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01/24/2023

Metro ‘well positioned’ to capitalize on shift to discount: CEO

President and chief executive Eric La Flèche spoke to analysts about inflation, supply chain and the growth of Metro's discount banners
Jillian Morgan
Digital Editor
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Metro said it’s “well positioned” to serve frugal shoppers as more Canadians choose to buy their groceries at discount retailers.

The grocer’s discount banners (Super C in Quebec and Food Basics in Ontario) have outperformed its conventional stores for several quarters, president and chief executive Eric La Flèche said Tuesday (Jan. 24) on Metro’s Q1 2023 call with analysts.  

“We delivered solid results in the first quarter in a very competitive and challenging operating environment, growing market share driven mainly by our discount banners,” he said. “Our internal food basket inflation was 10% – same as that in the last quarter. Compared to last year, traffic was up while the average basket remained flat. Not surprisingly, customers are searching for value and promotional penetration continues to increase, and private label sales growth is outpacing national brands. Discount continued to outperform conventional and we are well positioned to capitalize on this trend.”

The grocer released its results for the first quarter of fiscal 2023 Tuesday. 

Sales were up 8.2% to $4.67 billion compared to the year-ago quarter, mainly due to higher inflation, Metro said. Food same-store sales increased 7.5%, pharmacy same-store sales increased 7.7% and online food sales were up 40%. 

Gross margin for the first quarter of fiscal 2023 was 19.6% versus 19.9% for the corresponding period of 2022, resulting mainly from higher cost of goods sold in food, Metro said. 

The company’s net earnings came to $231.1 million, up 11.3%. 

La Flèche said Metro’s discount stores in Quebec and Ontario are growing at a similar pace, but noted that the company’s conventional banners are still holding their own.  

“Consumer behavior is more of the same in this high inflationary period,” he said. “Our features and specials are selling more and more every month. So people are looking for value and stretching their dollars – no big surprise. Our teams are working really, really hard to provide the best value possible in this tough period for customers… We received, in the fall, a lot of cost increases, we continue to receive some, so the search for value continues.”

The executive said inflation may moderate later this year, but was careful to not make any predictions. 

“We can't predict future inflation as many vendor requests for price increases continue to come in and the root causes outside of our control are still present,” he said. 

Those increases can be expected to materialize in the coming weeks as Metro’s price “blackout” – a long-standing practice in which the grocer does not accept price increases from vendors from November to February – is coming to an end. 

“Over the next weeks and months there will be more cost increases,” La Flèche said. “We have good conversations with our vendors to manage it, to mitigate and to control the rate of increases because we want to protect customers and protect the pricing at retail, but there are increases coming… We're going to have to accept some of these increases.”

As for whether supply chain issues are showing any signs of improvement, La Flèche is hopeful, but said it’s not back to pre-pandemic levels just yet. 

“We are still on allocation with certain vendors in certain categories,” he said. “[Vendors are] still concentrating on their best-selling items to ensure supply…. so you can still see holes on some of our shelves. Most of them are vendor related, sometimes it's self-inflicted for sure… but the supply chain service levels from our vendors have improved. But we're not quite where we want to be.”
 

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