PRESS RELEASE: JANUARY 29, 2010

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Surprise Executive Departure Seen A "Loss" For Loblaw

Grocer Loblaw Cos. has lost a highly respected member of its executive team in Dalton Philips, whose resignation took observers by surprise Wednesday.
Philips, the grocer's chief operating officer, was seen as a likely successor to Allan Leighton, Loblaw's current president and deputy chairman. But Philips, who hails from Ireland, has opted for the chief executive job at William Morrison Supermarkets PLC (MRW.LN), the U.K.'s fourth-largest grocer.
In an e-mail message, Loblaw spokeswoman Inge van den Berg said Philips will stay with the company for another two months to ensure a smooth transition, and the "strong team" he's put in place will continue to oversee Loblaw's turnaround plan.
Scotia Capital analyst Patricia Baker said his exit is a "loss" for Loblaw and "leaves a serious void" in the grocer's ranks.
"It appears his departure comes as a surprise and to an extent impedes turn activities at Loblaw, in so much as management plays a role in the execution. Mr. Philips also, by all accounts, was well respected within the organization, and that itself will be missed," she wrote in a note to clients.
Until a replacement is found, his duties will be assumed by the four people who reported to Philips, all of whom are seen as possible candidates for his job: Mark Butler, executive vice-president of central operations; Grant Froese, executive vice-president of merchandising; Calvin McDonald, executive vice-president of marketing and customer relationship management; and Arnu Misra, executive vice-president of national retail operations.
Loblaw wouldn't put a timeframe on the naming of a new chief operating officer.
Philips had a wide range of duties, including those of former chief merchandising officer Frank Rocchetti, who left Loblaw last year and wasn't replaced. In 2009, Philips also assumed responsibilities for the store renovation program, according to the 2009 proxy circular.
Market watchers questioned whether Philips had been wanting to return to Europe after three years in Canada, or if a promotion was farther off than he hoped. Loblaw wouldn't make Philips available for an interview.
A fund manager who owns Loblaw stock called the news a setback, but probably a minor one. "It likely pushes out some elements of the turnaround, but does not change the fact that the business is getting back on track," the fund manager said.
While Philips was a key member of the team, the company's needs go beyond people, including improved systems and processes to manage such a large operation effectively, and Loblaw is making progress in these areas, the fund manager added.
Philips was Loblaw's fourth-highest paid executive in 2008, with a salary of C$484,000 and total compensation of about C$1.7 million, according to the proxy.
In Toronto Wednesday, Loblaw shares were off 48 Canadian cents, or 1.3%, to C$35.56 on about 362,000 shares

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