The interior of a Metro grocery store in Toronto's Liberty Village.Fred Lum/The Globe and Mail
Grocery retailer Metro Inc. MRU-T received tens of thousands of requests from suppliers for price increases in its past fiscal year, a number that underscores the inflationary pressures across the industry. And more price hikes will hit shelves in the coming weeks, Metro CEO Eric La Flèche said on Tuesday.
The Montreal-based company – which owns grocery banners including Metro, Super C and Food Basics, as well as the Jean Coutu drugstore chain – fielded 27,000 such requests from vendors in the dry-goods category alone in fiscal 2022, Mr. La Flèche said during a press conference after the company’s annual general meeting. That represented three times the usual volume of such requests.
The dry-goods category accounts for 50 per cent to 60 per cent of grocery sales, depending on the store, meaning that number does not include other price-increase requests Metro received for products such as meat, produce, dairy and baked goods.
The pressures continue. Metro is in a blackout period for price increases – a common practice for the retailer that lasts from mid-November to the beginning of February. But there are thousands of cost-increase requests in the system and some prices will begin rising again in the next several weeks.
Canada’s grocery sector is facing scrutiny over food prices, which continue to grow at the highest rate in decades, outpacing general inflation. Grocery prices rose by 11 per cent in December compared with the same month the prior year, according to Statistics Canada, slowing only slightly from 11.4-per-cent annual growth in November.
“Inflation in general, and food inflation in particular, is a worldwide phenomenon,” Mr. La Flèche said, echoing other Canadian grocery chief executive officers who have stressed they are not profiting from inflation. “… I think that ‘greedflation’ accusations or comments are unproductive, unconstructive and not true.”
On Tuesday, Metro reported that its sales grew by 8.2 per cent in the quarter, largely driven by inflation. The company’s overall profit – including both its grocery and drugstores – grew by 11.3 per cent in the 12 weeks ended Dec. 17, 2022.
Mr. La Flèche pointed to Metro’s gross profit margin, which was 19.6 per cent in the quarter, compared with 19.9 per cent for the same period in the prior year, saying it demonstrates the company is not passing on all cost increases to consumers.
Like other retailers, Metro does not report separate numbers for its grocery and drugstore operations, but Mr. La Flèche said healthier profit margins at pharmacies have been offsetting declining margins in food. Metro has also stepped up its promotions, with products selling at lower margins as part of those promotional features accounting for a higher percentage of sales, he added.
All of Canada’s major grocery retailers have pointed to higher volumes of cost increases among suppliers. Metro’s largest competitor, Loblaw Cos. Ltd., made headlines last year when a dispute over price hikes led PepsiCo-owned potato-chip manufacturer Frito-Lay to temporarily cut off shipments to Loblaw’s stores. Metro has not had any similar stopped shipments from suppliers, Mr. La Flèche said, but is negotiating with suppliers to mitigate increases where possible.
On Tuesday, Metro reported net earnings of $231.1-million or 97 cents a share in the 12 weeks ended Dec. 17, 2022, compared with $207.7-million or 85 cents a share in the same period in 2021. The company also announced a 10-per-cent increase in its quarterly dividend paid to shareholders, to three cents a share.
Metro’s internal measure of food basket inflation was up 10 per cent, though this number is not directly comparable with Statistics Canada’s figure because it looks at prices based on what customers bought at its stores, rather than tracking price changes in a static basket of goods.
“We’re not happy with 10-per-cent cost inflation. It’s not good for anybody,” Mr. La Flèche said.
There has been pressure on grocery CEOs to answer questions about declining food affordability in Canada. Last month, a parliamentary committee called on chief executives including Mr. La Flèche to appear for questioning on the matter, after senior finance executives from Sobeys parent company Empire Co. Ltd. and from Loblaw attended a committee meeting in Ottawa, but not the companies’ CEOs. Mr. La Flèche said on Tuesday that Metro is scheduled to appear before the committee and intends to send chief financial officer François Thibault.
Mr. La Flèche added that Metro intends to participate in the federal Competition Bureau’s study of the grocery sector, which is intended to produce recommendations to government on improving competition in the industry.
Sales in the quarter were nearly $4.7-billion, the company reported on Tuesday. Same-store sales – an important metric that tracks sales growth not tied to an increase in the number of store locations – were up 7.5 per cent at Metro’s grocery stores and 7.7 per cent at its pharmacies. The drugstores benefited from higher sales of prescription drugs, as well as growing sales of cosmetics and other beauty products.
Online sales grew by 40 per cent, compared with the same period in the prior year when e-commerce sales were flat.