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Report On Business Sobeys to close stores, chop jobs in wake of Safeway deal

A Sobeys store in Calgary on June 13, 2013.

Todd Korol/The Globe and Mail

Grocer Sobeys Inc. is set to announce on Thursday that it is closing underperforming stores and cutting jobs following its $5.8-billion acquisition of rival Safeway Canada as it looks for savings in an intensifying food fight.

"After the acquisition of Safeway, we did a thorough review of our store network across the country," Sobeys spokesman Andrew Walker said late Wednesday.

"We identified a number of underperforming stores and we have made the decision to close those stores."

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The closings could involve as many as 50 to 60 stores, said one industry source, but company officials wouldn't confirm the numbers.

Mr. Walker said the retailer was in the process of communicating the plans to its employees. On Thursday, the company will provide more "context" when it releases its fourth-quarter results, he said.

Sobeys and other grocers have felt the squeeze of a more crowded market as U.S. discount titans add more stores – and food aisles – in unprecedented expansion initiatives. Among them, Wal-Mart Canada Corp. is launching more supercentres with full supermarkets and Target Corp. rolled out almost 130 stores in Canada since it entered this country in early 2013.

Domestic players have countered by forging their own alliances to shore up their business, vowing to slash costs. Grocery leader Loblaw Cos. Ltd. acquired Shoppers Drug Mart Corp. for $12.4-billion.

Sobeys, which is owned by Empire Co. Ltd., has pledged to cut $200-million in annual costs within three years of its takeover, which closed last November – half of which within the first 12 months.

Its upcoming retrenchment will entail the "closure of consistently underperforming stores that will make us stronger," Mr. Walker said on Wednesday.

Late last year, in a controversial move, Sobeys told its suppliers it was retroactively cutting their prices by 1 per cent and not accepting increases in 2014, with some exceptions, to generate savings. And in March, the company said it was consolidating manufacturing and distribution operations and cutting jobs in two regional offices.

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On Wednesday, the company said in an internal Safeway memo that it plans to close a juice and grocery plant in Alberta on Aug. 29, affecting 38 employees.

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