On his first outing to the Montreal business community, George Weston’s new CEO, Richard Dufresne, left more than one on their appetite.
European E-commerce Report
The President and Chief Executive Officer noted that the “lightning-fast” growth of e-commerce was disrupting all retailers, but he did not specify the action plan and the amount of investment or projects involved. Expansion caressed by Lob law’s owner (L, 61.46 $).
The CEO from Rouyn Noranda simply said that the network of 1000 grocery stores gives the group a strong competitive advantage against the assault of Amazon (AMAZON, US $ 1772.36) in food.
The group’s grocery stores are all within 10 minutes of all Canadians.
“Those who offer the best product assortment and fast, flawless service will win,” he told the 250 guests at the invitation of the Canadian Club of Montreal.
Amazon is still not very present in the food, because it is very complicated to deliver fresh food to the customer when it suits him.
It’s not for nothing that Amazon wants to open 3000 points of sale and that the Chinese Alibaba imitates, suggested the defector Metro (MRU, $ 45.78).
Order-pick up most popular
Weston will let consumers decide, but the model it advocates is one that combines online ordering and in-store pickup. The majority of Canadians are not home during the day to wait for a delivery person.
Speed is a key factor because “80% of Canadians do not know what they will eat for dinner at 4:00 pm,” Dufresne said, citing a survey. Loblaw also saw a 30% increase in online order volume after cutting the window by 4 to 2 hours for customers to pick up their groceries in stores.
In Asia, the delivery window is already 30 minutes long, he said. In the Provigo and Maxi stores in Quebec, employees will even bring groceries to the customer’s car to integrate this stop into their journey. In Toronto, the group is also testing other approaches such as picking up orders at six subway stations.
For home delivery, Loblaw teamed up with Instacart a year ago. For now, this service is offered in twenty markets. It will be soon in Quebec too.
The traditional stores will continue to be “relevant”, given the importance of the car in the North American culture, ensures the big boss. Mr. Dufresne recalled that e-commerce is still very marginal in the country’s food, with a penetration rate of only 1%, compared to 7% in Britain and Japan.
“The delivery is expensive, but it will change in a few years,” he added.
In office for eleven months at the Weston Bar, Mr. Dufresne has not slipped a bell on the recent reorganization that saw the Choice Properties Investment Trust (CHP.UN, $ 12.25) move from Loblaw to Weston.
This asset realignment is designed to add value to Loblaw, which no longer consolidates Choice Properties’ debt and becomes a pure retailer. At the same time, Choice Properties in Weston has a better-equipped shareholder to financially support future expansion plans.
This complex exchange gives Weston holding a true third leg of growth: real estate. “The fact that the Weston family agrees to reduce their control block in George Weston from 63% to 53% in order to facilitate the transfer of assets is a reflection of the strategic importance it places on real estate,” said Patricia Baker.
Scotiabank announced the redesign in September.
The ultimate motivation of the fourth-generation family will undoubtedly be revealed when its companies make other strategic moves, argued the analyst. “Weston has raised the possibility of adding a fourth pillar to the group in one area of expertise, but the horizon looks more medium term than in the short term,” said Jim Durran of Barclays on November 21st.
The analyst estimated that Weston would have the means to make a purchase of $ 640 to $ 780 million, without compromising its credit rating. Mr. Durran had reduced his target price from $ 113 to $ 96 because the new portfolio structure justified a 15% discount to the value of his assets.
A training actuary, Mr. Dufresne also did not mention the painstaking recovery of baker Weston Foods, which is slow to produce results. For 2018, its revenues will decline by 6% and its operating profit by 20%, predicts Mr. Durran.
This subsidiary represents 2 to 5% of the value of Georges Weston.
Although he is disappointed with the performance of the bakery subsidiary, Mark Petrie of CIBC believes that Loblaw’s performance and the stability of the real estate fund make Weston attractive to the most patient investors. The analyst sets his target price at $ 107.
The title of George Weston has yielded a total return of 21% for 5 years, but its course is at the same level it had in 2001.