- Category: Investing
- Last Updated on Friday, 19 October 2012 19:14
- Written by Grocery News
On Tuesday October 16, 2012 Julija Hunter of Loblaws announced the layoffs of 700 employees or 10% of its administrative workforce, affecting only the head office in Brampton, Ontario; According to Loblaw Cos, the job cuts will streamline the business resulting in a more efficiently run organization, it is also inline with the company's long term strategy since 2007. New technological systems at Loblaws -- SAP enterprise application software and systems have made many jobs reduntant resulting in inflated costs (new systems don't require as much data to be inputed manually). Between 2009 and 2013, Loblaws will attempt to reduce the number of separate systems from 250 down to ~100. Because the layoffs will eventually result in improved earnings per share (annually up by at least +10/share), investors reacted to the news positively; On the day of the news, Loblaw Cos stock price (TSX:L) was up +2.5%. It's important to remember that Loblaw Companies remains a major job creator in Canada, over the past year the company added 2000 employees, total workforce = 135,000.
Canadian spending (stagnant), higher wholesaler costs (cost of merchandise/food input costs), intense competition (half of Walmart Canada's locations now have grocery section) are some of the reasons why major retailers are laying off many of their highest paid workers (Loblaw Cos is not alone, recently Hudsons Bay Company and Shoppers Drug Mart have also trimmed their workforce; HSBC's information services department will move from Toronto to St. Louis, resulting in 210 jobs lost; Shoppers Drug Mart lays off 80 people over the next 12 months due to changes in Canada drug laws).
The last round of corporate layoffs at Loblaws happened in 2007 when 800 people were fired. They represented 15% of head office employees.