Loblaw to close 52 North American stores

Closures will save up to $40 million; no word which locations will be shuttered

Loblaw Companies Ltd. announced Thursday it will close 52 underperforming stores across Canada and the U.S. as it begins rationalizing its sprawling empire, which includes Shoppers Drug Mart and Joe Fresh, No Frills, T&T, Zehrs and Fortinos, among other banners.

Despite questions from analysts on the company’s second-quarter earnings call, Loblaw executive chairman and president Galen G. Weston declined to say how many stores from each banner would be affected.

The stores have not been notified. The decision to close the stores was made after a review of operations following the acquisition of Shoppers Drug Mart in 2014.

Loblaw operates more than 2,300 stores, according to the most recent annual report. Closing 52 stores will save as much as $40 million in annual operating income, despite the loss of $300 million in sales. Weston said the company was focused on finding efficiencies as growth slows. In a normal year the company would close 10 to 15 stores, he said.

“Yes, it’s an increase, but it’s not radically different and it doesn’t signal any kind of change from a strategic perspective in any of our businesses; and we continue to plan to invest and grow in our network.”

The closures are distributed across the country and will affect about one per cent of the company’s total retail square footage. They include two Joe Fresh locations in New York, grocery stores, drugstores and several gas bars across the entire network of stores in Canada.

Weston said Loblaw is learning how to upgrade stores more cost-effectively. He also said Loblaw is working closely with provincial health ministries to identify innovative services that could be provided to customers at the pharmacy level to improve their overall health.

Joe Fresh president Mario Grauso has previously said the brand’s agreement with J.C. Penney to operate Joe Fresh departments inside the struggling U.S. retailer’s stores will not be renewed in January.

Joe Fresh launched at 683 J.C. Penney stores two years ago.

Earlier this year, Loblaw announced that it would add 50 new stores under a variety of banners in 2015, as part of $1.2 billion in capital expenditures, including store renovations.

Canada’s retail market has become increasingly competitive as companies such as Loblaw and Walmart have sought to diversify their sales and make their stores into one-stop shops for daily necessities.

In June, Sobeys and Safeway owner Empire Co. Ltd. said it was cutting 1,300 jobs from its back-office and logistical operations, following a June 2014 decision to close 50 stores.

RBC Capital Markets analyst Irene Nattel said one of the wild cards in 2015 will be how many former Target leases get picked up by Walmart. Still, she predicted that momentum in Loblaw financial results should accelerate in 2015-16 as it reaps the benefits of a previous investment in the company’s supply chain. By the numbers

Profit: Loblaw reported a secondquarter profit of $185 million, or 45 cents per share in its latest quarter, compared with a loss of $456 million or $1.13 per a year ago.

Earnings: Loblaw says it earned $350 million or 85 cents per share in the quarter compared with an adjusted profit of $297 million or 74 cents per share a year ago.

Revenue: Income grew to $10.54 billion, up from $10.31 billion a year ago.

Sales: Same-store sales — sales at the same stores, open more than a year — were up 4.2 per cent in groceries and 3.9 per cent at Shoppers Drug Mart stores.

Share price: Shares set a 52-week high on Thursday, gaining $2.29 or 3.39 per cent, closing at $69.84. With files from Star news services