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IN PHOTO: Executive Chairman of Loblaw Companies Limited Galen G. Weston speaks at their annual general meeting for shareholders in Toronto, May 5, 2010. REUTERS/Mark Blinch

Canada’s largest food retailer, Loblaw, announced closing of its 52 unprofitable stores by next year in its second-quarter report, which would cost the company around C$120 million [$126 million]. The company said that all the banners and formats would be affected by the closures, which would be distributed across the country while making the announcement. Loblaw Companies has more than 2,300 stores, including Loblaws, No Frills, Wholesale Club, Shoppers Drug Mart, Provigo and Extra Foods.

The earnings report said the closings of the stores would cut the annual sales of the company approximately by C$300 million per year. However, the operating income of the company would improve roughly by C$35 million to $40 million.

The list of stores would include gas bars, Joe Fresh standalone stores and select pharmacies and grocery stores, reported CBC news. Loblaw President and Executive Chairman Galen Weston Jr. said the company would intend to focus on increasing efficiency as growth has slowed. However, he also asserted the closures would hardly affect the growth of jobs in its network of stores. “Yes, it's an increase, but it's not radically different. It doesn't signal any kind of change from a strategic perspective,” he added.

According to Reuters, Loblaw had planned on opening more than 50 stores and renovating more than 100 by investing more than C$1.2 billion. But with the second quarter earnings, they would have to close down the same number of stores. Chief Executive Officer at HRC Advisory Anthony Karabus said it was better to move on by cutting losses.

It is believed Loblaw’s grocery business has been facing stiff competition from Walmart stores, local rivals like Sobeys Inc. and Metro Inc. and the pharmacy business has also been running low as price controls have imposed on generic drugs for health programs and government purposes. The company is believed to be closing all its underperforming stores, said an academic in retailing, reported CBC.

Contact the writer at priya.shayani@gmail.com.

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