Loblaw: first loss in 19 years

Canadian retailer Loblaw recorded its first annual loss in 19 years due to problems in streamlining operations in the face of rival Wal-Mart Canada and increasing costs. Canada's biggest supermarket chain, which last month delayed disclosing full financial results, said its fourth-quarter loss was CAN$756mn compared with net income of CAN$201mn a year ago.

For the full year Loblaw's 2006 loss was CAN$219 mn compared with profit of CAN$746mn in 2005. Loblaw, which operates stores under banners including Great Canadian Superstore, Maxi, Fortino's and Zehrs, recorded CAN$800 million in costs during the year to writedown the value of purchasing the Quebec-based Provigo chain, acquired in 1998.

"Loblaw lacked the structural agility and vigour to address its changing environment," the retailer said in its annual report. The grocery retailer and its competitors, including Sobeys Inc. and Metro Inc., have been improving their fresh-food offerings and streamlining logistics in order to better fight Wal-Mart, which opened its first grocery stores in Ontario last fall.

Loblaw spent the past two years expanding its Western Canadian Superstore format in Ontario. The large warehouses carry food, furniture, clothing, housewares, toys and cosmetics. But Loblaw's supply chain got bogged down in the midst of the process, which coincided with a company-wide computer systems upgrade and warehouse consolidations. It resulted in out-of-stocks, which hurt sales, and Loblaw incurred costs to warehouse excess merchandise. (Source: Edmonton Journal)