Metro receives boost from meal kit business
• Metro Inc.’ s investment in a meal kit startup MissFresh is bringing more customer traffic into its stores, the grocery chain’s chief executive said Tuesday.
It comes as grocery companies across North America grapple with shifting consumer tastes and a desire for fresher, home-cooked meals. Metro acquired a majority stake in Montreal- based MissFresh last August but has been also offering the ready- to- assemble meals in its stores.
“The in- store pickup reduces delivery costs of MissFresh, but it also increases traffic into the Metro stores, and we have promotions ongoing,” Metro chief executive Eric La Fleche told analysts. MissFresh customers who use the home delivery service have also received $ 5 coupons to shop at Metro. “We use cross-promotions at an effective cost.”
Ready- to- eat meals from grocers and meal kit companies were the fastestgrowing food service meal segment last year, according to market research firm NPD Group, with an eightper- cent market share and growth of 20 per cent a year.
La Fleche told analysts Metro is expanding its selection of take- out meals as the trend becomes a bigger focus. “We’re not a restaurant, we don’t pretend to be a restaurant, but we are selling more and more meals, that’s for sure.”
The c ompany, which topped analysts’ first-quarter earnings estimates, earned $ 1.3 billion for the period ended Dec. 23, boosted by the sale of its stake in Alimentation Couche-Tard Inc. to help fund its $ 4.5- billion deal to acquire Jean Coutu Group Inc. That amounted to profit of $ 5.67 per share and compared with $ 138.1 million or 58 cents per share, in the same quarter a year earlier. Sales were $ 3.11 billion, up from $2.97 billion last year.
On an adjusted basis, Metro earned $ 153.4 million, or 67 cents per share, up from $ 138.1 million ( 58 cents) a year ago. Analysts on average had expected a profit of 59 cents per share and $3.02 billion in revenue, according to Thomson Reuters.
Same- store sales, an important retail bellwether, rose 3.4 per cent, or up 1.2 per cent excluding the im- pact of the pre- Christmas week.
Sylvain Charlebois, food industry expert and dean of management at Dalhousie University, noted the retailer’s solid same- store sales gains came despite a food basket increase of just 0.5 per cent. “It’s pretty impressive given the market,” he said, adding Metro has been ahead of the curve by buying into a meal kit company.
La Fleche said competition remained intense with other grocers during the quarter and price wars between grocers are keeping inflation in check. “Intense promotional activity is a fact … people shop around, and it’s a very competitive market.”
The CEO said teams at Metro and Jean Coutu are working to prepare a smooth transition. The deal is expected to close this spring, pending regulatory approval.
Metro also boosted its quarterly dividend nearly 11 per cent. It will pay 18 cents per share on March 13, up from 16.25 cents in the prior quarter. On an annualized basis, the dividend is the equivalent to about 27 per cent of the retailer’s 2017 net earnings.