Loblaw to invest $1B in major store expansion, create 20,000 new jobs

TORONTO – Loblaw said Tuesday it is planning to build 50 new stores and renovate 150 others this year in its latest effort to adapt to a rapidly evolving food retail sector.

The grocery and pharmacy giant said the $1.3 billion revamp and expansion project would cover stores of various banners. It is not yet releasing information on where the new stores will be located.

The number of new stores announced is not unusual, said Edward Jones analyst Brittany Weissman, though Loblaw (TSX:L) plans to renovate slightly more outlets than before.

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    Loblaw made a similar announcement early last year, when it said it would build 50 new stores and improve more than 100 others. Later, in July 2015, Loblaw said it was closing 52 locations across Canada that had fallen short of expectations – more than the 10 to 15 stores it would typically shut down.

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    “They close some stores each year, they open some new stores each year,” Weissman said.

    Catherine Thomas, Loblaw’s director of external communications, said in an email that the expansion would add about 5,000 new store employees while creating roughly 15,000 construction jobs.

    The new jobs would beef up Loblaw’s employee base by 2.6 per cent. Loblaw employs about 192,000 full- and part-time workers, according to its most recent annual information form.

    The company plans to invest $1 billion in the expansion, while Choice Properties REIT (TSX:CHP.UN), a real estate investment trust, is expected to contribute $300 million.

    “We continue to invest in our business in ways that matter for the Canadian economy and the millions of Canadians who shop with us each week,” Galen G. Weston, the company’s president and executive chairman, said in a statement.

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    The announcement is the company’s most recent move to compete in an industry that has seen waves of change in recent months.

    Inflation and the dropping value of the Canadian dollar earlier this year triggered sharp increases in some food prices, and both Loblaw and rival Metro have dipped their feet into the waters of online shopping and pickup services.

    Just last month, Loblaw announced that it was expanding its Naturally Imperfect line of discount produce.

    Thomas said the completion and success of multiple IT and supply chain investments over the past few years now allows Loblaw to increasingly focus its capital on stores. The investment announced Tuesday would also go towards increasing Loblaw’s e-commerce, IT infrastructure and supply chain projects, the company said.

    Loblaw will likely expand its click-and-collect program, said Weissman. The service allows customers to shop online and pick up their order at a participating store.

    In February, Weston said the company planned to accelerate the program’s rollout beyond its current 39 stores.

    Loblaw already operates more than 2,300 stores. They include Loblaws, No Frills, Shoppers Drug Mart and Joe Fresh apparel outlets.

    The company’s most recent quarterly results in February showed profits slipped more than a third compared with the previous year. However, the decline was primarily due to costs and accounting items associated with unusual items, rather than store performance, Loblaw said.

    It will release its first-quarter results on May 4.