Metro Inc. MRU-T +1.69%increase reported a 14.5-per-cent decline in profits in its second quarter, as the company continues to face higher-than-usual expenses related to investments in its supply chain.
The Montreal-based grocer also announced on Wednesday that it is terminating its partnership with Air Miles this coming fall, as it plans to expand its own MOI loyalty program to cover all 275 of its Metro and Food Basics stores in Ontario.
MOI launched in Quebec last May, and currently has 2.5 million active members in that province. Air Miles can still be collected and redeemed at stores until the launch, according to the company.
The company recorded a $20.8-million impairment charge related to the decision, saying the impairment of assets represents the carrying value of the loyalty program.
The company reported net earnings fell to $187.1-million or 83 cents per share in the second quarter ended March 16, compared to $218.8-million or 93 cents per share in the same period the prior year. Adjusting for the loss on impairment of the loyalty program as well as other items, adjusted net earnings declined by 8.4 per cent, to $206.4-million or 91 cents per share compared to $225.4-million or 96 cents per share in the same period the prior year.
Metro had previously forecast that this fiscal year would see net earnings slip as the company makes investments in improving its supply chain operations. That includes a transition to a new automated distribution centre for fresh and frozen products in Terrebonne, Que., which is now completed, and to another automated facility for fresh food in Toronto, which will enter its final phase this summer. Last November, executives forecast that on a full-year basis, adjusted net earnings per share would fall within a range of flat-to-down by 10 cents per share.
Canada’s major grocers have faced intense scrutiny over food inflation, which peaked at more than 11 per cent in late 2022 and early 2023, but has been slowing in recent months. The latest data from Statistics Canada showed that prices for food purchased from stores increased by 1.9 per cent in March on a year-over-year basis, down from 2.4 per cent in February.
Metro’s own internal measure of food basket inflation was roughly 3 per cent in the second quarter, down from 4 per cent in the first quarter. (The number is not directly comparable with the rate of food inflation measured by Statistics Canada’s consumer price index, because it is based on prices for a basket of goods that are frequently purchased at its stores.)
Metro’s total sales in the quarter increased by 2.2 per cent compared to the prior year, to nearly $4.7-billion.
Same-store sales – an important metric that tracks sales growth not attributable to new store openings – were roughly flat, growing just 0.2 per cent at Metro’s grocery stores. Sales were affected by a timing shift in the quarter, which began closer to Christmas than the same period in 2022 – meaning that the prior period included more of the busy pre-Christmas period. Adjusting for that shift, food same-store sales were up 2.7 per cent, according to Metro. Same-store sales at pharmacies, including the company’s Jean Coutu drugstore chain, increased by 5.9 per cent.
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