Loblaw Plans to Grow Discount Banners
Loblaw Companies is on track to open 50 new stores by the end of fiscal 2024, with plans to surpass that number in 2025 as it focuses on its discount banners.
"Our focus is on adding square footage. If we have the right business model that works and resonates with customers, we just replicate it with new stores and in the long term, we win," Richard Dufresne, Loblaw chief financial officer, told investors last week.
Loblaw has been scaling its value-driven offerings, most recently through the elimination of multi-buy pricing at its No Frills banner and its piloting of ultra-discount No Name banners.
"It’s still too early to draw meaningful conclusions," CEO Per Bank said on the No Names format. "We’re still learning and refining our offer. If it works, we will build more. If not, we will pivot, take the learnings and apply them to our discount program."
Beginning this month, the company started lowering prices on approximately 400 SKUs sold at Shoppers Drug Mart as part of a bid to drive food sales at the pharmacy retail banner.
While Loblaw's discount-driven strategy puts short-term pressure on sales, Bank said the grocer is experiencing its best tonnage growth in a decade.
"Long term, it makes more customers come into our stores. Lowering prices, as we have done, will give more tonnage. Of course, it puts a little bit pressure on the overall top line," he added. "But for us, it is really important to be in tune with our customers and give them what they want. And that's value at the moment," which he expects will continue for several years.
"That’s also why we are building many of the new, small stores in our hard discount, because that resonates so well with our customers," he said.
Loblaw opened 25 hard discount stores in the third quarter, including six small-format No Frills stores. The retailer plans to open 20 new Maxi and No Frills stores in the fourth quarter.
Bank also discussed the rapid growth of Loblaw’s T&T banner. In the last three months, the Asian supermarket chain opened three stores in Quebec and Ontario. It's also set to open its flagship U.S. store in Bellevue, Washington, in December.
"Our T&T stores continue to outperform our existing network, and are generating consistent high, single-digital same-store sales growth," Bank said.