Grocery Business

November 18, 2015

Loblaws, Metro, cagey on long-term Internet plans
More than two decades after Netscape went public, grocers struggle to find the correct online mix

Two of Canada’s three largest grocery retailers released earnings results during the past 24 hours. However as usual, it was the grilling that Loblaw’s and Metro’s CEOs, Galen Weston and Eric La Fleche, underwent during their conferences with investment analysts this morning, that shed the most light on the grocers’ ongoing operations and future plans.

Both companies reported stronger same store sales numbers, driven in large part by price increases, as well as growing earnings per share data, and both discussed their challenges in what La Fleche described as a highly “promotional and competitive market.” Metro for example, which reported total sales of $2.8 billion during the fourth quarter, is continuing efforts to reduce shrink and labor hours where feasible, and is pushing its growing discount offering to take on the increased threat from Wal-Mart, particularly in certain communities.

Metro is also looking to leverage continuing growing demand for healthier products said La Fleche, such as natural organic, gluten and hormone free offerings, particularly in full service outlets in major urban centers. Health food demand in rural and discount outlets, while growing, is doing do at a slower pace. Metro will also continue to invest heavily in its network, and has set aside $300 million for store renovations and upgrades during the coming year, and another $50 million for intangibles such as software, information technology applications and scheduling capabilities.

The acquisition of the Premiere Moisson and Adonis brands will also continue to play a role said La Fleche. A new Adonis store was opened during the four quarter of last year and another one will be added just before Christmas of 2015. As for Premiere Moisson, the bakery brands will continue to be rolled out within Metro stores, though this will be preceded by rigorous testing in select markets.

Loblaws won’t rule out home delivery
Another thing that Metro and Loblaw have in common is their inability or unwillingness to commit to long-term Internet strategies. While Metro’s LaFleche said that the retailer was “well positioned to compete in ecommerce” and that convenience was a big part of the Metro brand, he refused to make any announcements about possible home deliveries, though he hinted some online options would be tested during the 2016 fiscal year.

Weston from Loblaws was also non-committal, noting that the Ontario based grocery chain’s “Click and Collect” food distribution program was generating positive results in its test phase, and would be expanded in the coming months. As its name implies, the program enables Loblaw’s customers to select a range of products on the company’s web-site, place an order, and then collect the basket, thus eliminating the in-store shopping. However Weston refused to rule out home deliveries at some future point adding only that, “you never say never.”

Weston also confirmed, as announced during the previous quarter, that 52 Loblaws outlets of various types, would be shuttered during the coming months, though he did not provide details, and that the company would take a $300 million annual revenue hit from the closures.

Weston also took issue with what he called “(Bay) street math,” which links the company’s stronger sales to higher food inflation costs, arguing that much of Loblaw’s increased revenues stemmed from customers shifting their purchases to higher value items, though there too he did not provide details.



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