Loblaw ties up with Instacart to launch home deliveries

(Reuters) - Canadian grocery and pharmacy chain Loblaw Cos Ltd said on Wednesday it is tying up with San Francisco-based Instacart to offer home delivery service in Toronto and Vancouver, as it tries to carve out more market share in a brutal retail sector.

A Loblaw supermarket is pictured in Ottawa, Ontario, Canada, November 14, 2017. REUTERS/Chris Wattie

The company will deliver food and other pantry staples from Loblaw’s Real Canadian Superstore and T&T supermarkets to customers in Toronto starting Dec. 6, and in Vancouver starting in January, Loblaw Chief Executive Officer Galen Weston said on a conference call with analysts.

Home delivery startup Instacart counts Whole Foods, Costco, Target and more than 100 other retailers as customers for grocery deliveries. Instacart charges a delivery fee to bring items to customers.

Like many other Canadian retailers, Loblaw has lost market share to bigger American rivals, and it will also face cost pressure next year from rising minimum wages in its home province of Ontario.

Amazon’s recent purchase of Whole Foods - which included Canadian locations - has put retailers against the wall. They have had to revamp their online and delivery services, as well as keep pricing competitive.

Loblaw’s Weston said he still expects “2018 will be a very difficult year.”

Earlier on Wednesday, Loblaw, which also operates Shoppers Drug Mart, said it would shut 22 unprofitable stores.

The company beat analysts’ expectations for third-quarter profit and revenue thanks largely to a rise in same-store sales at its Shoppers Drug Mart outlets, which rose 3.3 percent in the quarter, up from 2.8 percent growth a year ago.

Same-store sales growth at its Loblaw groceries was flat at 1.4 percent in the quarter ended Oct. 7, compared with the year-earlier period.

Loblaw said the store closures would come across its brands and formats and would largely be completed by the end of the first quarter of 2018.

It had earlier said it would cut 500 jobs, planning to reinvest the savings in its digital and e-commerce businesses.

The Brampton, Ontario-based retailer expects to record charges for the layoffs and store closures of about C$135 million, most of which will be factored into the fourth quarter.

It expects annualized savings of about C$85 million from the changes.

Excluding items, the company earned C$1.39 per share, beating analysts’ average estimate of C$1.30 per share, according to Thomson Reuters I/B/E/S.

Revenue was flat at C$14.19 billion, but beat analysts’ estimate of C$14.10 billion.

Loblaw shares were up 2 percent at C$70.39 Wednesday morning on the Toronto Stock Exchange.

($1 = 1.2742 Canadian dollars)

Reporting by Taenaz Shakir, additional reporting by Nishara Karuvalli Pathikkal in Bengaluru; Editing by Patrick Graham and Bernard Orr