Customers, workers, and security stand outside a Metro grocery store in Toronto on July 29.Cole Burston/The Canadian Press
Metro Inc. MRU-T has reported a jump in both sales and profits in its third quarter, as a strike among its roughly 3,700 Toronto-area grocery workers continues for a second week.
The Montreal-based retailer reported on Wednesday that adjusted profits grew by more than 10 per cent in the quarter, as inflation pushed prices higher and shoppers looking for deals visited its discount stores more often, pushing sales up.
“Inflation is tough. People are searching for value in all our stores, on all of their trips,” Metro chief executive officer Eric La Flèche said on a conference call to discuss the results.
Metro’s net earnings grew to $346.7-million or $1.49 per share, compared with $275-million or $1.14 per share in the same period the prior year. According to the company, that 26.1-per-cent jump in profits was partly accounted for by a one-time favourable adjustment on a tax benefit. Not including that $40.7-million benefit, Metro’s adjusted net earnings grew by 10.9 per cent.
There are signs inflation is moderating: Metro received 40-per-cent fewer price-increase requests in the third quarter than it did in the same period last year, Mr. La Flèche said. But the size of those requests is still above normal levels, he added, with suppliers asking for percentage increases in the mid- to high-single digits, on top of double-digit increases put forward in 2022.
Like other retailers, Metro executives say that while prices on shelves have been going up, they do not entirely pass on the cost increases received from suppliers.
“We are absorbing part of the cost increases,” Mr. La Flèche said. “… There are limits to what we can charge to our customers.”
Metro has been gaining market share amid higher traffic to its discount stores such as Food Basics and Super C, Mr. La Flèche said. Metro’s sales grew by 9.6 per cent to $6.4-billion in the third quarter.
Same-store sales – an important industry measure that tracks sales growth not tied to new store openings – grew by 9.4 per cent at Metro’s grocery stores and rose 5.9 per cent at its drugstores such as Jean Coutu. Metro’s online grocery sales nearly doubled in the quarter compared with last year, largely because of partnerships the company has struck with other food-delivery companies.
Food inflation has remained stubbornly high, even as the rate of overall inflation has slowed significantly. Food prices rose by 9.1 per cent year-over-year in June, once again outpacing the general rate of inflation at 2.8 per cent.
Metro’s internal measure of food inflation was roughly 8 per cent, a deceleration in price hikes compared with its previous quarter. The company’s “food basket inflation” metric is based on prices for a basket of goods frequently purchased at its stores, and does not measure the same set of products as the Consumer Price Index tracked by Statistics Canada.
Metro donates perishables to food banks as workers strike citing affordability issues
Workers at Metro have raised concerns that their pay has not risen adequately, even as inflation has sharply increased the cost of living and grocers have reported increases in profits. In the Greater Toronto Area, 27 Metro stores remain closed amid the strike. A one-week labour dispute last year with Metro’s distribution-centre employees in Toronto cost the company $7.7-million.
Metro announced on July 19 that it had reached a tentative agreement with Unifor Local 414, which represents the workers, and that the union’s bargaining committee had unanimously recommended the deal. However, workers rejected the four-year agreement, which included wage increases above inflation, and have been on strike since July 29.
“Front-line grocery workers deserve their fair share of Metro’s record profits,” said a Unifor statement provided by spokesperson Paul Whyte on Wednesday. “Thirty-seven-hundred Metro workers remain focused on achieving a fair collective agreement that addresses the significant affordability challenges they face.”
On Wednesday’s call, Mr. La Flèche also addressed a continuing investigation by the Competition Bureau into an alleged industry-wide scheme to inflate the price of bread in Canada. Metro is among the retailers, which have denied wrongdoing, under investigation. In June, one of the country’s largest bread producers, Canada Bread, agreed to pay a record $50-million fine to settle its part in the case.
“Let me be clear. We have not participated in any price-fixing agreements, and we have not violated the Competition Act,” Mr. La Flèche said Wednesday.
A court document related to the investigation included a screenshot of a 2007 e-mail in which Maple Leaf Foods’s former chief executive, Michael McCain, described a conversation with then-Metro employee Paul del Duca in which they discussed “the strategy of managing category profit up in the retail environment.” Maple Leaf controlled Canada Bread at the time.
“Consistent with the position that he took on the last bread price increase, his point of view (and it is a very vigorous point of view) is that this is an acceptable strategy and they are aligned with it even in our meat categories,” Mr. McCain wrote in the e-mail, which was sent from the account of his executive assistant at the time, Sue Perkins.
Maple Leaf has denied any involvement in the alleged bread price fixing, and denied that the e-mail suggested any knowledge of or involvement in improper activity.
A class-action lawsuit is seeking certification in Quebec over alleged price fixing in the meat category. Mr. La Flèche said on Wednesday that the company will “vigorously” oppose certification.
“Allegations that the food industry’s culture is such that these practices may be generalized, or that the governance is somehow deficient, are simply not true, damage the reputation of our company, all its employees and the industry, and should stop,” Mr. La Flèche said.