When Metro reported its quarterly earnings this week, its shares sank more than 5 per cent.Cole Burston/The Canadian Press
If grocers are reaping the benefits of soaring food prices, someone had better tell investors.
When Metro Inc. MRU-T reported its quarterly results earlier this week, the shares sank more than 5 per cent, casting further doubt on a rally that has been sputtering over the past six months.
Remember when consumers and regulators were up in arms as inflation blew up household budgets? Major grocers were tarnished as villains in 2023, and rising share prices didn’t help their case.
From late 2023 through mid-2025, Metro’s share price gained 67 per cent as investors embraced a sector that appeared to hold tremendous pricing power.
Empire Co. Ltd. EMP-A-T, which operates under banners such as Sobeys and Foodland, performed even better during this bonanza. Shares gained 78 per cent from April, 2024, through mid-2025.
And no wonder Loblaw Cos. Ltd. L-T – whose banners include Loblaws, No Frills, T&T and Shoppers Drug Mart – endured the greatest wrath. Its share price led the sector, soaring nearly 130 per cent over a similar period.
The company completed a four-for-one stock split last August, which reduced the nominal price of its stock. Hey, at least something in the grocery aisle has a lower price tag.
You can understand why investors gravitated toward grocers.
In an era of rising prices, where suppliers charged more for everything from eggs and meat to coffee and juice, grocers could pass rising costs to consumers. If some consumers balked at high prices, the largest grocers had discount banners to entice them and could squeeze greater efficiencies from their sprawling operations.
Grocers preserved their margins and the stocks looked like a safe bet in an uncertain economy. If that sounds terrific, it is – but only to a point.
That’s because for all the consternation over inflation, grocer margins remain wafer-thin.
Loblaw generated just 3.5 cents in net income for every dollar of sales in 2022, according to data from S&P Global Market Intelligence. The margin, which includes pharmacy earnings, was the same in 2024 even as inflation heated up.
Metro generated a profit of 4.5 cents for every dollar of sales in 2022, also including pharmacy earnings, but the margin fell slightly to 4.4 per cent in 2024.
Food prices continue to cause consumers pain. They increased by 5 per cent in December, on an annualized bass, which was more than double the headline inflation rate.
Now, though, investors are taking a more cautious approach to grocery stocks.
While Loblaw’s share price remains near record highs ahead of its quarterly results next month, others have felt the pull of gravity.
Metro’s latest quarterly financial results, released this week, add a lot of what-have-yous to the case for diving into grocery stocks when food prices are rising.
Like, maybe inflation isn’t so great for grocers after all?
Eric La Flèche, Metro’s chief executive officer, said during a call with analysts this week that the grocer is navigating a “challenging environment” marked by “persistent food inflation.”
The operator of Metro, Food Basics and Jean Coutu stores in Quebec and Ontario reported that its adjusted quarterly profit increased just 1.3 per cent over the same period last year.
The slim gain excludes costs associated with the temporary shutdown of its frozen-food distribution centre in Toronto; include that setback and earnings declined during the quarter.
Metro CEO says GST credit hike ‘a good thing,’ but much of food inflation outside grocers’ control
It doesn’t help matters that Canada’s population growth is slowing. But Metro is also caught between suppliers demanding higher prices and cash-strapped consumers demanding price stability, pushing the company to wage its own battle against inflation.
“We’re negotiating as much as we can. Some of it is justified by commodity prices – chocolate, coffee, you name it. There are inflationary pressures that some of our suppliers are facing and trying to push or transfer to us,” Mr. La Flèche said on a call with analysts.
According to a survey of nearly 100 grocery industry insiders by CIBC Capital Markets analyst Mark Petrie, 70 per cent of respondents expect that food inflation will persist at a level in the range of 3 per cent to 4 per cent.
That could push consumers to seek deals and continue to trade down from premium brands and high-end store banners, potentially weighing on margins.
Metro’s share price is down 14 per cent since August, and has underperformed the S&P/TSX Composite Index by about 30 percentage points over the past 12 months. Perhaps investors aren’t so sure about this new grocer-as-victim look. Villains are far more bullish.