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Loblaw ready for Target’s arrival, president says

Tags: Loblaw, Retail, Target
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The new president of Loblaw Cos. Ltd. (L-T) says he’s ready to take on Target Corp. (TGT-N) when the U.S. discounter launches its first stores in Canada next year.

“Let them come,” Vicente Trius told the grocer’s first investor meeting in five years in reply to a question. “Let them taste it.”

He outlined on Tuesday a plan for the coming years that focuses on strengthening Loblaw’s core food offerings -- including adding more ethnic fare and improving customer service -- while also bolstering its PC Financial arm and, possibly, adding a new loyalty card in 2013 and even some new store formats eventually.

By 2013, Loblaw intends to move into e-commerce, starting with selling its Joe Fresh Style apparel online, he said.

And he will put more emphasis on smaller stores in the future rather than giant superstores that the company built a decade ago to try to compete head-on with discount giant Wal-Mart Canada Corp. That overhaul got Loblaw in trouble by 2006, forcing it to scramble to dig out of the difficulties under new management.


Now Trius, a Spanish native who has previous experience at Wal-Mart Stores Inc. (WMT-N) overseas as well as other international retailers, is set to build on Loblaw’s strategy as it faces burgeoning competition, including the arrival of Target in 2013 after its $1.8 billion purchase of Zellers leases.

Trius pledged that Loblaw’s annual margin of earnings before interest, taxes, depreciation and amortization will be 7 percent or better, compared with the current 6.7 percent EBITDA margin, in coming years and that sales will grow at the same or higher rate as the total market.

He said Loblaw will count on introducing more products for new Canadians, who are expected to spend $1 of every $3 in the future. And it’s betting that its multi-format stores -- a combination of discount and conventional, small and larger ones -- will help it fight competition, including Target.

The grocer will continue to add more standalone Joe Fresh stores in coming years, while also expanding the fashion chain globally, after launching its first store in New York last fall and with five in the New York area today, he said. Loblaw has a goal of reaching annual sales of $1 billion a year in its Joe Fresh fashion division. But having missed reaching that ambitious target in the past, it no longer sets a timeline for the objective.

The Loblaw update came after the company disappointed investors last week by warning that 2012 profit will be dragged down by more heavy spending in its five-year-old systems facelift to get products to stores faster and more efficiently.

Galen Weston, executive chairman and scion to the controlling Weston family, said last week that Loblaw will need to spend $70 million to bolster its information technology and supply chain and $40 million to continue pumping up its customer service and product promotions.

Trius said the added spending in improving the “customer proposition” is needed because Loblaw lost some competitive momentum in the last half of 2010 and the first half of 2011, before he took the top position.
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