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Canada’s grocery market is ‘extremely competitive,’ Metro chief says

As Ottawa courts foreign retailers, Eric La Flèche says the industry already competes with global players
Jillian Morgan, female, digital editor for Canadian Grocer
Mississauga, Canada, March 2, 2021;  The iconic sign and roof line on Quebec based Canadian business Metro grocery store in Missisauga; Shutterstock ID 1928049206
Metro reported its second quarter earnings Wednesday (April 24).

Foreign grocers looking to set up shop in Canada should expect some healthy competition, said Metro Inc. chief executive officer Eric La Flèche.

“The Canadian food market is very competitive. Any affirmation that our industry is not competitive, we disagree with that completely,” La Fleche told investors Wednesday (April 24). 

Last week, the Wall Street Journal reported that Ottawa had shortlisted 12 international grocers to compete with Canada’s big chains: Metro, Loblaw and Sobeys. Earlier this year, industry minister François-Philippe Champagne said he was working phones to court a challenger.

“We compete with large global players. We have strong regional and national competitors. We have strong local independents. We have discounters, dollar stores – you name it. Amazon, Walmart, Costco,” La Flèche said. “This is an extremely competitive market. It's a large geography with a growing population, but for the geography, it’s a pretty small population. So we'll see. If anybody wants to come, it's an open market… but it's a very competitive market.”

The executive shared the comments on Metro’s second quarter earnings call.

Net earnings for the quarter were $187.1 million, down 14.5%.  Adjusted net earnings were $206.4 million, down 8.4%.

READ: Metro to bring Moi Rewards program to Ontario

Sales came to $4.66 billion, up 2.2%. 

Food same-store sales increased by 0.2%, or 2.7% when adjusting for the Christmas week shift. 

“Our discount banners continue to fuel this growth on top of the high comps in discount recorded last year,” La Flèche said.

Though food inflation appears to be stabilizing, Canadians consumers are still feeling squeezed, said Marc Giroux, EVP and COO, food.

“Consumers are continuing to trade down in some categories, meat in particular,” Giroux said. “The growth of our private label is twice the growth of national brands. Promo penetration is back to pre pre-pandemic levels… the discount growth in our discount channel is greater than conventional.”

READ: Price growth at restaurants outpacing grocery inflation as businesses struggle

Looking ahead, Metro warned it will face “significant headwinds” in fiscal 2024 as it continues work on two automated distribution centres in Terrebonne, Que. and Toronto, respectively.

The company forecasts income to grow by less than 2% and adjusted net earnings per share to be flat down to $0.10 this fiscal year, when compared to 2023.

Growth is expected to resume next year, and Metro maintains its annual growth target of between 8% and 10% for net earnings per share over the medium and long term.

“Our second quarter was very busy for our teams with the transfer of the fresh meat, deli and ice cream volumes to our new [Terrebonne] facility,” La Flèche told investors. “Only dairy products left to be transferred. We are on track with the planned expenses and we are pleased with the service level to our stores. Going forward, our teams are focused on ramping up productivity and we are now also gearing up for the launch of the final phase of our Toronto automated fresh facility next summer.”

“Fiscal 24 is a transition year with the startup of two large new automated distribution centers. But we are confident that our sustained investments in our supply chain, our retail networks and our digital capabilities will position us well for the future.”

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