Sobeys to close 50 stores

(Justin Parsons/QMI AGENCY files)

(Justin Parsons/QMI AGENCY files)

Bill Kaufmann, QMI AGENCY

, Last Updated: 1:26 PM ET

CALGARY — Grocery chain Sobeys will be closing 50 underperforming stores in Canada after its operator, Empire Co Ltd, reported a lower quarterly profit Thursday.

Of the closures, 60% will occur in western Canada, said Marc Poulin, CEO of Empire.

"The majority will close by the end of the year but none before the fall," he said.

"Over the next six to eight weeks, we'll be able to share the official dates of closure."

He said it's hard to say how many employees will be laid off at the stores that each employ about 60 people.

"We'll try to minimize the amount of losses by providing many of our employees opportunities at employment at other stores," he said, noting the affect it'll also have on those stores' neighbourhoods.

"It's never an easy decision to announce a closure — we know it impacts both customsers and staff."

Following Sobeys' $5.8-billion acquisition last November of 200 Safeway stores in western Canada, a comprehensive rationalization review was made of the merged chain, said Poulin.

Empire wanted to double its reach in the Western provinces and help it compete with U.S. retail giants such as Wal-Mart Stores Inc and Target Corp.

Fourth-quarter sales rose about 40% to $5.94 billion, which included $1.59 billion from Safeway stores.

Net earnings fell to $800,000, or 1 cent per share, in the fourth quarter that ended May 3, from $105.9 million, or $1.56 per share, a year earlier.

The company said the closures would result in a decline of sales by about $400 million but did not provide further details.

"Going forward, we will continue to work diligently to successfully integrate the Canada Safeway business ... while at the same time maintaining a relentless focus on securing operational efficiencies and cost reductions across the organization," he said in a statement.

The closures will impact 1.5 million sq. ft. of floor space and lead to a reduction of $400 million in sales, says the company.

Graham said the future of that vacated space can't be revealed due to issues of corporate competitiveness.

- with files from Reuters