The worst part of Loblaw’s multiyear restructuring plan is over, and consumers can now look forward to improved service, George Weston Ltd. chairman W. Galen Weston told the company’s 80th annual meeting Tuesday.
“Over the last 12 months, customers have generally not seen the best of what we can do for them as a result of our challenging restructuring,” Weston said. “The worst of this is now behind of us.”
Loblaw’s first-quarter earnings hit $62 million up from $54 million in the first quarter last year as sales increased to $6.5 billion from $6.35 billion.
Going forward, Weston told shareholders, “the restructuring is designed to make the food retail division competitive for the long term,” repeating a message that he began delivering while still chairman of Loblaw, before handing the job to his son.
Although publicly traded, both Weston and Loblaw are controlled by the Weston family. Apart from the grocery business, Weston has a major bakery business.
Weston said Loblaw’s senior management team, “while under real pressure to perform, is responding correctly and forcefully in ways that reveal the strengths and quality of the company as well as its opportunities and challenges.”
Loblaw recently announced several executive changes in an effort to improve performance.
Allan Leighton, a long-time advisor to the family, became president of Loblaw last month, replacing Mark Foote, formerly head of retailing of Canadian Tire Corp., who had been named to the post in September 2006 when Galen G. Weston, 32, succeeded his father as executive chairman and chief executive of Loblaw.
Weston said Loblaw’s five-point plan, which builds on the work already done over the first year of the turnaround, “will result not only in Loblaw becoming the best again… it will provide a new and stronger foundation for the company’s long-term performance and profitability.”
George Weston Ltd. recently reported a first-quarter profit of $131 million, up 26% from a year-earlier $104 million on price increases and cost reductions. Sales for the period ended March 22 ticked up 1.6% to $7.34 billion from $7.2 billion in the year-earlier period.
But, despite the improvements, “the big story these days is the unprecedented increase in commodity prices,” said Galen Sr.
For instance, he said, the price of hard red spring wheat rose from under $5 a bushel in early 2007 to a recent peak of over $20.
It has since dropped back below $10, but this still means the company’s costs have doubled on this important bakery ingredient, he said.
Many other commodities on which the company depends have also reached unheard of pricing levels, such as gasoline.
“We have over 8,000 trucks across the country distributing food stuffs. That gives you some idea of the extra costs that the gas is having within the context of our business,” he said.
“Whatever the best manufacturers and the lowest cost retailers can do, consumers will be faced with significant cost increases in food products.”
