Metro profit jumps 10.4% as inflation continues to drive food sales up

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Grocery retailer Metro Inc. MRU-T says that food inflation is beginning to moderate, even as rising prices continue to outpace the general rate of inflation.

Metro reported on Wednesday that its second-quarter profit grew by 10.4 per cent, as inflation continued to push sales higher.

The results for the 12 weeks ended March 11 reflect the end of Metro’s customary blackout period for price increases, which lasts from mid-November to the beginning of February. Metro chief executive Eric La Flèche signalled in January that more price hikes would hit its shelves as the company faced thousands of cost-increase requests in its system. However, on Wednesday he said that the overall number of such requests from suppliers decreased in February and March compared with the same period last year, and that the size of those requests was also coming down.

“While we are not able to predict how the current macro environment will evolve, we expect some moderation in food inflation,” Mr. La Flèche told analysts on a conference call to discuss the results.

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On Tuesday, Statistics Canada reported that inflation began to cool in March, including in the food sector. Grocery prices rose by 9.7 per cent compared with the prior year, down from increases of more than 11 per cent in recent months, but still higher than the overall rate of inflation, which was 4.3 per cent in March compared with the prior year.

Metro reported that its food basket inflation was 9 per cent in the quarter. The company’s internal inflation metric is based on prices for a basket of goods frequently purchased at its stores, and is not directly comparable with Statistics Canada’s Consumer Price Index.

In this environment, promotional intensity has been increasing across the sector, as items on discount are accounting for a higher percentage of sales. Sales of Metro’s house-brand products are also growing at double the rate of overall sales. Promotions dipped early in the pandemic as shoppers turned to one-stop shopping and as product availability was a challenge. But those promotions have ticked up again with inflation, and are now slightly above prepandemic levels, Mr. La Flèche said.

“Features, specials are selling more,” he said. “People are managing their budgets.”

The Montreal-based grocer reported net earnings ahead of analysts’ expectations, at $218.8-million or 93 cents a share, compared with $198.1-million or 84 cents in the same period the prior year.

In a release on Wednesday, the company reported that same-store sales – an important metric that tracks sales growth not tied to new store openings – grew largely because of inflation. Same-store sales rose by 5.8 per cent at the company’s grocery stores compared with the same period last year, and were up 7.3 per cent at Metro’s drugstores, including the Jean Coutu chain.

Online food sales grew by 41 per cent compared with the same period last year, largely because of e-commerce partnerships that Metro has signed with companies such as Instacart and Uber Eats.

Canada’s grocery sector has been facing scrutiny over rising food prices, which have outpaced general inflation. Last month, Mr. La Flèche and the CEOs of competitors Loblaw Cos. Ltd. and Empire Co. Ltd. appeared before a parliamentary committee looking into the matter, telling members of Parliament that accusations of profiteering amid inflation are false.

“We’re not passing on all the inflation that we receive,” Mr. La Flèche said on Wednesday.

Metro’s total sales increased by 6.6 per cent in the second quarter, to $4.6-billion. That was compared with a period last year when COVID-19 restrictions in Quebec and Ontario led to elevated grocery sales.