Metro Inc. MRU-T reported a 14.5-per-cent decline in profits in its second quarter, as the company continues to face higher-than-usual expenses related to investments in its supply chain.
The Montreal-based grocer also announced on Wednesday that it is terminating its partnership with Air Miles this coming fall, as it plans to expand its own MOI loyalty program to cover all 275 of its Metro and Food Basics stores in Ontario.
MOI launched in Quebec last May, and currently has 2.5 million active members in that province. Air Miles can still be collected and redeemed at stores until the launch, according to the company.
Metro recorded a $20.8-million impairment charge related to the decision, saying the impairment of assets represents the carrying value of the loyalty program.
The company reported net earnings fell to $187.1-million or 83 cents a share in the second quarter ended March 16, compared with $218.8-million or 93 cents a share in the same period the prior year. Adjusting for the loss on impairment of the loyalty program as well as other items, adjusted net earnings declined by 8.4 per cent, to $206.4-million or 91 cents a share, compared with $225.4-million or 96 cents a share in the same period the prior year.
Metro had previously forecast that this fiscal year would see net earnings slip as the company makes investments in improving its supply chain operations. That includes a transition to a new automated distribution centre for fresh and frozen products in Terrebonne, Que., which is now completed, and to another automated facility for fresh food in Toronto, which will enter its final phase this summer. Last November, executives forecast that on a full-year basis, adjusted net earnings per share would fall within a range of flat-to-down by 10 cents a share.
Canada’s major grocers have faced intense scrutiny over food inflation, which peaked at more than 11 per cent in late 2022 and early 2023, but has been slowing in recent months. The leaders of Canada’s largest grocers have been called to Ottawa on more than one occasion to face questioning over food prices, and the federal government at one point threatened unspecified tax measures to compel the retailers to stabilize prices.
The latest data from Statistics Canada showed that prices for food purchased from stores increased by 1.9 per cent in March on a year-over-year basis, down from 2.4 per cent in February.
Metro’s own internal measure of food-basket inflation was roughly 3 per cent in the second quarter, down from 4 per cent in the first quarter. (The number is not directly comparable with the rate of food inflation measured by Statistics Canada’s Consumer Price Index, because it is based on prices for a basket of goods that are frequently purchased at its stores.)
Even as the growth in prices has slowed, people’s grocery bills remain significantly higher than they were just a couple of years ago. As they have been doing for months, shoppers are selecting lower-priced products, such as cheaper cuts of meat and store-brand items; and retailers are competing for customers’ dollars with higher levels of promotions.
“Facing cost-of-living pressures all around, customers continue to shop carefully and search for value,” chief executive officer Eric La Flèche said on a conference call Wednesday to discuss the results.
A market study released last summer by the federal Competition Bureau said that Canada’s grocery industry is too concentrated, and included recommendations to encourage international retailers to enter Canada and boost the sector’s competitiveness.
“Any affirmation that our industry is not competitive, we disagree with that completely,” Mr. La Flèche said on Wednesday’s call. “We compete with large global players; we have strong regional and national competitors; we have strong local independents; we have discount, dollar stores; you name it. Amazon, Walmart, Costco. This is an extremely competitive market.”
Metro’s total sales in the quarter increased by 2.2 per cent compared with the prior year, to nearly $4.7-billion.
Same-store sales – an important metric that tracks sales growth not attributable to new store openings – were roughly flat, growing just 0.2 per cent at Metro’s grocery stores. Sales were affected by a timing shift in the quarter, which began closer to Christmas than the same period in 2022 – meaning that the prior period included more of the busy pre-Christmas period. Adjusting for that shift, food same-store sales were up 2.7 per cent, according to Metro. Same-store sales at pharmacies, including the company’s Jean Coutu drugstore chain, increased by 5.9 per cent.