competitive in the increasingly crowded grocery segment.

"We're managing costs where it makes sense by reducing administrative expense," Loblaw president Vicente Trius said in announcing some 700 management and administrative jobs were being trimmed.

The company, which operates under several banners including Loblaw, Zehrs, and The Real Canadian Superstore, has about 135,000 full-time and part-time employees across the country.

The cuts will affect about 10 per cent of its management and administrative staff.

Loblaw said the layoff notices would begin going out Tuesday and the cuts should be complete within three weeks.

The move will result in a one-time expense of $60 million, to be recorded in the fourth quarter of its financial year.

RBC Capital Markets analyst Irene Nattel called the move a step toward making the company more productive.

"Loblaw is generally not the leanest of organizations and today's announcement is a move toward streamlining functions," Nattel wrote in a report, adding she expects the company to realize annual savings in the neighbourhood of $60 million, starting in 2013.

"But we would not assume that the cost savings will necessarily flow to the bottom line, but rather be reinvested in pricing (and) in-store service to drive top-line performance," Nattel said.

Loblaw spokeswoman Julija Hunter said the move is part of the company's long-term strategic plan as well as to make good on its commitment to become more efficient and increase investment value.

"We are streamlining the organization and reducing costs to strengthen our competitive position," said Hunter, vice-president for public relations.

"We feel confident in this direction -- that the changes will help eliminate duplication, help us prioritize better and focus on our customer experience in our stores more effectively."

The supermarket chain operates in an intensely competitive market against other Canadian grocery chains, such as Sobeys and Metro, as well as other retailers that offer food as part of their lineup -- including Walmart.

Minneapolis-based Target Corp. (NYSE:TGT) is set to enter the fray next year as the U.S. discount retail giant begins opening the first of 124 stores across Canada starting in March and April. Those stores also plan to sell frozen, dairy and dry grocery products being supplied by Sobeys under a deal announced last fall.

Loblaw has been going through a series of restructurings for several years, as it has introduced more non-grocery merchandise items, adopted new store formats and reworked its distribution and information-technology systems.

George Condon, consulting editor for industry publication Canadian Grocer, said he wasn't surprised by the cuts.

"With the increasing competition in square footage of grocery space from Walmart, and next year from Target, everybody is concerned about their profit margins and Loblaws would clearly like to make sure that they have some manoeuvring room," Condon said.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition October 17, 2012 B5

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