Canada's largest grocery chain Loblaw Companies Ltd is cutting about 500 jobs across the company, and plans to reinvest the savings into digital and e-commerce services, the company said on October 16 as Loblaw, competitor Metro and US chain Ahold step up their e-commerce plans.
The job cuts make up 0.25 percent of the Toronto-based company’s workforce, will apply for executive and management positions, but will not affect store-level employees, company spokesman Kevin Groh said.
However, some analysts stated that Loblaws and other retailers had expressed concerns over rising minimum wages in some Canadian provinces, while Mr. Groh said the grocery industry faces a variety of pressures and the announced job cuts don't relate to any single one, including raising the minimum wage.
BMO Capital Markets analyst Peter Sklar said in a note that the primary purpose of the layoffs is to mitigate the impact of the upcoming increases in the Ontario minimum wage, which starts in the new year.
“The future is digital, and that’s not lost on us, the need to make a significant investment in omni-channel and e-commerce,” Mr. Groh said, declining to reveal how much the company would save from the cuts, Reuters reported.
For its second quarter retail sales to July 2017, 'Retail segment' sales were C$10,827 million, an increase of $333 million, or 3.2 percent, compared to the second quarter of 2016, with Food retail (Loblaw) same-store sales growth of 1.0 percent, excluding gas bar. Excluding the favorable impact of the timing of Easter, Food retail same-store sales were relatively flat.
However, Loblaw's Drug retail (Shoppers Drug Mart) same-store sales growth were 3.7 percent, with pharmacy same-store sales growth of 2.9 percent and front store same-store sales growth of 4.5 percent.
The job cuts add to the gloom gripping the Canadian retail sector, where nimble online operators have pulled back market share from traditional brick-and-mortar operators.
Reuters said in October that Sears Canada received court approval to start liquidation mid-October, resulting in the loss of 12,000 jobs.
And grocery operator Metro Inc. said it would cut 180 full-time and 100 part-time jobs as part of an effort to modernize and automate part of its distribution network following its decision to buy pharmacy chain Jean Coutu Group for C$4.5 billion.
Metro said it would invest C$400 million ($320 million) over six years beginning in 2018 to automate its distribution network.
Meanwhile, giant US grocer Ahold said that its new digital strategy has resulted in one million new digital users, increased monthly app usage by 76 percent and driven a 179 percent increase in digital coupon activation over last year.
Ahold's new strategy focuses on enhancing promotions and personalization, and with it, loyalty through investments in more relevant digital coupons, an improved mobile app, a recipe center and other digital tools.