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Industry NewsSobeys’ new CEO indicates changes to come soon

Sobeys’ new CEO indicates changes to come soon

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Thursday, May 4, 2017

Since Michael Medline was brought on board as CEO of Sobeys and its parent, Empire Company Ltd., the veteran retailer has been planning big changes designed to turn around the struggling grocer.

In a one-on-one interview with the Globe and Mail, Medline said big changes are imminent as Sobeys works to improve its customer service. Medline, the former CEO of Canadian Tire Corp. Ltd., is “gearing up for the fight of his life in a business transformation he dubs ‘Project Sunrise,’” the Globe reports.

Medline is overseeing a turnaround plan that entails slashing costs, slimming down the company’s “labyrinthine” structure, reconnecting with customers, especially at Safeway, and fixing problems in Sobeys’s western division, the Globe reports. He must do all that in an increasingly intense grocery landscape, and in a period of food deflation that makes a recovery even tougher.

Medline is also tasked with turning around the company’s financial results, reported in its most recent quarter as a $30.5-million profit compared with a $1.4-billion loss a year earlier, mostly owing to the write-down of the Safeway operation. During the quarter, sales slipped to $5.9-billion from $6-billion.

“Our results are not where they need to be,” Medline said.

Empire’s Class A shares tumbled almost 39 per cent last year but, year-to-date, are up nearly 34 per cent – essentially coinciding with Medline’s arrival at the helm, the Globe reports.

Medline is also wrestling with Sobeys being alone among major chains in not running a discount chain in Western Canada at a time when rivals, including low-cost U.S. titans Wal-Mart Stores Inc. and Costco Wholesale Corp., are ramping up their grocery aisles.

As a Canadian Tire veteran, Medline can attest to the effort it took that retailer to survive the Walmart assault (and later Target Corp., which came and failed in Canada) by focusing on the domestic chain’s strengths, such as tires, tools and other areas where Walmart didn’t excel, the Globe reports. Now at Sobeys, Medline plans to follow a similar path and focus on its strengths of higher-margin fresh produce, meat and seafood, while bolstering its Compliments private label products. That won’t be easy, with formidable competition from leading grocer Loblaw Cos. Ltd. and its high-profile President’s Choice and other store brands. “We need to up our game,” Medline says. “We have to convince people that we’re the place to come and shop.”

Medline says he will not drop the Safeway name in favour of Sobeys because Safeway is a valuable banner in the West. And while Medline says he’s flattered that Jim Pattison of rival Overwaitea Food Group is interested in buying available Safeway or Sobeys stores, they’re not for sale. Medline is looking into expanding Sobeys’ Ontario-based FreshCo discount chain to the West, but probably not right away because of other priorities.

As for the imminent changes, Medline says: “we’re not messing around here. We’re going to get at it very soon. I don’t see any reason to elongate the process. I think it’s good for the customers and it’s not fair to the employees, who have been hearing about this restructuring for over six months.”

Click here to read the entire Globe and Mail article (subscribers only).

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