Metro to close, convert some Ontario stores
Competition spurs chain to grow pharmacy business with Target deal in Quebec
MONTREAL— Metro is reorganizing its Ontario grocery store network and will become the exclusive operator of Target’s pharmacies in Quebec as it continues to adjust to intense competition and dramatic changes in the Canadian supermarket and pharmacy businesses.
The Montreal-based company, one of Canada’s largest grocery retailers, said 15 stores would be affected including six Metro stores in Ontario that will be converted to the Food Basics discount banner and up to three underperforming locations that will be closed over the coming months.
Metro said it will also offer buyouts to an unspecified number of unionized employees at the other Ontario stores affected as it aims to reduce its labour costs. It declined to say how much will be saved or how many people will be let go.
The company, which has 263 Metro and Food Basics stores in Ontario, said it will take a $40-million restructuring charge in its next quarter related to the reorganization.
Meanwhile, Target Corp. will partner with a Metro subsidiary under an agreement announced Wednesday that will see Brunet own and operate 18 pharmacies that Target will open next summer in Quebec. The deal will raise its Brunet store count to168 and nearly double its presence on the island of Montreal.
“This strategic partnership will enable us to significantly increase the presence of Brunet in Greater Montreal and represents a solid growth platform for our pharmacy business,” La Fleche told analysts.
Metro has said it is interested in growing its pharmacy division, especially in Quebec. La Fleche said it will consider other expansion opportunities should they become available.
Minneapolis-based Target, which has acquired much of the space formerly occupied by Zellers, said it plans to open its first 25 stores in Quebec this fall. Only 18 will have pharmacies, but Metro will have the exclusive right to add other Brunet locations as Target expands its presence in the province.
Under Quebec law, pharmacies must be owned by individual pharmacists. The Brunet locations inside Target stores will be run by independent pharmacists supplied by Metro’s McMahon subsidiary, which also distributes pharmaceutical products. McMahon will supply the prescription drugs and over-the-counter medicines while Target will provide its private-label brands. . “We’re pleased with the positive response we’ve received from guests at the 62 in-store pharmacies that are currently in operation throughout Canada, and look forward to delivering superior, patient-focused health care to our guests in Quebec,” said Tony Fisher, president of Target Canada. Metro is facing increased pressure to expand following recent deals by Loblaw to purchase Shoppers Drug Mart and Sobeys to buy Safeway Canada, based in Western Canada. Quebec-based Jean Coutu Group has been named as one of the likely takeover targets. Metro’s changes were announced Wednesday as it reported a thirdquarter profit of $149.8 million or $1.55 per share, up from $144.4 million or $1.43 per diluted share a year ago. However, sales slipped to $3.57 billion for the quarter that ended July 6 compared with $3.6 billion a year ago.