Posted Oct 20, 2006, 3:35 PM
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It's Hammer Time
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Join Date: Mar 2004
Location: Hamilton
Posts: 20,303
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Wal-Mart goes gourmet
By DANA FLAVELLE
Toronto Star
(Oct 20, 2006)
From sushi to organic baby food, Wal-Mart's newest Canadian store is a notch above what some analysts say they expected from a discount mass merchandiser.
The Ancaster store is the first Wal-Mart in Canada to offer fresh food alongside frozen and packaged goods and general household merchandise.
Called Your Fresh Market, it's one of several the country's biggest retailer plans to open between now and the end of January.
One analyst said the new stores may take a bigger bite out of the $70 billion a year grocery industry than originally expected.
"We would describe it as discount plus," Perry Caicco, an analyst with CIBC World Markets, wrote in a research note to clients. "This will be a formidable grocery entry."
A Wal-Mart spokesperson declined to comment on the report, which was written after Caicco got a sneak peak at the Ancaster store.
The focus of the report was the store's impact on supermarket leader Loblaw Cos. Ltd., which Caicco immediately downgraded to underperform.
Caicco was one of four analysts to issue reports on Loblaw this week, including Michael Van Aelst, at TD Newcrest, who initiated coverage of the company with "reduce" recommendation.
Scotia Capital's Ryan Balgopal rated it "underperform" while National Bank Financial's James Durran maintained his "sector perform" rating. The other analysts' reports were not immediately available.
The Ancaster store is remarkably different from any other Wal-Mart in Canada, or any of its U.S. formats, with the exception of its upscale experiment in Plano, Texas, Caicco said.
Eschewing the Supercentre name, the company instead called the grocery side of the store "Your Fresh Market" and gave it a separate entrance off the parking lot.
The store is bigger than its nearest discount competitor, which is a Food Basics, and charges lower prices than the nearby full-service supermarket, a Fortino's, Caicco said.
Recently, Loblaw Cos. signed a new four-year contract with its unionized workers across Ontario. The deal gives Loblaw the right to convert more stores to lower-cost formats and bought four years of labour peace, moves that should have been good news for retailer.
The company also announced plans to begin reinvesting in its traditional food stores, which have been languishing since Loblaw shifted its focus two years ago to adding more general household goods in a bid to compete with Wal-Mart.
Instead, Loblaw's stock continued to slide in each of the four days since the contract was ratified.
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