Canadian Food Retailer Sobeys Closes 50 Underperforming Stores

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A employee walks by a meat cooler in the grocery section of a Sam's Club during a media tour in Bentonville, Arkansas June 5, 2014.
A employee walks by a meat cooler in the grocery section of a Sam's Club during a media tour in Bentonville, Arkansas June 5, 2014. The tour was part of Walmart Stores Inc. annual shareholder meeting. REUTERS/Rick Wilking

Canadian food retailer Sobeys and its parent company Empire Co. will be closing 50 stores all across the country due to underperformance. Majority of the closing stores are located in Western Canada.

The move will enable the company to gain savings following last summer's $5.8-billion acquisition of Safeway Canada.

"During the fourth quarter of fiscal 2014, Sobeys completed a detailed full review of its retail store network," the company said in an earnings release on Thursday from Empire Inc., parent company of Sobeys. 

"Based on this detailed review, Sobeys has determined that consistently underperforming stores, representing approximately 50 stores ... and 3.8 per cent of the total retail network gross square footage will close."

A note obtained by the Globe and Mail said the 30 closing stores are located in the following:

  • Atlantic Canada: 6 stores
  • Quebec: 1 store
  • Ontario: 7 stores (including the Sobeys Urban Fresh store on Front Street, near Sherbourne, in Toronto, that closed this week)
  • West: 25 stores

CEO Marc Poulin stressed the closures will "strengthen the quality of our store network and is expected, along with other initiatives, to enhance overall performance and net earnings." 

"After an acquisition of this size (Safeway Canada), we thought it made sense that we would re-look at the country as a whole, market by market, [at] what assets we currently had and the ones that were performing and not performing to expectations," Poulin said.

"What's visible today is the part related to the stores that didn't play a strategic role into the long-term future of the company and were consistently underperformers. What's not as visible is the new real estate and development plan that is a result of that analysis."

CIBC analyst Perry Caicco said the scheduled closures will mean an offload of 1.5-million square feet from the national grocery store market, or 0.77 per cent. "Rapid square footage growth has crimped the Canadian market, and Sobeys has been the first to acknowledge that," the analyst said.

"Sobeys has really got to try to figure out within that where it's going to play, and where it can play to a strength of some kind," Financial Post quoted Doug Stephens, founder of Toronto-based advisory firm Retail Prophet. "Otherwise, it is going to be a long, sustained and bloody fight in that middle group."

Sobeys is a middle-ground chain store.

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