The price of the grocery basket has seen inflation of about 8.5% at Metro compared to last year, but this increase has not been fully reflected in the revenues of the Montreal company at a time when consumers are more likely to eat out.
In the third quarter ended July 2, the grocer, owner of the Metro and Super C brands, observed an acceleration in food inflation. The food basket experienced an inflation of 8.5% compared to the same period last year. This compares with a 5% pace in the previous quarter. In June, food prices saw an annual inflation of 8.8% in Canada, according to Statistics Canada.
This increase was not fully reflected in revenues, while comparable food store sales advanced only 1.1%. During a call with analysts on Wednesday, Metro President and CEO Eric La Flèche cited sales volumes to explain the more modest increase as more households eat out. outside their homes than at the same time last year.
The big boss of Metro expects comparable grocery sales growth to be more robust in the future when the comparison with last year is between two periods when health measures were relaxed. “We’re going to compare apples to apples and I think we’ll do very well. »
Asked about the impact of inflation on consumers’ purchasing power, Mr. La Flèche said he was not afraid of a drop in grocery spending. “Are people going to eat less and put less stuff in their basket? Personally, I don’t believe so. »
Consumer behavior is changing, admits the leader. “Yes, they are turning to private labels. Yes, they are consuming cheaper protein, but it is believed that these changes will come to our stores. »
The moderation in same-store sales growth is not related to stronger competition among grocers, La Flèche replied. “Competition is always intense. The market is very competitive, but we haven’t seen any irrational behavior. »
The situation described at Metro is similar to what is observed at competitor Loblaw, believes Chris Li of Desjardins Capital Markets. The analyst estimates that volumes were down about 7% at Metro, compared to 5% in the previous quarter. “As at Loblaw, the marked decline in volume is explained by the comparison with last year when grocers benefited from sanitary restrictions and probably, also, by changes in habits on the part of consumers who have chosen products cheaper due to inflation. »
Pharmacies, locomotives of the quarter
The pharmacy segment, for its part, was supported by activities related to COVID-19 and by the sale of cosmetic products at a time when people go out more. The owner of the Jean Coutu brand recorded a 7.2% increase in sales in the pharmacy segment.
In the third quarter, net income amounted to $275 million, compared to $252.4 million for the corresponding quarter of 2021.
Total revenues, for their part, increased by 2.5% during this period, to $5.9 billion.
Adjusted diluted earnings per share were $1.18 compared to $1.06. Prior to the earnings release, analysts were expecting earnings per share of $1.19, according to Refinitiv.
Metro’s stock lost $1.45, or 2.06%, to $68.78 at the close of the Toronto Stock Exchange.