‘Strength of econ­omy’ helps off­set pres­sure for pro­mo­tions

Edmonton Journal - - FINANCIAL POST - ROSS MAROWITS

Metro Inc. says a strong econ­omy and low un­em­ploy­ment are driv­ing cus­tomers to its full-ser­vice gro­cery stores and help­ing to off­set the in­tense pro­mo­tional pres­sure, mostly from dis­count chain com­peti­tors.

“The strength of the econ­omy in both Que­bec and On­tario, com­bined with low food in­fla­tion, cur­rently favour the fullser­vice su­per­mar­ket, and we are pleased with the per­for­mance of the Metro ban­ner in both prov­inces,” CEO Eric La Fleche said Tues­day during a con­fer­ence call about its sec­ondquar­ter re­sults.

The Mon­treal-based gro­cery firm said it earned $106.9 mil­lion in its lat­est quar­ter, down 19.3 per cent from $132.4 mil­lion a year ago. The dip was at­trib­uted to a shift in the Christ­mas week to the first quar­ter, and the loss of its share of Ali­men­ta­tion Couche-Tard earn­ings af­ter the sale of most of its stake in the con­ve­nience store chain.

Metro recorded a gain of $1.1 bil­lion on the sale. It plans to even­tu­ally sell the re­main­ing stake.

Ex­cludin­gone-timeit­ems, Metro earned $108.1 mil­lion, or 47 cents per share, in the pe­riod ended March 17, in line with an­a­lyst fore­casts and com­pared with $113.9 mil­lion, or 48 cents per share, in the prior year.

Sales in the com­pany’s sec­ond quar­ter to­talled just under $2.9 bil­lion com­pared with just over $2.9 bil­lion a year ago.

Sales for stores open at least a year — a key re­tail met­ric — were down 1.2 per cent, but would have been up one per cent ex­clud­ing the shift in the hol­i­day pe­riod, the com­pany said.

La Fleche said he be­lieves Loblaw’s $25 gift cards, re­lated to its par­tic­i­pa­tion in what it al­leges is an in­dus­try-wide bread price fix­ing scheme, had a ma­te­rial im­pact on con­sumer shop­ping, adding that the price and pro­mo­tional en­vi­ron­ment was com­pounded by the gift cards.

“So our­selves, com­peti­tors, we will de­fend mar­ket share,” he told an­a­lysts. “But to say that it had no im­pact would be push­ing it. To say how much ex­actly, hard to say. It’s a com­pet­i­tive fact.”

Loblaw Com­pa­nies Ltd. has tried to mit­i­gate po­ten­tial dam­age from an in­ves­ti­ga­tion into an al­leged in­dus­try-wide bread price­fix­ing scheme through its ad­mis­sion of guilt and of­fer­ing the gift card.

Metro and ma­jor gro­cery ri­val Sobeys, which deny any wrong­do­ing, have crit­i­cized the gift cards as a way for Loblaw to sal­vage its rep­u­ta­tion even as they ad­mit­ted wrong­do­ing.

La Fleche also said the hike in On­tario’s min­i­mum wage to $14 an hour in Jan­uary had an ef­fect on Metro’s re­sults, although it con­trolled ex­penses as much as pos­si­ble to off­set the im­pact. He added that other em­ploy­ment law changes, such as part-time pay eq­uity in On­tario, will put ad­di­tional pres­sure on op­er­at­ing costs.

He said Metro is pre­par­ing to close the $4.5-bil­lion ac­qui­si­tion of the Jean Coutu Group on May 11.

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