Good day, ladies and gentlemen, and welcome to the Loblaw Companies Investor Update conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, April 18th, 2023. I would now like to turn the conference over to Roy MacDonald. Please go ahead.
Thank you very much, Michelle. Good morning, everybody. Thank you for joining us this morning on short notice. Welcome to the Loblaw Companies investor update to discuss this morning's press release dated April 18th, 2023. I'm joined in the room this morning by Galen Weston, our Chairman President, and by Richard Dufresne, our Chief Financial Officer. Before I begin, note that today's discussion will include forward-looking statements about Loblaw and George Weston and the corporate actions disclosed today.
Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, including those set out in Loblaw and George Weston's current annual MD&A and AIF, which are both available on SEDAR. I'll remind everybody that as we are in our quiet period pending the release of our Q1 results on May third, today's call will focus solely on today's announcement. With that, I'll turn the mic over to Galen.
Good morning, and thank you, Roy. When Richard and I returned to Loblaw, we convinced Robert Sawyer, a top retail veteran and member of our board, to come out of retirement to join us as Chief Operating Officer. We shared the belief that with our strategy and the right focus, we could bring retail excellence to life at Loblaw. Since then, Loblaw has consistently delivered excellent results and set itself on a path for future growth. We also knew Robert's time with us would be limited and have been thinking for some time about a transition that would ensure we maintain the focus on retail excellence when he retires at the end of 2023. As COO, Robert continues to make great contributions to the company and none more important than his mentoring of our young leadership team. It's too soon to say goodbye.
We still have lots of work ahead, but I wanna take this opportunity to publicly recognize Robert for his partnership, authentic leadership and enthusiasm, and for setting a tone and focus that we will all carry forward. Last year, we initiated a global search for the right leader who would sustain that trajectory and enable me to step back from day-to-day management of the business. Today, I'm pleased to announce that we found that leader in Per Bank, currently the CEO of Denmark's Salling Group, will join us as president and chief executive officer by early 2024. Today, Per oversees a purpose-driven family company established more than a century ago. It's the nation's largest retailer and the leading grocer with 1,700 stores across various banners and geographies.
It has the top discount chain, large format hypermarkets, compelling e-commerce, loyalty and private brand programs, and a range of growth initiatives that stretch beyond traditional grocery. The parallels with Loblaw are quite remarkable, as is Per's record of retail excellence driving growth. I have a great sense of excitement and confidence for Per's arrival as President and Chief Executive Officer. At which point I will remain Chair of Loblaw while keeping my role as Chair and Chief Executive Officer of George Weston Limited. In that position, I will work closely with Richard and our two operating companies on vision, strategy, and capital allocation. Similarly, Richard will remain Chief Financial Officer of Loblaw and President and Chief Financial Officer of GWL. Our management board has enormous depth and is otherwise unchanged.
I see this as maintaining and ideally enhancing the combination of skills and approach that has been so successful for us over the last few years. In the meantime, delivering our 2023 plan remains our priority. Expect us to remain focused on our strategic agenda, retail excellence, advancing growth initiatives, and developing our longer term connected health. Expect us to continue our focus on clarity and accountability instilled in the last two years and for us to continue to deliver consistent financial performance against our framework. I'll just turn the floor over to Richard to say a few words.
Thank you, Galen. I'm excited about our plans for this year. I will reiterate what Galen said. We have a lot of the year ahead of us and much work still to do to deliver that plan. That remains our focus. At Loblaw, we have a very strong culture and team, and we have set ourselves on a path of consistently delivering strong operational and financial performance from our unique assets. Retail excellence is steady state as we build on our successes and continue investing wisely in our growth initiatives.
With Robert's deserved retirement approaching, his shoes were always going to be hard to fill. However, having spent some time with Per, it's clear that he is a seasoned grocery retailer with a broad and deep skill set, much like a slightly younger version of Robert. He has a strong track record of driving significant growth, organic and through acquisitions in a leading national retailer. I'm looking forward to him joining and working with him over the years to come to continue to build on Loblaw's recent strong performance. I'll open the line to questions now.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press the star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. First question comes from Irene Nattel of RBC Capital Markets. Please go ahead.
Thanks, good morning, everyone. Two questions actually. I'll start with the first. Maybe, Richard, you alluded to this in your answer, but what was it in particular about Per that made him the right choice to lead Loblaw on a go-forward basis?
Yeah, great question. You can imagine we asked ourselves that, quite a lot over the last, you know, number of months. First of all, we took our time with this process. You know, it was a proper global search. Ultimately, we had a short list of candidates of five people. Per was the clear standout. Robert had the opportunity to spend time with him, walking stores. Of course, I spent an extraordinary amount of time with him personally, myself, and we had an active search committee on the Board, who all had a chance to spend meaningful time with Per.
What we, you know, believed strongly, in this search process that, you know, we needed somebody who had deep retail knowledge, retail pedigree and retail excellence. You know, that's what we've built the success of Loblaw's performance over the last few years on. Per, you know, rang the bell in every way on that. two specific things, you know, that I think are particularly important for success, working inside the Weston, Loblaw group. The first is that he has extensive experience working for a controlling family, and understands what that relationship needs to be in order for a partnership to be successful. So that's number one.
Second, you know, he has been leading an organization that has a outsized cultural and, you know, financial place inside his country. You know, that's the case for Loblaw. You know, we're a big company in a small country, and that comes with different leadership challenges and opportunities. It's not so easy for people, you know, who have worked, say, in monolines in much larger countries or markets, you know, to understand how different that is. You know, as an example, he sits, you know, on the board of the Bank of Denmark, you know, and provides unique perspective on consumer behavior, you know, to the national bank there. This is the type of experience that goes above and beyond, you know, simply running retail stores, and Per has the combination of both.
That's really helpful, Galen. Thank you. The follow-up question would be, you know, we've been through a number of transitions on the CEO side at Loblaw. Company has some really great momentum. How can you or what more can you say to reassure investors that this time will be different, that we will see the momentum sustained, and I guess for lack of a better way of putting it, Galen, that we won't see some backsliding to the way things maybe were in the past?
Yeah. Well, I think you could also imagine, you know, that there is nobody, you know, with more focus on preventing that. You know, I understand, you know, that over the past, we haven't been able to make it work quite right. The amount of time, effort and energy that we've, you know, put into this search and to an appropriate transition plan is, you know, has been, you know, has been very significant.
I mean, you know, simply put, I see this as a change, you know, designed to maintain and enhance the combination of skills, you know, that Richard Dufresne and Robert Sawyer and I have brought to the business over the last couple of years, to enhance, you know, that, you know, and to build on it. The core characteristics of Per Bank as a retailer, you know, lead us to believe that that's exactly what's gonna happen. He's a super guy. Everybody who's had a chance to meet him, you know, over the last week or two, you know, reiterates the cultural fit, you know, that they see in there. That's really important. Then he's got tenure.
You know, as Richard describes, you know, if you could find a Robert Sawyer who was 55, you know, that'd be an ideal combination for this. In Per, we think we found that. You know, he sees long tenure in his visit or in his move to Canada.
That's really helpful, Galen. Thank you. Congratulations and best of luck.
Thanks.
Thank you. The next question comes from Mark Petrie of CIBC. Please go ahead.
Yeah, good morning. I wanted to just ask about your views on the COO role. I'll assume that this is ultimately Per's call, and so you won't be able to give me a definitive answer about sort of future structure. Just more broadly, what is your view on the importance of a specific COO role, and it's not one that has always existed in the organization, but has obviously borne fruit over the last few years. It'd just be helpful to hear your sort of overarching views on the merits of that position.
You're right on the first point, which is, you know, ultimately it'll be up to Per to determine how he wants to structure the reporting, you know, to him and the management board of the company. What I would say is that the key, you know, contribution that Robert has made over the last couple of years is not so much, you know, his title, you know, and position as COO, but the breadth and depth of his experience as a retail operator. Having really experienced retail operations, you know, at, in the most senior leadership roles in the organization is an imperative.
Whether that's in the COO or whether it's in the CEO, what's important is the fact that we have it. My sense, in talking to Per, is that he is a retail operator first, and so he'll want, certainly in the early stages of his leadership, to stay very close to those key retail operations. So that's what I would expect to see in the first number of months of him being in the organization. And that should give you some confidence that that notion of retail excellence continues to be an essential priority for the company.
Yeah, appreciate that. Okay, thanks. Also just, you know, I don't expect you to comment on the Salling business, but perhaps you could just talk about some of the sort of key assets or facets of the organization and key elements of the culture, that you think Per will be able to leverage, and translate to Loblaw.
Yeah. I mean, first and foremost, you know, some of the comments I already made. You know, it's a, it's an enterprise with a large footprint, you know, in their home country. As a result, they have similar strategies. You know, their mission and purpose, if you look on their website, is not identical in words, you know, to the purpose of that Loblaw has of helping Canadians live life well, you know, but it's very similar. The footprint, you know, of the, of the enterprise, again, by virtue of being, you know, limited, geographically, you know, they operate multiple formats, including a very, very successful discount business, hypermarkets and supermarkets.
You know, he understands, you know, what it takes to manage a business effectively with multiple go-to-market strategies. That's not easy to find, you know, in sort of retail executives today. I think one of the, one of the key characteristics, you know, that Per Bank brings is a sense of what I describe as controlled impatience, you know, to running his business. That type of impatience is really essential, culturally, when you're running a retail business, especially a grocery business, where you're making decisions every single week, and you need to have the decisions moving at the speed of the trading. Those would be some of the things that he will bring.
It's very helpful. Thank you.
Thank you. The next question comes from Michael Van Aelst of TD Cowen. Please go ahead.
Hi, good morning. I think you alluded to it, but part of Per's background is, you know, he's made some acquisitions in the past. He's expanded outside its home market. I'm just wondering what level of flexibility or freedom he'll have to try to make these types of moves, and if that's something that the board is supportive of.
Yeah, absolutely. I mean, you know, I think it's intentional, you know, that with this appointment, where he has the title of CEO, you'll see that he will report to the board. You know, in the past, you know, changes like this, you know, the role has been president, and that president has reported to me as executive chair. There's important symbolism in that. Having said that, you know, this is a controlled company. You know, I represent the controlling shareholders as the key executive. You know, I'll be the chief executive of the holding company, the parent company of Loblaw.
You know, the long-term strategic vision of the company, it's essential that there's a high level of alignment between myself, you know, and any chief executive or any key operating exec. I would expect that dynamic to continue. You know, I think Per will bring some new ideas. You know, Richard and I will both be open and engaged in those ideas. Ultimately, you know, the ownership block is gonna need to be supportive of any change in the strategic direction. Certainly at this point, that is not, you know, the intent. The intent is to continue to execute against the strategic path that has been developed by Richard, myself and Robert. Y ou know, that's the way to think about it in certainly the early days.
Okay, great. That's helpful. Then just secondly, you know, Robert is here till the end of the year. I'm sure that he identified several large opportunities over the last couple of years that he wanted to address. I'm just wondering what's left for him to accomplish in the year that year, the last eight months that he has and, you know, and what's the timing on those projects?
I think as you said at the outset, we can't comment on the sort of business performance at this point because we're in our quiet period. What I will say is this: We're making this announcement today, and with the expected takeover of Per in early 2024, that gives us some extended runway to continue to execute against things that are particularly important to Robert, and some other things that are particularly important to me. More importantly, we believe that it will enable a transition period for Per, where he can spend considerable time here, learning, understanding the geography of the country, the different formats.
You know, he has an aspiration before he takes over, managing the business, you know, to spend a couple of days working in each of the formats, in each of the geographies, to really get a touch and feel sense of, you know, how this country works and operates. The fact that we have this transition period enables him to do that. You know, and, you know, it's also a time frame during which he'll get a chance to build his relationship with Richard, in particular, and to, and to learn from Robert. Richard, if you wanna share a little bit what you're...
Yeah, yeah. A few things out there. I guess, what Galen and Robert and I wanna do over the rest of the year is not only deliver on the 2022 plan, but also build a very solid plan for 2024, so that when Per comes in, he comes in with a business that has strong momentum. In the meantime, I'll be spending a lot of time with him. I'm gonna travel to Denmark in June to go spend a few days with him to familiarize myself with his business so that when we work together, I can understand the context of where he's coming from. Him and I are already in a weekly dialogue about tons of stuff. I'm gonna be helping him, ramp up his knowledge on the organization, Loblaw and everything, so.
Great. Thank you. Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. The next question comes from Vishal Shreedhar of National Bank. Please go ahead.
Hi. Thanks for taking my questions. What was the thinking of changing two key executives at the same time? That's a lot of change coming at the company at once. Was there opportunity you're thinking of maybe staggering some of that change, you know, half a year or a year, something of that nature?
uh, so yeah, we certainly thought, you know, what are, what's the optimal, sort of transition period, you know, change over time. And we think this is a really good combination. Of course, Robert's retirement precipitated, you know, this search. It allowed us to look at COO, you know, succession candidates. It allowed us to explore the potential for CEO candidates. And we found, you know, such a terrific candidate, you know, with that attractive extended, you know, notice period that allowed us to do that transition.
I think the way you should think about it is that he will overlap in a number of key ways, you know, with Robert, and with myself between now, and the day that he takes over. Rather than think about both folks leaving or leaving myself and Robert at the same time, you should think about it as a transition period with very constructive overlap. I think the other thing to remember is, you know, I'm not leaving.
I'm stepping back into, you know, what I consider to be my natural role as the controlling shareholder. And, you know, that'll afford an opportunity for me to continue to support Per, you know, during his transition and as he ramps up. Of course, you know, Richard, you know, will be there too. In the context of, you know, smooth transitions, you know, we think this ticks a lot of boxes.
Yeah, Vishal, I'll add. I've been here for 12 years. I've seen how the group operates now. For me, it's one executive leaving because we were a team of three. Okay? We are a team of three today, and we're gonna be a team of three tomorrow. It's just like Robert is being replaced by Per, and Gil is not going anywhere. That's how you should think about it.
Okay. Got it. That's helpful. You've touched on this at the top, but I just want to make it clear, what are the key tenets of Loblaw that are kinda non-negotiable for the investment community? I mean, when this triumvirate came in and took over the management of Loblaw, they implemented some things that I think resonated well, you know, the retail excellence, the commitment to the financial framework, and of course, everyone intends to keep the things that are successful.
These changes sometimes happen on the edges. As you said, retail is fast-moving. Sometimes with an executive coming in, having his own ideas and not maybe the visceral understanding of what these tenets mean to the investment community, things can change. Just wondering, how should the investment community think about that? Per is going to come in with his ideas, and has it been made clear to him that these are certain things that the board and the controlling shareholders, let's say, values significantly?
Yes. I mean, you know, two really critical pieces. The first is the financial framework, you know, and the hard work that we've done over the last, you know, number of years to establish confidence and trust, you know, in that financial framework. I was out speaking, you know, to a number of investors just a couple of weeks ago, you know, about our ongoing commitment to that. The word consistency, you know, is an important addition to the way that we think about managing the business. I've had extensive conversations with Per about that framing, you know, of how we think about building our strategy and managing performance against it.
The second, you know, is the three spheres of how the pillars that we organize, you know, our business priorities against. Enhancing the core which captures, you know, retail excellence, driving growth, which is, you know, keeping ourselves at the very short focused list of initiatives that are actually driving a positive contribution, you know, to earnings in the organization. Then maintaining that third pillar, you know, where we continue to look to invest in areas of substantial growth potential, and acknowledge that, you know, they don't need to generate the payback right away. He very much likes that framework, those organizing principles. He will bring, you know, a commitment to those two things when he joins the business.
The last thing, which you'll see, you know, in, I think, Salling will release their latest ESG report in just a couple of weeks. A commitment to, you know, core ESG pillars, you know, which remain essential for Loblaw as an organization. Does that mean that he has no flexibility to tweak and adjust, you know, and make important decisions? Absolutely not. You know, in the same way that everything evolves over time under Per's leadership, I would expect things to evolve. The takeaway here is this is not a sharp left turn. This is about evolution and building on the platform that's been established. I think it's one of the things that draws Per to, you know, to Loblaw, is the, is the opportunity to build on top of a strong foundation.
Thank you.
Thank you. There are no further questions. I will turn the call back to Roy MacDonald for closing remarks.
Thank you, everybody for your time this morning. If you have any follow-up questions related to today's announcement, give me a shout or drop me an email. We look forward to chatting again on May 3rd to report our Q1 results. Thanks, everybody. Have a great day.
Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.