Sobeys doesn’t need A& P, CEO says

Reassures investors in wake of loss to Metro in bid war

Sobeys Inc. chief executive Bill McEwan told investors yesterday that the Nova Scotia-based food retailer is in good shape despite losing out to Metro Inc. in a bidding war for A&P Canada, which ran the lucrative Dominion banner in Ontario.

“Make no mistake: we haven’t lost any momentum in Ontario,” Mr. McEwan told investors and analysts yesterday at a back-toschool retail conference hosted by Scotia Capital.

He conceded the province “has been, and will be for the foreseeable future, our biggest challenge and our biggest opportunity,” but added, “it would be inappropriate to leave any impression that we are disappointed in any way.”

Mr. McEwan said Sobeys will benefit from a rejuvenated business now that the competition has ceased, adding the retailer has hastened its expansion plans in the province since losing out on the deal.

“Not just new stores, but a lot of expansions and renovations,” he said.

Metro, the third-largest supermarket chain in Canada behind Sobeys and industry titan Loblaw Cos., trumped Sobeys in July when it announced it would buy A&P’s 236 stores for $1.7-billion.

The move was viewed as a puzzling loss for Sobeys, which had the money and the desire to buy A&P but found the final price too costly.

Both Sobeys, which has 380 stores under various sizes in Ontario, and Metro, which until the acquisition had operated just a handful of outlets in Ottawa, wanted to strengthen their presence in the province and in particular in the Toronto area, a strong market with A& P’s best assets.

Mr. McEwan said Sobeys has successfully turned around its western Canadian business, which had “gone awry” under the Garden Market concept, a format that focuses principally on fresh food such as produce and fish.

He noted the retailer has converted 72 stores to the Sobeys banner in Western Canada, refocused the grocery business around groceries, and shaved retail prices 15% across the board in order to make the business more competitive.

The retailer has also relaunched its line of house-branded goods this year, which competes with the highly successful President’s Choice line at Loblaw. McEwan said 3,000 of the privategoods had been rebranded under a low and midprice category under the name Compliments.

Mr. McEwan said Sobeys is more competitive on pricing than ever before and is focused on customer service and improving its assortment, including categories such as health and beauty products.

In the first quarter ended Aug. 6, profit at Sobeys rose 3.4% to $48.2-million, or 74¢ a share, from $46.6-million, (71¢), a year ago. Sales rose 9.6% to $3.3-billion.

Financial Post hshaw@ nationalpost. com

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