New Union Deal Cuts Loblaw’s Labour Costs

Article Excerpt

LOBLAW COMPANIES LTD. $47 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; SI Rating: Above average) is Canada’s leading food retailer by market share, with over 1,000 company-owned and franchised stores across Canada. These include many supercentres, which carry a wider range of food and general merchandise, and are larger than Sobeys’ stores. The company has struggled in the past few months as it overhauls its distribution system. The new system should cut the company’s costs and help it compete with Wal-Mart, which is adding more grocery items to its stores. Loblaw is also converting more of its stores into supercentres. A special deal with its Ontario union in 2003 let Loblaw pay supercentre workers less than its regular store workers. The company has just signed a new union contract that should let it convert more stores into supercentres. Labour peace will cut Loblaw’s risk, but the stock may stagnate until it starts to realize the benefits of its restructuring. Loblaw is a hold…

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