Loblaw Companies Limited for years has been trying to redesign their strategies to take on increasing competition in the retail food industry. Using cost leadership strategy, Wal-Mart has snatched some of Loblaw’s market share. Rising costs and a stagnating retail food market led Loblaw to diversify the products and services that it offers.
Due Loblaw adopting International Financial Reporting Standards (IFRS), it was able to have more comprehensive reporting for each department such as retail food and financial services. As a result Loblaw sees its financial services as the most lucrative option for their capital.
Their strategy to increase other services has lead to a heavy investment of company profits in order to build the management information systems (MIS) required for the financial services. As a result, company executives have warned of overall lower returns for the next few quarters. Inevitably, this will deflate the stock price of Loblaw but once they have established the infrastructure for the financial services will the stock price return to its previous value?
The future for Loblaw looks fierce as Metro Inc. strips Loblaw of unit sales, and not to mention the emergence of Wal-Mart and Target next year.
Loblaw gets boost from higher food prices, apparel sales, financial services