Sales at Jean Coutu and Brunet pharmacies were strong this winter thanks to the flu season, the new “Me” loyalty program and a new merchandising strategy.
Comparable sales in Metro’s pharmacy segment, which owns both brands, increased 5.9% in the second quarter ended March 16. The increase is surprising, because the comparison was with particularly strong results last year.
“The most important factor is the flu season which began in mid-December,” explains Metro President and CEO Eric La Flèche during a conference call on Wednesday to discuss the results. Combining this with a good merchandising strategy, we were able to post good in-store sales on top of an already very strong year. »
The president of the pharmacy division, Jean-Michel Coutu, did not want to go into details of the merchandising strategy, but he affirms that it has borne fruit. “We have completely revised our strategy. We have adjusted to the market as it has evolved and our team has done a good job of anticipating customer demand. »
The inclusion of all banners under the same loyalty program in Quebec in 2023 also contributed to the acceleration of sales, said La Flèche. “Jean Coutu had another program and they switched to “Moi”; Brunet had none. So, that’s a plus and customer engagement is good. »
Moderation of food inflation
Food inflation at Metro continued to moderate to 3% in the second quarter, compared to 4% in the previous quarter.
Unlike most recent quarters, Metro food inflation is not lower than Canadian food inflation, which was 0.4 percentage points lower during this period.
“Based on our price reviews, it appears that Metro was less aggressive with promotions in January and February, although we are not sure that this reflects the quarter well,” says analyst Michael Van Aelst of TD Cowen. We do not believe Metro’s basket will grow faster than inflation in the future. »
Questioned on the subject, Mr. La Flèche replied “not to draw any conclusions”. “It’s a tight gap. […] This is based on the items sold in grocery stores and last year’s promotions. […] I would say we are in line with the Consumer Price Index. »
Results above expectations
Metro reported second-quarter results that beat analysts’ expectations. “The outperformance is largely attributable to lower-than-expected expenses, better sales in pharmacies which were offset by a slight decline in margins,” summarizes Chris Li, of Desjardins Capital Markets.
In November, Metro had already warned investors that its results would be under pressure in fiscal 2024 due to its investments in its distribution centers which lead to a temporary duplication of costs and require a certain learning curve.
Metro revealed a net profit down 14.5% to 187.1 million. Adjusted diluted earnings per share were 91 cents. Revenues, for their part, increased by 2.2% to 4.7 billion.