Title: A market mover speaks out

Subtitle: Jarislowsky, Fraser Limited is the single largest shareholder of Metro Inc. shares. Lately, despite the looming recession, the company picked up some Loblaws stock too.

 

Stephen Jarislowsky did not become one of the grocery industry’s most influential personalities by following the crowd. Last year, while many Loblaws shareholders were dumping their holdings, Jarislowky, Fraser Limited, the investment firm he heads, was loading up on them.

 

“Loblaws had made a lot of bad moves, but the markets had priced the stock so low that we could not ignore it,” said Jarislowsky, who is thought to be worth close to $1 billion and whose firm manages close to $50 billion in investments, in a recent telephone interview. “They have some wonderful locations and they own much of their own real estate, a fact that gives them a considerable competitive advantage.”

 

Although Jarislowsky maintains a low profile and he is almost unknown to the average grocery sector employee, he is one of the industry’s most powerful stakeholders. In addition to the Loblaws shares that Jarislowsky, Fraser recently picked up, the company is also the largest single shareholder of Metro Inc. More important though, Jarislowsky is simply one of Canada’s most astute business and economic minds. So when he agreed to chat with Canadian Grocer, we just put our feet on the desk, turned on the speaker phone and began taking notes.

 

Jarislowsky has both good and bad news for food sector employees. First off, he predicts four or five rough years ahead for the Canadian economy, with unemployment expected to hit 10 percent. “People say that the problems won’t affect Canada but that is not true,” says Jarislowsky. “Don’t forget that America is our largest trading partner, and if (U.S. companies) stop buying products Canadian business will get hurt too. Furthermore, the average consumer is carrying about 60% more debt today than he was 15 years ago. So with less money and fewer jobs, consumer spending here is bound to take a big hit.”

 

The good news? “People still gotta eat,” said Jarislowsky, a long-term bottom-up investor who relies heavily on solid fundamentals.  “That means that grocery companies should continue to do relatively well, as long as they don’t get themselves drawn into stupid price wars.”

 

Nor is Jarislowsky overly concerned with another industry bugbear: the advent of Wal-Mart stores. “Yes they will be a threat,” admits the 83-year old veteran, who boasts a string of letters beside his name, including B.A., M Sc. and M.B.A. (from Harvard no less, where Metro CEO Eric Richer La Flèche also studied). “But you have to take this in context. Wal-Mart is primarily a regional story. In many, if not most of the urban areas, they simply will not be able to compete with the existing grocery operations’ locations.”

 

Jarislowsky is also not shy about giving advice to the current crop of industry leaders, most of whom were not even born when he began investing. For one, he is not too keen regarding grocers branching too far away from the food business by stocking non-food items. “There are many seasonal items that can do well,” said Jarislowsky. “But they have to watch that they won’t get stuck with excess un-sellable inventory.”

 

One good way to get a good idea of what will move is to check out what grocers in other countries are doing. “Managers need to get out of the office more and see what is going on at store level,” he said. “Every time I travel, whether it be to British Columbia, to Florida or elsewhere, I go and visit local retailers and competitor operations such as pharmacies and convenience outlets, to see how they are doing.”

 

Another trend that Jarislowsky is less than convinced about due to Canada’s ageing population is the continuing advent of ever larger grocery stores.  “Not everybody has the time and money required to make the long journeys to some of those locales, particularly if gas prices continue to remain at high levels,” said Jarislowsky. “So I would not write off those smaller stores just yet. In fact I think that there is room in the market for both types of operations.”

 

 

Photo: A photo of Stephen Jarislowsky is available in the Canadian Business archives.

 

Peter Diekmeyer is Canadian Grocer’s Quebec correspondent.

 

 

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