Galen G. Weston is concerned about lacklustre sales growth at Loblaw Cos. Ltd. but said all grocers are feeling the pressures of a skittish consumer.
"We are concerned about sales growth - no retail business likes to see flat or declining sales," Mr. Weston, executive chairman of Loblaw, said at the annual meeting in Toronto on Thursday in response to a shareholder's question.
"However, if you look at what's happening in the marketplace, you'll see all of our competitors are, by and large, operating at similar levels of sales. That's an indication of a market that is under significant consumer pressure."
And while Loblaw's first-quarter sales slipped 0.6 per cent, on a brighter note its profit jumped almost 23 per cent, a reflection of disciplined management of the business and the help of a stronger Canadian dollar.
"What you're seeing, in terms of earnings growth in the business, is the beginnings of the results of the work that we've spent many, many years putting in place ... ," said Mr. Weston, scion to the wealthy Weston family that controls Canada's largest supermarket chain. "We feel the performance of the business has been reasonably good in difficult situations."
Loblaw is completing a five-year turnaround project aimed at fixing a troubled business that was unable to get food to store shelves on time, resulting in empty shelves - and its first annual loss in almost two decades in 2006. That fall, Mr. Weston stepped in as executive chairman and Allan Leighton, a British retailing veteran, took the post of deputy chairman and, a couple of years later, became president, essentially running the business.
By late summer, Mr. Leighton will be replaced by Vicente Trius, a native of Spain and another seasoned merchant who cut his retailing teeth at discount giant Wal-Mart Stores Inc., Loblaw's nemesis.
Mr. Trius, who previously headed a European division of French retailer Carrefour SA, will soon be settling into his new home in Toronto, having recently bought a house in the city, Mr. Weston said. In the meantime, Loblaw has to grapple with a tough retail market in which consumer confidence is low and consumer debt is high, he said. "We remain cautious about our outlook."
Mr. Weston praised Mr. Leighton for having a "profound and positive impact over the people he has worked with" and having established a solid foundation for Loblaw.
Mr. Leighton's accomplishments include reviving tired store concepts, setting up a "world-class" supply chain and 12 consecutive quarters of growth in earnings before interest, taxes, depreciation, and amortization (EBITDA), Mr. Weston said.
Still, a shareholder complained that Loblaw's stock price "is a disaster." Mr. Weston, who comfortably stepped out from behind the podium to take shareholder questions, was direct in his response. "We are a long-term investor as a family," he said. "The business is being managed in that way. Over the next five to 10 years, I think you'll be very happy to hold on to the stock."
Loblaw's shares, which peaked at more than $76 apiece in 2005, traded below $30 just a few years later and, today, are above $40.