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RETAILING REPORTER

Loblaw Cos. Ltd. , in the midst of turning around its operations, faces further uncertainty with the loss of a senior executive that observers say was being groomed to take over its top operating position.

Dalton Philips, Loblaw's chief operating officer, is leaving the country's largest grocer at the end of March to become chief executive officer of Wm Morrison Supermarkets PLC, the fourth-ranked grocery chain in Britain.

Industry observers said his departure may delay Loblaw's efforts to reverse its fortunes - although it may not be a fatal blow.

His exit leaves a "serious void" at the grocer's senior ranks, Patricia Baker, retail analyst at Scotia Capital, said in a note yesterday. "It appears his departure comes as a surprise and to an extent impedes turn activities at Loblaw, in so much as management plays a role in the execution," she wrote.

Loblaw has seen a number of senior managers coming and going since Galen G. Weston, scion of the controlling Weston family, took the reins as executive chairman in late 2006.

He and Allan Leighton, deputy chairman and a close adviser to the Westons, have been focused on overhauling operations after a failed expansion into superstores and non-food products in Ontario to take on discount titan Wal-Mart Canada Corp.

The reshufflings have included the departure of high-profile retail executives such as Mark Foote, now CEO at discounter Zeller, and Frank Rocchetti, who left Loblaw last spring.

"I haven't seen too many retailers shuffling as much as they have in the past few years," said Tom Stephens, a former Loblaw executive who now runs Brand Strategy Consultants. "It tells us that they're very uncertain about what the future is."

Loblaw spokeswoman Inge van den Berg, who is moving on to a merchandising position within the company, said in an e-mail that Mr. Philips' staying on for two months ensures a smooth transition. The senior team will "continue to work to complete the company's turnaround plan," she added.

Mr. Leighton will announce a successor to Mr. Philips "at the appropriate time."

While Loblaw's more recent results have shown signs of recovery, Mr. Leighton has taken a cautious approach. He has warned that while food inflation helped all grocers bolster their business in early 2009, deflation will now squeeze Loblaw and others.

Mr. Philips, a former Irish retail executive, joined Loblaw three years ago and was both well respected and well liked, insiders said. "He's a tough guy to replace, excellent leader and colleague," said one former employee.

He was believed to be the top choice to replace Mr. Leighton, who is also president. Mr. Leighton was expected to leave Loblaw in the next couple of years as the company's turnaround took hold.

LOBLAW COS. LTD (L) Closed: $35.57, down 44 cents

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