Yahoo Finance Loblaw to spend $2 billion to expand store network, renovate nearly 600 locations
Loblaw (L.TO) said it will spend more than $2 billion in 2023 to expand its store network, renovate hundreds of locations and improve its supply chain, a move the grocery retailer says will create 6,000 jobs.
The company said in a news release that the increased investment will include "new discount-format supermarkets in underserved communities, an increase in pharmacist-led health clinics, hundreds of carbon reduction initiatives across its business, and continued development of a modern distribution centre in the Greater Toronto Area."
Loblaw had forecast in its last quarterly conference call that it planned to increase capital spent in 2023 to invest more in its store network and distribution centres. The company said the increased level of investments will largely be funded through the sale of real estate assets, as Loblaw has more than $1.8 billion in "excess real estate" that it plans to sell at a more rapid pace over the next few years.
The grocery giant said it will use the investment to open 38 new or relocated stores, as well as renovate or convert nearly 600 locations.
"We're probably running a bit behind in the industry in terms of square footage growth, and we're doing a bit of catch-up," chief financial officer Richard Dufresne said on a conference call with analysts in February.
The new and relocated stores will be across the company's brands, including No Frills, Maxi, T&T, Independent, City Market and Shoppers Drug Mart. A key area of focus in the plan is to get more discount locations to customers, Loblaw spokesperson Catherine Thomas said.
The bulk of the renovations will be at Ontario stores, with more than 330 locations slated for improvements this year. Loblaw will also have 14 new or relocated stores in the province. Western Canada will see 18 new or relocated stores and nearly 140 renovations, while Quebec will have 3 new or relocated stores and more than 60 renovations. Atlantic Canada will have 3 new or relocated stores and more than 40 renovations.
"The renovations range from expansions in our fresh hall, to updates to our front end and full refreshes of stores to modernize the look and the experience for customers," Thomas said.
"We also continue our focus on reducing the environmental footprint of our stores, introducing energy savings and GHG reductions through new equipment."
CIBC Markets analyst Mark Petrie said in a note following the company's initial announcement about the investment that the increased capital spend is "in large part to re-ignite retail square footage growth." He noted that the company's conversations in Quebec from Provigo stores to discount brand Maxi "have done well in a market hungry for discount options and where Walmart is under-penetrated."
"Overall, we expect square footage to remain below market growth and do not see risk to competitive balance unless competitors leap frog Loblaw’s plans," Petrie wrote.
Loblaw's investment comes as it faces continued public pressure and scrutiny over increases in sales and profitability amid soaring food prices. The grocery giant has repeatedly said it is not causing or profiting from food inflation, pointing to higher supplier and input costs as the key factors driving price increases.
Loblaw said in its last quarterly conference call that it expects food prices "will remain elevated" throughout the first half of 2023 as the grocery giant faces more than 1,000 requests for suppliers for "significant" cost increases.
Loblaw currently employs approximately 220,000 people, and said the increased investments are expected to create more than 6,000 new jobs in retail, supply chain, technology and construction.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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