Grocery retailer Metro Inc. plans to open more discount stores next year, as Canadian shoppers hit hard by inflation continue to look for value.
The Montreal-based retailer on Wednesday announced plans for 12 new stores in 2025, including some locations that will be converted from full-priced banners. Metro owns discount chains Food Basics and Super C.
Metro is facing greater competition in the discount space, as rival Loblaw Cos. Ltd. has been opening more locations, and converting a number of its Provigo stores in Quebec to the lower-priced Maxi banner.
“We see good opportunities, in discount mostly, in both provinces,” president and chief executive officer Eric La Flèche said during a conference call to discuss the company’s fourth-quarter earnings. “… Food Basics in Ontario is is doing really well, has been on a very good run for a few years, capturing share. And we see more opportunities. Same with Super C.”
Mr. La Flèche said that customer counts are up at all of Metro’s banners, and that the retailer is gaining market share. But a shift in shopping behaviours has been persistent, as people continue to opt for store-brand products, and customers are buying on promotions more frequently.
Grocery prices have continued to be a pain point for many Canadians’ budgets. While food inflation has slowed compared to the double-digit increases seen in 2022 and 2023, consumers are still facing significantly higher prices than they were just a couple of years ago. And in recent months, grocery prices have been rising faster than overall inflation. On Tuesday, Statistics Canada reported the price of food bought in stores rose by 2.7 per cent in October, compared with the same month one year ago. That was higher than the growth in the Consumer Price Index, which was up 2 per cent.
Metro reported on Wednesday that its own internal measure of food basket inflation was higher than Statistics Canada’s CPI measure, which was 1.7 per cent during the fourth quarter ended Sept. 28. The company’s internal metric is based on prices for a basket of goods frequently purchased at its stores, and is not directly comparable with CPI. Last week, competitor Loblaw Cos. Ltd. also reported its internal food inflation measures were higher than CPI in its third quarter, which ended Oct. 5. Neither company discloses those internal figures.
People are also seeking value through the use of loyalty programs. This fall, Metro terminated its partnership with Air Miles in order to expand its own MOI loyalty program to Ontario. Since the launch of the program in late October, more than 1-million people have signed up, Mr. La Flèche said.
Metro reported that sales grew across its store network in the quarter ended Sept. 28. Same-store sales – an important metric that tracks sales growth not caused by new store openings – grew by 2.2 per cent at Metro’s grocery stores, and by 5.7 per cent at its pharmacies, including the Jean Coutu drugstore chain.
Metro executives had previously said that higher-than-usual expenses related to investments in its supply chain would weigh on profits this fiscal year. That has included transitions to new automated distribution centres in Quebec and Ontario, which are now complete. Executives said on Wednesday that they expect the company to return to earnings growth in 2025.
Metro reported net earnings fell by 1 per cent to $219.9-million in the quarter ended Sept. 28. Earnings per share grew slightly to 98 cents per share in the quarter, compared with 96 cents per share in the same period the previous year, when the company had more shares outstanding.
Over all, Metro reported its sales fell 2.6 per cent in the fourth quarter because of a calendar shift: this year’s quarter spanned a 12-week period, while the same quarter in the previous year included 13 weeks. Total sales were $4.9-billion, up 5.7 per cent when compared to a similar 12-week period. The growth came both from higher sales at the company’s stores, as well as the fact that it compared to a period in the previous year when Metro faced lost profits and added costs from a five-week strike that shuttered 27 stores in Ontario.
Online sales grew by 27.6 per cent, when compared on a 12-week basis with the prior year.
For the full year, sales grew by 2.4 per cent to $21.2-billion. As with the fourth quarter, full-year results were affected by the year having one less week compared to fiscal 2023; when compared on a 52-week basis with the prior year, sales were up 4.4 per cent.
Net earnings for the year fell to $931.7-million or $4.11 per share, compared to $1-billion or $4.35 per share in the prior year. The results included a loss on impairments of assets relating to the decision to end the Air Miles partnership. Not including that one-time loss and other adjustments, adjusted net earnings were $972.9-million or $4.30 per share, a decline of 3.3 per cent overall and flat on a per-share basis.