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Metro reports second quarter profit and sales up from a year ago

Montreal-based grocer sees strong food sales amid higher prices for fresh produce

Metro Inc. reported strong food sales amid higher prices for fresh fruit and vegetables in its most recent quarter, though the company expects produce costs to moderate close to summer.

"Normally we would expect produce inflation to level off as we start to buy more locally, but we're not there yet, especially with this long winter," said CEO Eric La Flèche during a conference call with analysts Wednesday.

The grocer's internal measure for food inflation rose 2.5% over the 12-weeks ending March 16, while its food same-store sales, a key retail metric, moved up 4.3%.

READ: Metro acquires Jean Coutu pharmacies for $4.5 billion

Statistics Canada released figures Wednesday that showed produce led the rise in food inflation last March. Canadians paid 15.7% more for fresh vegetables and 8.6% more for fresh fruit last month compared to March 2018, according to its data.

La Flèche said he expected inflation on produce to be closer to 2% for the remainder of the year.

"But we don't have a crystal ball," he said.

However, La Flèche noted that there are also signs of meat inflation down the road, pointing to China's issue with pork production as it grapples with an outbreak of African swine fever in its pig population.

READ: Jean Coutu deal starts paying off for Metro

It's hard to say whether that will have a domino effect on other meat prices, he said.

So far, the company has found it pretty manageable to protect its profit margins by mixing up its product offering, he said.

Metro also said it was piloting its delivery offering in Toronto and expects to launch in the Greater Toronto Area in the next few weeks. The company already operates so-called click-and-collect and home delivery services in Quebec.

The comments came as the grocery-and-pharmacy chain said it earned $121.5 million or 47 cents per diluted share during its second quarter, up from a profit of $106.9 million or 47 cents per share a year ago.

READ: Metro to allow reusable containers in effort to cut waste

Sales totalled $3.7 billion, up from $2.9 billion. Excluding the Jean Coutu Group, Metro said sales were up 4% compared with a year ago. Pharmacy same-store sales gained 1.1%.

On an adjusted basis, Metro said it earned 60 cents per share for the quarter, up from an adjusted profit of 47 cents per share a year ago.

Analysts on average had expected a profit of 63 cents per share and revenue of $3.73 billion, according to Thomson Reuters Eikon.

The company also announced that Francois J. Coutu will retire as president of the Jean Coutu Group (PJC) Inc., Metro's pharmacy division, on May 31. Alain Champagne has been named as his successor.

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