The year-end results presented Wednesday by Goodfood Market and Metro were not impressed. In a context where inflation is affecting the activities of both companies, investors have reserved a very different fate for the two Montreal grocers.
Market Goodfood lost 26% of its value on Wednesday to close at $ 5.30 on the Toronto Stock Exchange despite investors anticipating bleak news, as the stock had already lost 50% from its high of $ 14.72 reached earlier this year.
The summer season is generally a slower period for Goodfood and the relaxation of sanitary measures has accentuated the phenomenon, explained CEO Jonathan Ferrari on a conference call.
The results missed the target of analysts on several points. Revenues for June, July and August were down 5% year on year to $ 79.3 million, as markets expected them to be up to $ 90 million.
The quarterly operating loss of $ 17.7 million turned out to be much larger than the $ 1 million expected by analysts.
“Goodfood has just missed the target for the first time in more than two years,” commented analyst Martin Landry, of the firm Stifel / GMP.
“The company must contend with wage inflation, rising food prices and costs to develop its online product offering. ”
Nonetheless, the main challenges, according to Martin Landry, are the intensification of competition in the ready-to-cook meal segment, which reduces the prospects for future growth, and the lack of data to measure progress on the side of the market. online grocery store. “As a result, Goodfood now needs to demonstrate that it can execute and deliver the intended results, which risks keeping the stock within a certain price range in the short term. ”
This expert notes in passing that while the number of active subscribers is up 6% over one year, it is down 6% compared to the previous quarter. “This is the second decline in a row in this chapter,” he emphasizes.
The number of active subscribers rose from 319,000 as of 1er March to 317,000 to 1er June, before slipping to 298,000 at 1er September.
Despite everything, Frédéric Tremblay, of Desjardins Securities, points out that progress towards making Goodfood a Canadian leader in online grocery shopping continues. “I continue to appreciate the potential that Goodfood has in building on its strengths with ready-to-cook meals and taking advantage of the online grocery opportunity. ”
Before the results were released, eight of nine analysts who track Goodfood’s business recommended buying the stock and their 12-month average target was $ 11.89.
PHOTO PATRICK SANFAÇON, ARCHIVES THE PRESS
Metro saw its action retreat on Wednesday
Metro
In Metro’s case, investors pulled the stock down 2% on Wednesday. The title had however reached a new high the day before, which gave an idea of the expectations towards the traditional grocer headed by Eric La Flèche.
The CEO was pleased to have ended the year strong with fourth quarter profit growth despite lower sales. “With the relaxation of government restrictions over the summer, part of food consumption has returned to the restaurant sector,” he said.
Adjusted earnings per share of 81 cents generated during the months of July, August and September is in line with experts’ forecasts. Comparable food store sales, however, were down 3% year-on-year. It is possibly this result that may have disappointed some investors. For one, TD analyst Michael Van Aelst expected comparable supermarket sales to grow by around 1%.
With a market valuation described as “historically” high, it probably didn’t take much for the stock to come under pressure.
Metro also says it is increasing the capacity of its online grocery network at a “measured” rate, and management points out that although it is difficult to predict how customer habits, the job market and Food basket inflation will change in the near term, the business fundamentals remain “strong” and sales continue to compare favorably to pre-pandemic levels.
Management further notes that the industry is under cost inflation pressures, primarily with respect to the cost of goods sold.
At the start of the day on Wednesday, only 3 of the 11 analysts following Metro suggested that their clients buy the stock.