Sobeys is now considering a new discount format for some of its struggling stores in Western Canada. This comes after sales challenges persisted at Safeway stores in the first quarter.
Francios Vimard, the company’s interim CEO, notes that Sobeys posted positive same-store sales outside of Western Canada during this time, but overall sales were down. The period (which ended August 6) saw a decline in overall sales by 1 per cent to USD $4.7 billion, while same-store sales—excluding fuel—fell by 1.2 per cent. Additionally, excluding Western Canada, non-fuel same-store sales improved by 0.6 per cent. The company’s net earnings were also down 39.5 per cent at USD $55.7 million.
Vimard sees these results as evidence of the company’s need to reduce retail prices, cut costs and improve customer experience. In a conference call with analysts, Vimard noted that these cost reductions would come from the consolidation of distribution centres.
“Our cost base is too high given our sales challenges across the country,” he says. “Therefore, it is critical that we optimize our cost structure so we can reinvest cost savings via the top line.”
Vimard adds that these struggles are “self-inflicted,” stemming from its turbulent acquisition of Safeway Canada and a weak economy in the Western provinces where those stores do business.
Earlier this month, Sobeys enacted a comprehensive plan of everyday price cuts through it’s “Simplified Buy & Sell” initiative. However, Vimard expects customer response to be gradual, with the company likely experiencing gross margin pressure as it is implemented.
