One year after announcing it was closing 50 “underperforming” stores across the country, grocery giant Sobeys Inc. said it is now going to cut 1,300 jobs by 2017 nationwide in a move toward streamlining costs.
The jobs will be related to a consolidation of the company’s distribution centres.
“We project that these closures, as well as the realignment of other back office support functions which were initiated at the end of the fourth quarter, will reduce headcount by approximately 1,300 jobs,” the company said in a conference call to analysts.
Three of the company’s 27 distribution centres will be closed. Those slated for closure are located in Milton, Calgary and Winnipeg. The company said it will open two new centres, one in October 2016 and the other in March 2017, including an automated centre in Rocky View, Alberta which was purchased from Target Canada for $50 million.
“The [automated] facility will be retro-fitted for automation and when renovations are complete, it will have the capacity to efficiently distribute dry grocery to stores in Alberta, Saskatchewan and part of Manitoba,” Sobeys said in its MD&A released June 25
The jobs lost will be a net reduction and do not include those employees that will be transferred to other distribution centres.
Cost of $53.4 million associated with this restructuring were recognized in the fourth quarter of fiscal 2015 ended May 2, 2015, even though the centres will not close until 2016. These costs include $27.7 million in severance, $15.7 million in onerous leases and $9.7 million in write-downs.
Overall company sales were down in Q4 2015 due to previous store closures. Consolidated sales were $5.77 billion in Q4 2015 – down $173.8 million or 2.9% compared with the previous quarter.
“The decline in sales, as expected, was primarily the result of retail store divestitures, store closures associated with the network rationalization and the decline in oil prices impacting fuel sales in the food retailing segment,” the company said in its MD&A.
“These negative pressures on sales have been partially offset by food inflation in the food retailing segment.”
However, consolidated sales increased 14.2% to $23.9 billion in fiscal 2015.
The Sobeys brand includes such retail banners as Safeway, IGA and Thrifty Foods and according to the chain’s website, it employs more than 125,000 people.
Sobeys bought the Canadian arm of Safeway Inc. in June 2013 in a deal worth almost $6 billion. At that time, Safeway had 223 stores and 12 manufacturing facilities across Canada.
