Food inflation has jumped to a rate of 10% at Metro and pressure on prices remains high, says the big boss of the grocer.
Suppliers continue to face inflationary pressures that are driving up food prices, company CEO Eric La Flèche said on a conference call to discuss the owner’s latest quarterly results. Metro, Super C and Jean Coutu brands.
The latter continue to ask for price increases at a “high” percentage. “We have already had to accept several increases at various times during the year at higher rates. The manager says that “it’s the job” of the Metro team to try to mitigate price increases, but adds that suppliers are in a difficult position.
At a time when major Canadian grocers are being singled out for soaring food prices, Metro denies profiting from them. Despite an 8.3% revenue increase to $4.4 billion in the fourth quarter of its 2022 fiscal year ended Sept. 24, gross margin remained flat. It reached 20.4%, the same threshold as last year. By comparison, the gross margin was 20.2% in 2019, before the pandemic.
Transport and labor
Management mentions that it had to deal with inflationary pressures, particularly for transportation and labour. Metro could have less room to maneuver if it tries to mitigate the increase in its costs, believes CIBC World Markets analyst Mark Petrie.
“We think the pressure is probably more pronounced at Metro than at its competitors, because Metro already manages its costs tightly, [ce qui réduit les avenues possibles lorsque l’entreprise cherche des moyens de réduire les dépenses] “, he underlined.
Large Canadian grocers are the subject of a study by the Competition Bureau announced at the end of October. The move comes in a context where food inflation is intensifying, despite a moderation in general inflation.
In September, the price of food purchased from stores jumped 11.4% from a year ago, according to Statistics Canada. This is the fastest rate since August 1981. On Wednesday, Statistics Canada indicated that inflation remained high in this category in October, at 11%.
Mr. La Flèche affirms, for his part, that the market is “very competitive”, with consumers being very sensitive to price. He mentioned that he was seeing more popularity of discount stores and private labels.
“With the acceleration of the transition to discount stores [comme Super C], all brands want to protect their market share, so they are aggressive. We will defend ourselves and we will do our best to keep our market share in traditional brands. [comme Metro]. »
Metro’s net earnings were down in the fourth quarter, but this decline was due to an asset impairment loss related to the decision to withdraw Jean Coutu from the Air Miles loyalty program in the spring of 2023. Excluding this item, the The company’s net profit would have increased by 9.4%, to $219.4 million.
Profit up at Loblaw
For its part, the Loblaw Companies posted third quarter profit up about 30% compared to the same period last year, to 556 million for the quarter ended October 8, against 431 million a year earlier. .
Revenues rose 8.3% to 17.39 billion. Sales at grocery stores that have been open for at least a year climbed 6.9%, while those at comparable pharmacies rose 7.7%.
Sales were supported by the strong performance of the grocer’s discount stores, Loblaw said. The company further noted the continued trend among consumers to choose private labels, such as President’s Choice and No Name.
Retail food price inflation in Canada remained among the lowest of G7 member countries, Loblaw assured, but “global inflationary forces [ont] however, continued to drive food costs higher in the quarter.” “Loblaw’s efforts to moderate cost increases and deliver superior value to customers through its PC Optimum program and promotions have resulted in strong sales and stable gross margins in the Grocery business in retail,” the company continued.