Five takeaways from Loblaw's results

Weston is prepped for a price war
The head of Canada's largest grocer says it's prepared to duke it out in a price war with its rivals in order to stay competitive in a low-inflation environment.

“Price wars are generally not something that we look forward to but we will certainly be ready if the marketplace heats up,'' said Galen Weston, president at Loblaw during a call with analysts Wednesday.

Loblaw is fighting rising food prices
Weston said the company is actively fighting back against rising food prices by going straight to their suppliers.

Earlier this month, Loblaw sent a letter to its suppliers notifying them it will be applying an automatic 1.45 per cent price deduction on all shipments it receives beginning Sept. 4. The letter also stated that the grocer will reject any future cost increases from suppliers unless they are related to higher input costs such as fuel charges or foreign exchange.

Additionally, the letter noted that Loblaw will assume that suppliers agree to the price decrease if the shipments continue past this deadline.

A company spokesman would not comment on whether the grocery owner has received any type of response.

“After two years of over $1 billion in cost increases from our largest suppliers and related higher retail prices across the country, we have asked this group to support us in our initiative to lower prices for our customers,'' Weston said.

It’s in no rush to sell its gas business
Loblaw said it's still looking for a buyer for its network of 212 gasoline-filling stations, which were put up for sale in May, but would only sell if the price was right.

“Gas bars are helpful in building traffic and we acknowledge that and we like that and we want to do more, however we don’t need to own them to be able to achieve that objective,” explained Weston. “So we feel that if we find a good partner that wants to align with us, that this could be a win-win for both parties.”

Loyalty’s a bit part of future plans
When Loblaw closed its deal to buy Shoppers Drug Mart in 2014, one of the big topics of discussion is what would happen with its loyalty programs. Loblaw’s PC Plus program and Shoppers Drug Mart’s Optimum Program are some of the most developed loyalty programs in the country.

When asked if Loblaw was still planning to keep them separate, Weston shared that there is an internal team working on this challenge. “Clearly two big loyalty programs, deep customer databases with a lot of cross shopping in between the two databases and so there is certainly inherent value and we need to figure out precisely the right way to extract that value,” he said, adding that at this point there was nothing to comment on.

Food in Shoppers Drug Mart is working
Shoppers Drug Mart continues to benefit from the expanded food offering which has been introduced into the stores.

Weston explained that two food programs are being deployed across Shoppers Drug Marts. The first is based on a selection of Loblaw’s private label products deployed in nearly 100% of Shoppers stores. That proves to be the anchor of the strong food performance taking place in the Shoppers business.

The second inititiave is what Weston referred to as the “Enhanced’ initiative, where small fresh departments are added into Shoppers stores. “It’s a very exciting initiative in terms of the way that the customer is responding to it, particularly in the urban market,” explained Weston.