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Loblaw intends to close 52 stores.

TORONTO -- Loblaw Cos. will shutter 52 underperforming stores, including Shoppers Drug Mart units, over the next year, giving up revenue to boost its bottom line.

Canada's No. 1 grocer said the closing of the outlets--which also include supermarkets, stand-alone Joe Fresh clothing outlets and gas stations--is expected to cut its yearly sales by about $300 million (Canadian) but add $35 million to $40 million to its operating income.

At the same time, Loblaw plans to spend more than $1.2 billion to build 50 new stores across the country this year and renovate or upgrade more than 100.

President and executive chairman Galen Weston noted during a conference call with analysts that the retailer typically shuts 10 to 15 units every year. "It's not radically different, and it doesn't signal any kind of change from a strategic perspective in any of our businesses," he said of the planned closings. "We continue to plan to invest and grow in our network."

With its big debt load and slower growth than in previous periods, he said, the company is getting better at managing capital efficiency, making sure it doesn't have the "inefficient assets in the business."

Weston said Loblaw's e-commerce pilot has shown positive results and is expected to be expanded. He also welcomed Walmart Canada's launch of online produce sales.

E-commerce is going to be a significant contributor to food and drug retailing over the coming years, "and we're well positioned," he said.

Loblaw's "click and collect" offering lets customers order groceries online for pickup at Toronto-area stores. Walmart began a similar operation for digital fresh-fare orders in greater Ottawa.

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Publication:Chain Drug Review
Geographic Code:1CANA
Date:Aug 10, 2015
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