Consumers remain “very value-conscious, very fickle,” which is keeping the Ontario and Quebec grocery markets highly competitive and promotional, says Metro president and CEO Eric La Flèche.
“You have to have the right promotional program week in and week out,” La Flèche told analysts during a conference call on Wednesday to discuss third quarter results. “We don’t win every week,” he admits.
However, customer satisfaction metrics are up at Metro in what La Flèche says was “a strong third quarter on all fronts,” with higher traffic, tonnage and basket size.
Gross margins increased primarily due to higher fresh sales, thanks to an increased focus on fresh in all banners and in all departments – produce, meat, deli and home meal replacement. The acquisition of the Première Moisson bakery chain also helped increase gross margins.
Inflation levels have declined from the previous quarter, mostly in fresh, but inflation is picking up in the centre store, he says.
During the first 40 weeks of fiscal 2015, Metro opened six new stores but also closed six, resulting in no net increase in square footage.
As well, Metro expanded or remodeled 17 stores, including renovations of six Food Basics stores. That’s a sign “we’re not letting discount go.”
Overall, when large investments are made to renovate solidly-performing stores, there is an increase in traffic and basket size because the offerings have expanded. But it doesn’t pay to make a big investment in all stores, he says.
La Flèche says Walmart’s incursion into Quebec with its Supercentres is having a moderate impact on Metro but overall the grocer is defending itself well.
“They’re rolling out (the Supercentres) at the same pace they have been for a few years – about 10 a year,” and about half of all Walmarts are Supercentres, he says.
Walmart is now putting its focus on eastern Quebec and Quebec City, areas wheres Metro and Super C stores can compete well, La Flèche says. “We have a strong presence in that market. We’re confident we’ll defend well but they will have an impact as they have had an impact elsewhere.”
He adds a new labour agreement with 28 stores in the Greater Toronto Area is “a win-win.” The agreement met union demands for improved scheduling for part-time workers without incurring any costs to the bottom line, he says, and the result will be less absenteeism and more employee satisfaction.
La Flèche adds that Metro’s Adonis banner, which specializes in ethnic fare, is doing well in Quebec, where it’s well-known, but the same can’t be said for the Ontario stores in Mississauga and Scarborough.
“Clearly in Ontario, it’s a newer concept. We’re satisfied with the progress,” he says, although sales are not at the level of the established Quebec stores.
Adonis recently opened its seventh store in Quebec and another new store will open in Laval this fall.
La Flèche adds that the Air Miles and Metro & moi loyalty programs in Ontario and Quebec remain important to the grocer. “The loyal basket keeps increasing at a faster pace than the average basket. On the conventional side of the business, loyalty is a big part of our mix.”