Loblaw, Canada’s largest food retailer, has put its turnaround strategy back two years as a result of being too “defensive” in its early stages, Allan Leighton, company president, admitted to shareholders yesterday (30 April).

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The strategy, which is currently lagging six to nine months behind, is now estimated to take closer to five years than the original target of three.


The strategy was announced in February 2007, after the retailer posted its first annual loss in 19 years.


“Sometimes we actually forget we are the biggest retailer in Canada. Sometimes you feel under siege,” Leighton said. “We are back on the front foot, as opposed to the back, aggressive, attacking, but in a very controlled way.”


Loblaw shares dropped 7% following president Mark Foote’s sudden departure last week, but closed up 8% yesterday after it reported first-quarter earnings in line with analyst estimates.

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As part of the turnaround strategy, Loblaw executive chair Galen Weston announced plans to upgrade 20 of its GTA stores, as profit grows 14.8% to CAD$62m (US$60.8m).


The retailer said it plans to invest in the 20 best food stores in the Greater Toronto Area by enhancing the food offering, stocking more local produce and hiring 1,000 extra service staff under a program it called “Back to Best.”


“We are now in a business where our costs are growing faster than our sales. We talk a lot about how to turn this around,” said Weston.


The company can offset some of the increase in diesel costs through its hedging program, and has also cut head office costs and negotiated better deals with some suppliers, he added. “But the pressure on margins will continue. Driving sales is how we will improve this business.”


The company, which has been cutting prices to compete with lower-cost rivals like Wal-Mart Canada, said it will continue to do so.