Metro sees shoppers ‘falling’ as inflation weighs, executives say retailer absorbs some cost increases

Executives at grocery store owner Metro Inc. say they aren’t passing on all the cost increases they see to shoppers, even though prices in stores have risen and the company has announced a $100 increase. 9% of its profits in the third quarter.

“Our costs have increased significantly. We are absorbing some of those costs,” chief executive Eric La Flèche said on a call with analysts Wednesday to discuss the financial results.

The Montreal retailer reported that its food basket inflation was 8.5%. Metro’s internal inflation is based on the prices of a basket of goods frequently purchased in its stores, but is not directly comparable to the consumer price index that Statistics Canada uses to track inflation. According to Statistics Canada, grocery store prices across the country rose 9.4% in June from a year earlier, slowing from the 9.7% jump in May.

Metro’s net income reached $275 million or $1.14 per share in the 16 weeks ended July 2, compared to $252.4 million or $1.03 per share for the same period last year .

Just like other grocers, Metro customers try to cut where they can because they feel pressured by rising prices. People have shifted to lower-priced cuts of meat, buying more private label products such as Metro’s Irresistibles and Selection brands (which offer higher profit margins for retailers who own these brands) and opting for lower margin discounts. grocery stores such as Food Basics at an accelerated rate.

“The consumer reacts and adapts his behavior. A lot of consumers have budgets,” La Flèche said. “Overall, I would say consumers are healthy. Unemployment figures are at record highs, people are working. But these are high inflation figures at the pumps and in the stores. So there is a change, for sure, towards the value. And it’s our job to provide the best possible value.

Metro sales rose slightly in the third quarter compared to the same period last year, although sales volumes fell as the lifting of restrictions prompted some Canadians to travel more and return to restaurants in the past few months. last months. Conversely, some high-margin categories in Metro stores, such as deli meats, hot meals and ready meals, are seeing significant sales increases – including pizza, roast chicken and sandwiches – a trend M La Flèche says it expects to sue, as they offer lower prices compared to these items in restaurants.

Metro food sales kept pace with the third quarter of last year, when grocery shopping was higher than usual due to the pandemic, and online food sales were flat by compared to a jump of 19% in the same period last year. Overall sales increased 2.5% to $5.87 billion. Same-store grocery store sales – an important metric that tracks sales growth unrelated to new store openings – rose 1.1%. Same-store drugstore sales, meanwhile, rose 7.2%.

The company, which owns grocery chains such as Metro, Food Basics and Super C, as well as Jean-Coutu and Brunet pharmacies, said a slight drop in gross margin for its grocery division was compensated by a better performance of its pharmacies. Pharmacy sales were boosted by strong sales of over-the-counter drugs, the distribution of rapid tests and other COVID-related services, and buoyant cosmetics sales as people continue to socialize more and return to the office .

But Metro faced continued cost pressure, not only because food suppliers demanded higher prices from retailers, but also because of rising transportation, energy and labor costs. -work. Labor shortages are leading to increased instances of overtime pay, La Flèche said, as some positions remain open and existing staff work overtime to keep stores running.

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