‘Strength of economy’ helps offset pressure for promotions
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.