10/16/2012 10:50 EDT | Updated 12/16/2012 05:12 EST

Loblaws cuts 700 head office jobs

Loblaw Cos. Ltd. announced today it will cut roughly 700 administrative and management positions from its Toronto-area head offices.

The grocery chain said notices will start going out today and the process will be completed within three weeks.

"The reality is that when compared to other retail organizations, our office administration costs are just too high," Loblaws president Vicente Trius told staff in an e-mail obtained by CBC News. "I am confident that creating a leaner organization will help us prioritize more effectively and serve our customer better."

Loblaws, headed by chairman Galen Weston Jr., says it will take a $60-million charge in the fourth quarter related to the head office job-cut move.

Turnaround plan

The company is in the middle of a multi-year plan to upgrade its technology and supply chain to compete with other big box retailers selling groceries, such as Wal-Mart.

In a release, the company noted it has opened 14 new stores over the past year, adding 2,000 new jobs in the process.

RBC Capital Markets analyst Irene Nattel called the move a step toward making the company more productive.

"Loblaw is generally not the leanest of organizations and today's announcement is a move toward streamlining functions," Nattel wrote in a report, adding that she expects the company to realize annual savings in the neighbourhood of $60 million, starting in 2013.

"But we would not assume that the cost savings will necessarily flow to the bottom line, but rather be reinvested in pricing (and) in-store service to drive top-line performance," Nattel said.