Loblaw Faces Long Road to Recovery: Analysts

TORONTO -- Canadian retailer Loblaw Cos., Ltd.'s recently outlined bid to salvage its business by such measures as concentrating on its Joe Fresh Brand of apparel and other nonfoods, slashing food prices, and improving services won't turn the troubled company's fortunes around overnight, analysts warned.

At an analysts' meeting last week, executive chairman Galen G. Weston laid out a detailed strategy aimed at a 10 percent profit increase and 5 percent sales growth within three to five years. The plan includes turning certain stores into "learning centers" where new staffers receive training, and instituting store "clocks" to ensure goods are moved from back door to shelves in a timely fashion.

Weston's acknowledgement that any financial improvement would likely take years bears out the earlier expressed opinions of expert observers.

"Although management just completed a 100-day review of the business with the goal of simplifying its operations and organizational structure, the execution of this plan will likely be a process requiring several years, with many supply chain and store execution issues yet to be resolved," noted Toronto-based Standard and Poor's credit analysts Don Povilaitis and Lori Harris in a Feb. 8 report. "Given the earnings declines for both the fourth quarter and full year, which underscore the magnitude of the challenges facing the company, we do not foresee a recovery in profitability this year."

Povilaitis told Progressive Grocer that his conclusions haven't materially changed in light of the information released at the meeting, a stance echoing his comments to the Toronto Star last week: "I think the management team in place is the right one. I think their strategy is very well thought out and measured and logical. But it will take time. This is not a quick fix.''

Loblaw has faced intense competition from the likes of Wal-Mart, which has recently introduced its Supercenter format to Canada.
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