Grocery Business

June 25, 2015

Sobeys confirms 1,300 job cut total
Grocer targets new distribution efficiencies

Sobeys confirmed today that in efficiency generation efforts would lead to a reduction 1,300 posts, in its distribution network and back-office operations. Those efforts got a boost earlier this month when Sobeys struck what Poulin called a “lucky break,” by acquiring a $50 million, 1.3 million square-foot distribution center, from Target, which is divesting its Canadian assets. The new center, which is located in Rocky View County, near Calgary, will be fully-automated, similar to Sobeys’ Vaughan, Ontario and Terrebonne, Quebec facilities.

In a conference call with analysts earlier this morning, Poulin also commented on the Empire Group’s (Sobey’s parent company) falling sales, referring to the current grocery retail environment as “competitive.” Like all the major food retailers, Sobeys is having trouble passing on rising prices, particularly on imported products, to consumers. The weak Canadian dollar, which makes foreign purchases more expensive in local currency terms, has been the major culprit. Meats have been hit especially hard, with many customers balking at the increased costs by shifting to cheaper cuts, Poulin said.

Empire Group’s sales fell to $5.77 billion during its fourth quarter ended May 2, 2015, from $5.94 billion during the same period last year. Poulin attributed the drop to retail store divestitures, store closures made to rationalize the network, and the drop in oil prices which hit fuel sales.

The picture was somewhat brighter on a same store sales basis, with revenues increasing by 0.8% during the quarter, and by 2.1% when the effects of the fluctuating oil prices are filtered out. However food inflation, which ran at 3.9% during the fourth quarter remains a real issue, implying that same store sales are decreasing in real terms.

That said, Sobeys will be investing big dollars in the coming years to beef up those numbers. The company will spend between $600 million and $650 million, in both 2016 and 2017, to modernize its retail and distribution networks. Those efforts should pay off well on Sobeys’ wholesale arm, which has been the source of positive growth. Recent changes in the tobacco industry will also play to the company’s strengths said Poulin.

Poulin also said that Sobeys’ purchase of five Co-op Atlantic stores is complete, that the deal took effect on June 21rst and the operations will be rebranded. He also described customer reaction to Sobeys new Paradise Newfoundland store as “very good.”

Sobeys got further good news earlier this week when unionized workers at Loblaws rejected a tentative deal with the company. Local 1000a of the United Food and Commercial Workers, which will be in a legal position to strike in early July, has threatened to take action, if its demands are not met.


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