RetailAnalysis
16 March 2017
Sobeys continues with turnaround plan

As Sobeys reports a challenging third quarter, we look at four key areas that the retailer is focusing on.

1. Simplifying the structure

One of the big areas of improvement identified by new CEO, Michael Medline, is around simplifying the existing structure. The current structure is highly regionalised, making decision making slow and limiting the ability to use the scale of business. By removing some of the complexity, Medline hopes to create cost savings, streamline decision making and be able to respond and capitalise on changes in the marketplace.

2. Reducing costs

With Q3 sales down 2.3% to $5.9bn and same store sales down by 3.7%, reducing costs is an important driver to help turn the financial situation around. Both short term 'quick wins' and longer term improvements to processes have been identified, with work already underway in this area. Taking costs out will allow the business to move faster and more efficiently, reinvest the savings into marketing and improve the bottom line, all crucial things for the retailer to improve its performance. Progress has already been made on getting the product pricing right and stabilising profit margin, but there is still more work to do through cutting costs further and making the organisation easier to manage.

3. Building the brand

One area that Medline has identified a big opportunity to improve, is understanding the customer better and marketing to them more effectively. There has previously been a large focus on price, however customers need a broader and more compelling value proposition than price alone, especially in such a competitive market. The retailer has access to a lot of customer data, but improvements can be made on using it effectively to identify and implement more customer focused initiatives.

4. Improving performance in the West

Since acquiring West coast based Safeway in 2013, integration has been challenging and has impacted the overall business. Medline believes that customer loyalty has been lost during the integration process and is looking to recapture this in the West. Again, building a better understanding of the customer and using this to target marketing and communication will be crucial in attracting customers back. There is also speculation that Ontario based, discount banner FreshCo could be expanded to the West, but no decision has been made yet.

Despite the challenging results this quarter, Medline is confident that the business can be improved. However, he is clear that there is a lot of work to do and that it will take time to see results. He is committed to tackling the issues faced by the company in a methodical manner, with aggressive and bold actions being taken to address the above areas.

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