Metro looks to regroup as it takes $90M hit due to strike in ‘challenging’ Q3
Food and pharmacy retailer Metro Inc. is focused on returning its operations to status quo as it reels from the impacts of the strike at its distribution centre in Laval, Que.
Metro said the labour dispute at its produce distribution centre—which began on March 30—negatively impacted third quarter results by $90 million.
That includes an estimated $66 million in lost profit and direct cost impact, or $0.32 per share.
The company reported net earnings of $211.3 million for its third quarter, down 34.6% from last year. Food same-store sales declined 1.5%.
Four weeks into its fourth quarter, Metro said food same-store sales are still down 1.5%.
President and CEO Eric La Flèche, who is retiring at the end of this year, said he expects fourth quarter results will continue to be “significantly impacted” if the strike is not resolved.
“Our third quarter was certainly challenging,” La Flèche said. “We remain committed to reaching a negotiated agreement with the union.”
La Flèche said Metro has presented a new global offer to the union with “competitive wage and working conditions that compare very favorably with the market. In addition to offering quality long-term jobs in Quebec.”
“You look at our same-store sales and our total sales and our financial performance year-to-date—we're in a very strong position, gaining share in both markets, doing really well. So clearly, this has had a significant impact,” La Fleche said on Metro Inc.’s earnings call Wednesday (Aug. 12). “We've been fighting with our hands tied behind our backs for a while. We're in tighter shape today, but it's been a challenging order. So we attribute the drop in our sales at this moment to the strike for sure. That said, the market's very competitive… That's what we expected, and we were facing that in the first two quarters anyway.”
For the time being, La Flèche said the company is focused on “restoring full assortment, strengthening store execution, and driving back traffic” to Metro’s stores as its contingency plan remains in place.
“We're in better shape every week. The assortment is not 100%, but getting close to that. It certainly wasn't at first. People couldn't find organic produce, for example, for a while in our stores, so we clearly lost sales and some traffic with that,” he said. “Our stores are in good shape, and we can compete. But we have work to do to bring traffic back to our stores, and that's what we're trying to do day in and day out.”
On his upcoming retirement, La Flèche said: “It has been an honor and a privilege to meet this group and to work alongside such talented and dedicated teams across our stores, distribution centers and offices. I would obviously have preferred to exit on a more positive note, but I'm proud of what we accomplished over the last 18 years.”
Discount growth
Metro’s chief executive said the company’s retail expansion plan remains on track.
The parent company of Metro, Super C, Food Basics and Jean Coutu opened five new discount stores in the third quarter, including one conversion and one relocation.
“We will achieve our plan to open a dozen discount stores by fiscal year end. We are very satisfied with the performance of our new and converted discount stores,” La Flèche said. “On the pharmacy side, our renovation program is also progressing well, with 30 projects planned for the year, including seven pharmacies under our new concept.”
In Ontario, Metro is converting 10 of its Metro stores to Food Basics. Marc Giroux, chief operating officer and La Flèche’s successor, said the plan should allow Metro to “grow market share, strengthen competitiveness in key markets and generate returns above [its] typical investment threshold.”
Food Basics marked a major milestone in June with the opening of its 155th store—the Ontario discount retailer’s first location in the town of Parry Sound. Super C opened its 121st store on June 18.
“Consumers are focused on value, disproportionately buying private label, participating in promotions. And we're continuing to see greater volume and discount than in conventional. This is this is going to continue, and that's why we've we're continuing to invest in our network and investing in the right store in the right market,” Giroux said.
