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Galen G. Weston takes over daily operations at Loblaw; Shoppers head to exit

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Galen G. Weston is taking more control of the family run business as he assumes the role of president at Loblaw Companies Ltd., Canada's largest grocer, amid the abrupt departure of two senior executives.

Weston, who is also executive chairman of the company, said Thursday that previously his responsibility had been to oversee strategy at the food retailing giant. Since that has been established in the last few years, he'll now handle the day-to-day operations, including opening up more communication with shareholders.

"I think the time feels right for me," he told analysts during a conference call following the early morning announcement.

Weston said his family, who also controls Loblaw's parent company, George Weston Ltd. (TSX:WN), has undergone some major changes in the past year, including the $12.4-billion blockbuster acquisition of the Shoppers Drug Mart chain.

"So it shouldn’t surprise anyone that the family, through me, are getting closer to the business to make sure that the vision that we’ve established, that supported the investment, actually gets delivered and executed," he said.

The move came as Loblaw (TSX:L) announced that president Vicente Trius was leaving to return to Brazil for personal reasons, including recent losses in his immediate family.

Domenic Pilla, president of Shoppers Drug Mart, will also be quitting Loblaw to pursue other opportunities. He will stay with the grocer until the end of the year and be replaced by Mike Motz, Loblaw's executive vice-president and chief merchandising officer.

Weston said management changes can be "destabilizing" for a company, but the timing was right in this case.

"Having said that, if you had to pick a time, this is a good time given the strength of the business, the consistency the business has performed and the shift in the strategy and priorities that need to be executed going forward," he said.

He reassured analysts that the corporate shuffle was not due to the incorporation of Shoppers, which he said has been going according to plan.

"We feel optimistic about our ability to deliver... there should not be any concern," he said.

As president, Weston will be at the forefront of the business, which has evolved from a food retailer to include drug stores, real estate holdings and financial services.

"The new structure puts Galen Weston squarely in the driver's seat, aligning shareholders and management responsibility," analyst Irene Nattel of RBC Dominion Securities, wrote in a note to investors.

"Although Mr. Weston has been part of the C-suite (senior executives) since 2006, his role has been more strategic; it is now becoming more operational and focused on execution. Mr. Weston also confirmed his/Loblaw's intention to continue to build stronger lines of communication with investors."

Nattel said the changes "should in no way be interpreted as a sign that anything is amiss."

An analyst note from CIBC echoed that view, adding that the changes could be a result of a refocus on the company on daily execution rather than strategy, which meant it no longer needed "more experienced leaders."

It also suggested it might be because Loblaw's organizational structure has become difficult for those outside the company, like Pilla, to operate.

"In the end, these moves won't make a big difference for Loblaw shareholders," said the note.

Other changes in the corporate structure Thursday included Richard Dufresne assuming the role as chief financial officer at Loblaw. He will also remain as chief financial officer at George Weston.

The company's former head of finance, Sarah Davis, will become chief administrative officer and will be tasked with finding efficiencies across the organization. Grant Froese will become Loblaw's new chief operating officer.

Loblaw is navigating its way through a competitive time in the grocery industry with several U.S. retailers, like Walmart and Target, trying to snag a share of the Canadian marketplace.

While the company is expected to report its financial results on July 24, Loblaw said preliminary figures point to strong same-store sales in its supermarkets and pharmacies, a key performance indicator for the retail industry.

Loblaw completed its purchase of the Shoppers Drug Mart chain of stores earlier this year and is working to incorporate the two businesses more fully, including offering Loblaw's President's Choice products, produce and prepared meals in some Shoppers locations.

Besides, its main grocery store business, which includes several other banners, Loblaw also operates the clothing line Joe Fresh, real estate trust Choice Properties, drugstore chain Shoppers Drug Mart and financial services division President's Choice Financial.

Loblaw shares dipped 32 cents to close at $48.96 on the Toronto Stock Exchange.

Follow @LindaNguyenTO on Twitter.

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