Howard Green: They have rearranged the executive furniture at Loblaw. President Mark Foote is gone, the CFO Bill Wells has left to become the new CEO at Biovail and another key executive at the troubled grocery chain has departed as well. The new president is Allan Leighton, a confidant of the Weston family. He’s been deputy chairman and part of a three-way executive suite that included Galen Weston Jr. and the departing Mark Foote. Loblaw shares fell more than six per cent on the news and are off some 39 per cent over the past 52 weeks as the company continues a multi-year struggle with Wal-Mart. With more on this shuffling of the management deck we are joined by Rick Wolfe, the president of PostStone Corporation. Good to have you back with us.

Rick Wolfe: Good to be here Howard.

HG: So how big a surprise was this to you today?

RW: Sadly, not too big a surprise. Obviously I didn’t know for sure it was going to happen, but these kinds of triumvirates are never successful. In this case Mark Foote was in place when Galen Weston Jr. decided to come on into an active management role and bring Allan Leighton with him. At that point it just got too crowded, it’s amazing that Mark Foote stayed as long as he did.

HG: So was he not up to the job or he left on his own volition, do you have any sense?

RW: My sense is that he could have been the most inspired manager on the planet, and because Allan Leighton has the confidence of the family, because the family feels there’s a great fit between them and Allan Leighton and between Allan Leighton and where they want to take the business, that it was just a question of having the player that they felt most comfortable with. Mark Foot is a very capable executive.

HG: And so what about the choice of Mr. Leighton as the boss overall here? What do we know about him, what should we know?

RW: Well I think the key piece of his background are the years that he spent at Asda in the U.K., first as the marketing director, which is the C-level for a North American, he was the C-level marketer at Asda, and then the CEO of Asda, which is a firm very much like Wal-Mart, in fact now owned by Wal-Mart. He completed a turnaround there and the culmination of that turnaround was the firm being purchased by Wal-Mart. He was publicly stating that Wal-Mart was Asda’s role model before Wal-Mart came in and bought them. So what do we have here? We have a ferocious competitor, we have a leader who knows how to compete against Wal-Mart.

HG: And so the fact that he knows so much about Wal-Mart, is that enough?

RW: No, it’s not enough, and so those are the questions. Does he have a feel for the power of the Loblaw’s brand, the power of President’s Choice? Does he understand how Loblaw’s fits into the fabric of Canada? Even though he’s been on the job for a while now, he still has a steep learning curve.

HG: What about the other executives who’ve departed? The CFO heading over to Loblaw’s, Bill Wells, he said in February, I think it was an analyst day, that the company intends to return the profit to historic levels. Does this mean he thinks it’s not do-able, or he just got a better opportunity elsewhere?

RW: Well, you know, if you think that it’s smooth sailing ahead of you and tremendous opportunities in the near to mid-term future, you are going to stick around. Perhaps it was a very convenient exit that he was able to join on an executive role at a firm whose board he was already on. So yes, his departure would tend to suggest that things aren’t going as smoothly as they’d hoped.

HG: And what about the third person, he was the executive VP of food? It’s an odd title, I mean one would think everything’s about food at Loblaw.

RW: Well there’s food, there’s the packaged goods, the soaps and the detergents and all of the non-food items in the traditional grocery store, plus there’s the new hard goods merchandise. Food is of course a critical piece, but in fact it’s the piece that you would have thought would be the least problematic, it’s their heritage. So a very strange departure.

HG: So what about what they do next? What do they have to do next, what is job one?

RW: Job one is the distribution system, their supply chain, and that’s what got them into this problem in the first place. Here was a company that did 19 years of profit growth and then they didn’t hit a wall, they smashed into a wall. Why? Because the distribution system which got their goods to the store and got them there at a very competitive price was unable to adjust to the increased level of competition that came with Wal-Mart and the increased level of complexity that came along with distributing the hard goods. And once it broke it broke terribly badly. It wasn’t a question of ‘Hey, let’s just slow it down a bit and then things will be fine,’ it’s a question of things bursting apart. And when they burst apart it became clear, and they have said so publicly, it became clear that they really needed to rebuild that distribution system.

HG: Just about a minute left. Back to Allan Leighton, the new president. We’ve heard he’s a very tough guy. What have you heard?

RW: I have heard that he is a tough guy and I have heard that in the U.K. he was considered to be a real people guy, a delightful person.

HG: That’s two views!

RW: So we will have to find out who is the real Allan Leighton.

HG: And so if you’re an investor in this company what do you do?

RW: I don’t think there’s too much more down side and I do continue to think that it is a phenomenal brand. I think that Canadians love Loblaw’s, they still have terrific market share. Retail is a better business to execute a recovery than most because people still have to drive by your store, and their store locations are outstanding. So be patient, don’t heavy up your investment today, you’ve got plenty of time to heavy up on Loblaw’s. I still think they’ll be back.

HG: All right Rick, pleasure having you back with us.

RW: Great to be here.

HG: Rick Wolfe of PostStone Corporation.