Loblaw closing 22 stores and launching home delivery

Loblaw closing 22 stores and launching home delivery

It’s facing competitive pressures

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THE CANADIAN PRESS/Brampton: Loblaw Companies Ltd. says it has finalized a plan that will result in the closure of 22 unprofitable stores across a range of its banners and formats.

The decision comes as the retailer plans to bring home delivery services to two of the country’s biggest cities in the next several months.

Loblaw (TSX:L) is partnering with California-based Instacart to deliver food and other pantry staples from Loblaws, Real Canadian Superstore, and T&T locations to customers in Toronto starting Dec. 6 and Vancouver starting in January.

“We are a customer-led company adding new ways to make shopping easier,” said Galen G. Weston, Loblaw CEO, in a statement.

Both moves come as retailers face increasing pressure on several fronts, including discount retailers such as Walmart, online retailers such as Amazon and pending minimum wage increases in some provinces.

Amazon’s recent acquisition of Whole Foods, including its 13 Canadian locations, increased speculation that Canada’s grocers would have to step up on home delivery offerings.

The announcement came Wednesday as Loblaw reported that it more than doubled its third-quarter profit compared with a year ago as its results were boosted by the sale of its gas bar business.

The retailer said its profit attributable to common shareholders totaled $883 million or $2.24 per diluted share for the 16 weeks ended Oct. 7. That compared with a profit of $419 million or $1.03 per diluted share for the same period last year.

Revenue totaled $14.19 billion, up from $14.14 in the third quarter of 2016.

The results included a $432-million gain on the sale of the company’s gas station business to Brookfield Business Partners. Excluding the deal and another one-time item, Loblaw says it earned an adjusted profit attributable to common shareholders of $549 million or $1.39 per share for the quarter, up from $512 million or $1.26 per share a year ago.

The store closures, which are expected to be mostly complete by the end of the first quarter next year, follow an announcement last month that Loblaw would cut 500 corporate and store-support jobs.

The company expects to record $155 million in charges, the majority of which are expected in the fourth quarter, and to realize approximately $85 million in annualized savings.

To date, Canadians have few options for grocery deliveries with companies like Grocery Gateway and select large chains offering the service in limited locations.

Walmart announced in March it would start delivering groceries to customers living in certain parts of Toronto and the surrounding area. Shoppers must purchase at least $50 worth of food before taxes and pay a $9.97 fee.

Most grocers, including Loblaw and Walmart, have opted to focus on in-store pick-up for online orders instead. Loblaw launched its click-and-collect offering in 2014 and it’s now available at nearly 200 locations.

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