Metro Quarterly Results | Consumer Caution Is Making Itself Felt

Consumers are more alert than ever when they walk the aisles of supermarkets and are willing to shop at multiple locations to save money. That caution partly explains Metro’s latest results, which are facing a drop in profits despite rising sales, experts said in a statement. The Press.

The Quebec company announced a 14.6% drop in its net profit for the third quarter, ending July 6, 2024, compared to the same period last year. Its turnover increased by 3.5% to reach 6.65 billion.

“We’ve been saying for a while that consumers would have to start changing their consumption habits to counter rising food prices,” says Pascal Thériault, an agronomist and economist at McGill University. “And I think we’re seeing it now. When customers move away from processed foods to lower-margin staples, it’s less profitable per unit sold. That could be part of the answer.”

“Consumers are very aware of grocery store prices,” adds Maryse Côté-Hamel, assistant professor of consumer sciences at Université Laval. “A few years ago, they paid a little less attention to it. Now, they are much more sensitive. They buy less.”

Barely a year ago, public opinion, and even some politicians in Ottawa, accused major food retailers of taking advantage of inflation to increase their prices and “line their pockets.”

Last fall, the federal Minister of Industry, François-Philippe Champagne, asked grocers to present their first measures to stabilize prices.

“We know that the cost of living is the main concern of Canadians,” said Audrey Champoux, spokesperson for the minister, in an email sent to The Press. That is why Minister Champagne continues to promote competition in Canada, to reduce prices and improve options for consumers.”

According to M^me Côté-Hamel says this negative image of supermarkets is starting to fade. “I think the big retailers have understood that they have to be careful and make sure to minimize price increases, if only because it looks bad.”

The relevance of traditional brands

Moreover, although consumers seem to be turning more to discount supermarkets like Super C or Maxi, traditional brands still have their place, Metro President and CEO Eric La Flèche said during a conference call with analysts to discuss the company’s third-quarter results on Wednesday.

Without naming Loblaw, which has converted many Provigo stores into Maxi stores, Mr. La Flèche acknowledged that the discount store market is growing faster in Quebec than in Ontario, where the company also has stores.

For its part, Metro opened seven new Super Cs between 2022 and 2024. During this same period, four Metro stores were converted into discount stores.

” [Les magasins au rabais] have to offer something different. They have more assortments, more services, he explained. The customer experience has to be improved, and I think that’s what the Metro brand is trying to do. Market by market, store by store […]we invest in our conventional stores, we invest in our programs, we invest in our loyalty programs.”

However, Empire, which only has traditional grocery stores in Quebec with IGA, saw its comparable store sales increase by barely 0.2% compared to last year, during its fourth quarter ended May 4. Analysts had then pointed out that the company did not have a low-cost brand in Quebec, unlike its competitors. And this could partly explain this performance.

Despite everything, Professor Thériault believes that IGA, Metro and Provigo stores still have their reason to exist. “Going to Metro instead of Super C or Provigo instead of Maxi is a choice we make as consumers. Will we save more if we go to a discount store? Yes. Will we get the same service? No.”

Profits down

Separately, Metro reported lower profits for its fiscal 2024 third quarter ending July 6, while sales rose 3.5%. The grocery and drug retailer reported net income of $296.2 million in its third quarter, down from $346.7 million in the same quarter last year.

Gross margin remained stable at 19.6% compared to the same quarter last year, while net margin declined. Operating expenses increased by approximately 5% year-over-year to reach $682 million, an increase of $31 million in one year caused in particular by the commissioning of the Terrebonne distribution center, Desjardins Securities explains in a note addressed to its clients.

In addition, depreciation costs increased by 14.5 million in one year, to 174 million, and the tax bill increased by 34 million, from 69 million to more than 103 million.

Sales were $6.65 billion, up from $6.43 billion in the same quarter of 2023. Same-store grocery sales were up 2.4%. Metro said food inflation in its grocery stores during the quarter was slightly lower than reported inflation for food purchased in stores of 1.1%.

Comparable pharmacy sales increased 5.2%, driven by increases of 6.3% for prescription drugs and 3.0% for commercial products, attributable to over-the-counter drugs, cosmetics and health and beauty products.

With information from The Canadian Press