A Metro grocery store in Toronto. The Montreal-based grocer saw sales grow to $5.1-billion in its second quarter, driven by the addition of new stores.Laura Proctor/The Globe and Mail
Grocery retailer Metro Inc. MRU-T is pushing back against cost-increase requests from suppliers, using negotiations to delay the impact on food prices in its stores, executives said Wednesday.
The Globe and Mail was first to report this month that suppliers such as Maple Leaf Foods MFI-T, Tree of Life and Unilever PLC UL-N have told grocers they plan to apply fuel surcharges or overall cost increases.
Metro has received “only a few” such requests, chief financial officer Nicolas Amyot told analysts during a conference call to discuss the company’s second-quarter results, “and we’re negotiating the conditions and trying to delay the impact that this might have on food pricing.”
Soaring fuel prices amid the United States and Israel’s war with Iran have impacted the global supply chain, adding to the costs of production and of transportation. Grocers are also affected, as they truck food from their distribution centres to stores. That will in turn put pressure on food prices on shelves.
“Over time, we expect that higher costs like that will be reflected, but it hasn’t started to happen yet,” president and chief executive officer Eric La Flèche said during the call.
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Canadians are reacting to inflationary pressures, including higher prices at the pump, by attempting to cut back where they can. There has been an overall shift in the market in recent years, as people shop more frequently at discount stores. That trend has been driving grocers to open more such locations as they compete for price-sensitive customers.
Those new stores were a driver of sales growth in the second quarter for the Montreal-based grocer. Metro reported on Wednesday that its sales grew to $5.1-billion in the three months ended March 14, up 4.1 per cent compared to the same period the prior year. Customer traffic was up because of new store openings.
“Fuel-price pressures contribute to the affordability crisis, and contribute to customers looking for value in everything they buy, including food,” Mr. La Flèche said.
Sales also increased slightly from existing stores, and results were boosted by a calendar shift that included one pre-Christmas shopping day during the quarter, which had fallen in the first quarter in the prior year.
Same-store sales – which is an important metric, because it tracks sales growth excluding the effect of new store openings – were up 1.8 per cent in Metro’s grocery stores.
Lower grocery same-store sales are being observed across the grocery industry, “with more growth coming from new stores,” Scotiabank analyst John Zamparo wrote in a research note Wednesday, noting that Metro’s comparable sales growth in the quarter was well below Canada’s food-inflation rate.
Same-store sales grew by 5.1 per cent in the company’s pharmacies, which operate under the Jean Coutu banner. The rise of blockbuster weight-loss drugs has contributed to sales growth, executives said, especially as new versions of GLP-1 medications come to market.
Net earnings grew to $246.6-million or $1.16 per share on a diluted basis, compared to $220-million or 99 cents per diluted share in the prior year’s quarter.
The earnings were positively impacted by a one-time gain on the disposal of warehouses the company no longer uses. Including that and other adjustments, net earnings grew by 4.4 per cent to $236.5-million in the quarter.