Metro trying to delay impact of fuel cost increases on food prices
Grocery retailer Metro Inc. is starting to feel the pressure of high fuel prices, but those costs have yet to trickle down to store shelves.
Nicolas Amyot, executive vice president, chief financial officer and treasurer, said the company has not received “that many” price increase requests from suppliers stemming from elevated fuel costs.
“We’re negotiating the conditions and trying to delay the impact that this might have on food pricing,” he said on a call with analytics Wednesday (April 22).
But Amyot said fuel prices are affecting Metro’s own distribution costs.
“That’s pretty direct. So we’ve started feeling it,” he said. “The current elevated pricing of fuel—you could imagine a $5 million-ish per quarter impact if everything was to hold as the situation is today.”
CEO Eric La Flèche added: “Over time, we expect that higher costs like that will be reflected, but it hasn't started to happen yet.”
“Energy price pressures, fuel price pressures contribute to the affordability crisis and contribute to customers searching for value in everything that they buy, including food. It's just one more element that puts pressure on the customer,” he said. “We're well positioned with our multiple store formats and growing discount formats to address those customer needs.”
The Ontario, Quebec and New Brunswick food and pharmacy retailer—whose banners include Metro, Super C, Jean Coutu and Food Basics—released its second quarter results today.
Net earnings were up 12.1% from last year at $246.6 million. Sales topped $5.1 billion, up 4.1%. Food same-store sales rose 1.8%, while online food sales increased 19.8% year-over-year.
La Flèche said Metro’s discount store expansion plan is “fuelling” the grocer’s food sales growth.
“Our discount banners continue to perform well with same store sales growth exceeding that of Metro, together with the continued contribution of new store openings and conversions,” he said on this morning’s second quarter earnings call.
La Flèche said the strike at Metro's head office in Montreal and distribution centre in Laval, Que., now in its fourth week, has impacted its sales.
He said Metro is “determined” to reach an agreement.
“The strike is affecting our Quebec business, not our Ontario business—let's be clear on that—but it is having an impact. Our contingency plan is better every day, stores are looking better every day,” La Flèche said. “Hopefully we'll settle this strike. But we need to be competitive. Demands at the table are not reasonable and can't be accepted, so we are patient.”
He said the grocer continues to see inflationary pressures on certain commodity prices, particularly in the meat category, in addition to “higher than usual CPG vendor cost increases.”
“Our teams remain highly focused on cost mitigation initiatives through supplier negotiations and pricing disciplines,” La Flèche told analysts.
Metro’s private label sales continue to outperform national brands, the chief executive said, adding that the “competitive environment remains intense, but rational.”
READ: Inside Metro’s private-label success
The grocer opened three new stores in its second quarter, including two discount stores. Its store expansion plan is focused on growing its discount share in Ontario.
“The competitive environment is intense. We are competing with large players. Everybody is looking for market share. It's competitive out there the way it's always been,” La Flèch said. “We’re well positioned to compete.”
On the topic of the “buy Canadian” movement, Marc Giroux, chief operating officer, said the momentum has “softened.”
“Buying Canadian continues to be of interest for consumers, but we have not seen a significant increase of sales year over year on Canadian products,” he said.
