Loblaw Co.’s Executive Chairman Galen G. Weston may disclose a plan tomorrow to improve the company's food offerings and boost service as he tries to turn around Canada's biggest supermarket chain.

Weston, 34, was promoted five months ago to lead the company by his father, W. Galen Weston, chairman of the Toronto-based company's parent company, as profit fell in six of the past eight quarters. Loblaw closed inefficient warehouses to lower costs to counter competition from Wal-Mart Stores Inc., which opened its first three supercenters in Canada last year.

Few investors expect Weston, who has an MBA, to deliver a quick fix for the ailing chain. Weston, part of Canada's second-richest family, will try to convince analysts at a former Toronto hockey arena that with the right team and strategy he'll win back customers.

"Why would a guy in his mid-30s, who because he bears the name of the family, suddenly save the company?" asks Pierre Bernard, vice president of Canadian equities at Montreal-based Industrial Alliance Fund Management Inc, which manages C$13.6 billion ($11.6 billion). "Some are saying we've seen all that before, and we don't want to go there."

Shares of Loblaw fell 34 percent over the past two years after a fivefold increase in the preceding decade. Canadian rivals Metro Inc. gained 44 percent, and Sobeys Inc. rose 16 percent in the past two years. In the previous five years, Loblaw shares averaged 17 percent gains a year.

The stock rose C$1.15 today, or 2.4 percent, to close at C$48.42 in trading on the Toronto Stock Exchange, its biggest gain in three months.

Skeptical Investors

Loblaw reported Feb. 8 its first annual loss in more than two decades because it's writing down C$1.5 billion in assets from its 1998 acquisition of Provigo Inc.

Investors are skeptical about a son taking over a company. Still, W. Galen Weston, 66, whose estimated fortune is about C$7.1 billion according to Canadian Business magazine, turned around a smaller, nearly bankrupt Loblaw for his father, Garfield Weston, in the 1970s while in his thirties.

"They need to get back to the fundamentals that drove the business for a long time," said Rick Wolfe, president of Toronto-based management consultant PostStone Corp.

Weston, who has worked for Loblaw for nine years, has promised to restore profitability, which historically has been around 15 percent growth in earnings per share.

Service and the quality of merchandise has deteriorated over recent years as the company's reorganization left many store shelves empty and seasonal merchandise arriving late, Weston said in a Feb. 8 conference call. "The customers do see it," he said. "They are giving us some pretty loud messages."

Improvement Initiatives

The younger Weston likely will tell analysts at Maple Leaf Gardens that he will revitalize the President's Choice label and improve customer service, Wolfe said.

Others see a switch in focus to new fresh-produce offerings, nutritional foods, international products and prepared foods, Perry Caicco, an analyst with Toronto-based CIBC World Markets, said in a Jan. 22 note. Loblaw may get rid of some general merchandise such as home electronics and furniture, he said.

Loblaw probably won't sell real estate, spin off units such as its financial services unit or buy back shares for short-term stock gains, Caicco said.

"What a challenge he has," said Bernard, who prefers to invest in Loblaw through 250,000 shares of parent company George Weston Ltd.

Rivals Advance

Loblaw started the restructuring to help lower its costs before Wal-Mart's expansion of supercenters in Canada in November. The world's biggest retailer sells fresh produce and meat at these stores.

"They didn't execute that well, and while they were doing so they took their eye off the ball," said Gavin Graham, chief investment officer at Toronto-based Guardian Group of Funds Ltd., which holds George Weston among about $5.1 billion in assets.

At the same time, Loblaw's rivals Metro, Sobeys and Safeway Inc. were "revitalizing" stores, improving produce and service and developing their own store-brand lines of products, he said.

Weston must win back customers while his management team, including newly appointed President Mark Foote, 45, cuts as many as 1,000 jobs. The company last month announced plans to fire about 20 percent of its administrative staff while retaining store employees. Loblaw employs about 134,000 people.

"Galen G. made it clear the buck was going to stop with him," said Jonathan Popper, a fund manager at MFC Global Investment Management Inc. in Toronto, which holds George Weston shares among about C$7 billion in assets.

"Hopefully, he will prove all his critics wrong," he said.

To contact the reporter on this story: Kevin Bell in Toronto at kbell2@bloomberg.net