Loblaws plans to close 22 unprofitable stores and launch home delivery

Loblaws said Wednesday it plans to close 22 unprofitable stores. The retailer also says it will begin rolling out an internet-based home-delivery service starting in December.

Online service to begin in Toronto Dec. 6, expanding to Vancouver next year, company says

Loblaws plans to shut 22 unprofitable stores, with the bulk of the closures coming by the end of the company's first quarter. (Aaron Vincent Elkaim/Canadian Press)

Loblaws said Wednesday it plans to close 22 unprofitable stores, with the retailer adding it will begin rolling out an internet-based home-delivery service starting in December.

The announcements come almost a month after the company said it was cutting approximately 500 corporate and store support positions.

Loblaws declined to release a list of which stores will close.

"What you've got is a healthy company pruning its garden," Jim Danahy, managing principal and CEO of CustomerLAB, told CBC's Meegan Read.

The grocery retailer, which also announced its third-quarter results, said it expects to take charges of approximately $135 million, with most expected in the fourth quarter of 2017. At the same time, Loblaws said the changes will allow it to save about $85 million annually.

Loblaws store banners include Zehrs, Provigo and Fortinos. It also has several discount grocery chains, including No Frills, Extra Foods and Real Canadian Superstore. The company also owns the Shoppers Drug Mart chain.

The company said it  expects the closures will be mostly done by the end of the first quarter of 2018.

Delivery service

At the same time, Loblaws said it will begin rolling out an online home delivery service, beginning Dec. 6 in Toronto. The service will launch in Vancouver in January 2018, with expansion to additional Canadian markets next year.

The company is teaming up with Instacart, an on-demand grocery delivery service, which operates in 150 markets in the United States.

Online orders from Loblaws, Real Canadian Superstore and T&T stores will be shipped to the homes of customers by Instacart in as little as an hour, the companies said.

In the Toronto region, the move puts it up against Grocery Gateway, which is held by family-owned Toronto grocer Longo's.

Danahy said Loblaws knew it had to get into online delivery and faced competitive pressure to do so.

"This is totally predictable," he said. "It's been a question of how to find the scale and the formula and the technology as they all evolve in what is nothing less than a space race."

For the third quarter, Loblaws said it had  profit attributable to common shareholders of $883 million or $2.24 per diluted share — up from the  $419 million or $1.03 per diluted share for the same period last year.

Loblaws attributed the big bump in profits to a $432-million gain it made on the sale of its gas station business to Brookfield Business Partners.

The company's revenue for the third quarter totalled $14.19 billion, up from $14.14 billion year over year.