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11/19/2021

Despite inflationary challenges, and weaker sales, Metro reports profitable quarter

Quebec grocery company closed its fiscal 2021 year with profit gains against tough 2020 comparisons
Shutterstock/Paul McKinnon

Like most grocery businesses, Metro continues to react and respond to the uncertainty of the transformative forces being unleashed by the pandemic, but still reported a profitable fourth quarter on Wednesday.

Profit of $194 million, was up from $186.5 million in the same quarter a year earlier. However, sales in the quarter of $4.09 billion were down from $4.14 billion in the same period last year when the company saw exceptionally strong sales due to the pandemic. Compared to the same quarter in 2019, sales were 6% higher this year.

In a call with analysts, CEO Eric La Flèche emphasized that last year’s numbers were significantly affected by the increased demand from consumers staying home and stocking up during the darkest days of the pandemic. He stressed the positive numbers when compared to pre-pandemic levels. “In our fourth quarter, same-store sales were down 2.9% but up 6.8% when compared to fiscal 2019,” he said.

La Flèche also pointed to the loosening of COVID restrictions for some of the lower numbers as more people were able to dine out once again. “As expected, with government restrictions easing over the summer, a portion of food consumption transferred back to restaurants,” he said.

La Flèche and CFO François Thibault spoke to a number of key developments for the business in the last quarter, which may also have an impact on the months ahead.

Inflation

La Flèche was asked if Metro was seeing any inflationary pressures emerging from suppliers and food companies. “Some of our vendors are experiencing inflationary pressures of their own, clearly. And we have received some cost increases late summer and through these last few weeks,” he said. “We are working hard to contain those costs. Make sure that we are market competitive and then we can provide great prices to our customers.”

La Flèche was then asked how or if they expect inflation to impact shopping choices and behaviours. “That will happen when their favourite cut of meat is up significantly, or is not promoted because the costs are gone too high,” he said. “So there have been some weeks recently where it's been challenging for our people to advertise some of the cuts we would have liked to advertise because the prices would be too high for everyone.”

The Dark Store

Metro opened a so-called “dark store” in Montreal this summer, closing delivery operations in three stores and turning one store into delivery-only. “We're using pretty much the same technology that we have in-store, with some adjustments. It's a learning curve… it's not exactly the same as in a store, it's more efficient,” he said. Metro had problems with staffing across its operations including the Dark Store, but overall they were pleased with the progress and plan to open one in Toronto as well. “We'll keep you posted,” he said.

Promotional activity

“Promotional penetration increased and is now back to pre-pandemic levels,” said La Flèche in his opening remarks. He was asked to expand on promotional activity during the Q&A with analysts, and once again La Flèche returned to inflation: “Everybody's looking for their piece of the pie. It's very aggressive,” he said. “It's hard to promote certain items with some of the inflation cost pressures we see, especially in meat… I think our merchandisers are experienced [and] can stick handle through this. We've done it before. And I think we're well positioned.”