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10/16/2017

Loblaw lays off 500 office workers in cost cutting efforts

Company says it is committed to growing key areas such as omni-channel
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Loblaw Companies Limited says it is laying off 500 workers from its office operations.

President Sarah Davis wrote in a memo to employees that some of the employees were informed Monday and many of the positions will be eliminated immediately.

She said the business faces growing pressures from both new costs and competition, and remains committed to reducing costs and running efficiently.

Davis said Loblaw is making major investments in omni-channel, financial services and other growing areas and expects to create hundreds of near-term jobs.

Spokesman Kevin Groh said the job cuts would come from its offices around the country including Calgary, Toronto, Winnipeg, Halifax and Montreal.

He said Loblaw employs about 200,000 people across Canada.

The decision comes after Metro announced last week it would eliminate about 280 jobs starting in 2021 as the grocery-store chain modernizes and automates its distribution network. Metro said the choice was unrelated to its efforts to offset added costs from Ontario's rising minimum wage.

Grocers and other retailers have expressed concerns over rising minimum wages in some Canadian provinces.

Groh said the grocery industry faces a variety of pressures and the announced job cuts don't relate to any single one, including rising minimum wage.

BMO Capital Markets analyst Peter Sklar, however, said in a note that "we believe the primary purpose of the layoffs is to mitigate the impact of the upcoming increases in the Ontario minimum wage."

The first major increase takes place in the new year when Ontario's minimum wage rises from $11.60 per hour to $14.

Sklar estimated the minimum wage increase would have a $150-million impact on a pre-tax basis on Loblaw next year.

The announced layoffs could save the company $75 million a year on a pre-tax basis, Sklar said. Between those savings and passing on the cost to consumer through price increases, he said "we believe Loblaw will largely be able to mitigate the impact of the increase."