Kadar Aden supervises delivery orders at a Metro grocery store in Toronto, on March 26, 2020.Christopher Katsarov/The Globe and Mail
As people became more aware of COVID-19 and rushed out to stock their pantries, grocery stores saw a major increase in traffic. For Metro Inc., that led to an estimated $125-million sales increase in just the first two weeks of March.
The Montreal-based company reported the sales impact of the pandemic for the first time on Wednesday as it released its financial results for the second quarter, which ended March 14. Sales continued to ramp up into the current quarter. Metro also said that same-store sales – a key retail metric measuring comparable sales in stores open more than a year – were up 25 per cent in the four weeks from March 15 to April 11, compared with the same time last year.
The impact on grocery sales owing to COVID-19 is becoming clearer. Metro’s results followed a report from Sobeys’s parent company Empire Co. Ltd. last week, saying that its same-store sales surged by 37 per cent in the four weeks starting March 8, and 24 per cent in the two weeks before Easter, compared with the same times last year. Loblaw Cos. Ltd. reports its quarterly earnings next week.
The change in buying patterns is significant. In Canada’s grocery sector, same-store sales growth is usually reported in the low single digits. In an interview last week, Empire chief executive Michael Medline said the surge in traffic to stores “boggles the mind.”
Customers are visiting stores much less frequently, but are buying much more per trip, Metro CEO Eric La Flèche said on a conference call to discuss the results on Wednesday morning. Because shoppers were willing to buy “anything they could get their hands on” during the strongest weeks of growth, private-label products also benefited from increased sales, he said. The largest sales increases were in the meat department and the grocery department – in other words, in the centre of the store where products such as packaged goods, frozen foods and shelf-stable items such as canned foods are sold.
At the same time, there are fewer deals to be had: Metro is selling fewer items on promotion, he said, partly because some of the stores' suppliers have asked retailers to pause or reduce promotional activities "to avoid putting further strain on the production line and supply chain." Prices have not gone up significantly, he said, and the page-count of Metro's flyers should return to normal in the coming weeks. Customers have not yet shifted to significantly more discount-shopping, he added, but the company expects that is likely in future, as the expected recession due to COVID-19 affects customer behaviour.
In the three months ended March 14, Metro's food same-store sales grew 9.7 per cent; excluding the effect of the pandemic, Metro estimates the growth would have been 5.2 per cent. Pharmacy same-store sales were up 7.9 per cent, and without the effects of COVID-19 it would have been closer to 6.4 per cent, Metro reported. The company owns grocery banners including Metro, Food Basics, Super C and others, as well as the Jean Coutu pharmacy chain.
Shoppers began stocking up in early March, but traffic has continued to be higher than last year as people have stayed home to try to curb the spread of the virus, and restaurants have been forced to close down to encourage physical distancing.
After extremely strong sales increases during the second and third weeks of March, sales growth levelled off somewhat but was still in the teens, Mr. La Flèche said on the call.
“The go-forward increase in food sales could be anywhere from 10 [per cent] to 20 [per cent],” he said. “... We expect strong sales to continue as long as confinement is where it is, and food [consumption] at home is where it is.”
The crisis has also increased costs for grocers as they have hired more staff, introduced more frequent and intensive cleaning measures in stores, and invested in safety measures such as protective gear for staff and plexiglass shields at checkouts. The increased sales are more than enough to offset those costs, however. Mr. La Flèche said he expects consumers will demand more from stores and that some safety and extra cleaning protocols will continue to be in place even as the crisis abates.
The demand for e-commerce services has overwhelmed Metro’s capacity to fill orders, Mr. La Flèche said, even though the company added more staff to fill online orders and put more trucks on the road. Like other retailers, Metro has seen time slots for delivery fill up as soon as they become available, and as awareness of the pandemic grew, the volume of online orders more than doubled overnight, he said. Metro has now signed on with third-party e-commerce service Cornershop to assist with online ordering, and has launched a new priority service for seniors and those who are in quarantine because of the virus. Going forward, Metro is examining ways to increase its market share in the grocery e-commerce business.
“What is going to be the new level of [e-commerce] demand? We expect it will be higher than it was before. There’s an acceleration, it’s pretty safe to say, an acceleration that will stay,” Mr. La Flèche said. “... We will need to add some capacity. So we’re looking at different options. We’d started to look at that precrisis anyway.”
Meanwhile, pharmacy sales have been squeezed, partly because of restrictions on customers’ access to stores, the company said. Same-store sales of non-prescription products at Metro’s pharmacies were down 9 per cent in the four weeks leading up to April 11. Sales have declined further in recent weeks, the company stated.
Metro reported total sales of nearly $4-billion in its second quarter, up 7.8 per cent from $3.7-billion in the same period last year. The company had net earnings of $176.2-million, or 70 cents a share, compared with $121.5-million, or 47 cents a share, in the prior year. Metro said COVID-19 was responsible for a gain in net earnings of roughly 3 cents a share.
With unemployment skyrocketing during the coronavirus pandemic, personal finance columnist Rob Carrick offers some tips on how to deal with creditors and make a bare-bones budget.
The Globe and Mail
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.