Sobeys Cutting Stores, Jobs

Canadian grocer Sobeys has revealed plans to shutter about 50 underperforming stores and eliminate jobs in the wake of its acquisition of Canada Safeway, in a bid to stay afloat in an ever more competitive supermarket landscape which includes more Walmart and Target stores.

The move comes after a full review of the chain's retail store network, undertaken during the fourth quarter of its fiscal 2014. "Based on this retail review, Sobeys has determined that consistently underperforming retail stores representing approximately 50 stores … will close," said Stellarton, Nova Scotia-based Empire Co. Ltd., Sobeys parent company, in its fiscal 2014 Q4 and full-year results.

Around 60 percent of the affected stores are in western Canada, the company noted, adding that the "rationalization will strengthen the quality of Sobeys' store network and is expected to improve net earnings as a result of cost savings," although "it will result in a reduction in future sales of approximately $400 million [US $374 million], or 1.9 percent of total sales."

According to Empire, the costs associated with the closures will come to CAN $169.8 million (US $158.8 million), including CAN $137.1 million (US $128.3 million) for severance, site closings and other expenses.

Additionally, Empire reported that Sobeys' Q4 same-store sales edged up 0.2 percent.

As part of the CAN $5.8 billion (US $5.4 billion) acquisition of Canada Safeway, Sobeys had to sell 23 western Canadian stores. Last February, the grocer entered into agreements to sell 29 stores in the region for about CAN $430 million (US $402.2 million).

Sobeys owns or franchises more than 1,500 stores across Canada under such banners as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods and Lawton's Drug Stores.