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Metro considers switching from Air Miles over consumer backlash

A woman walks into a Metro grocery store in downtown Montreal. Metro said Tuesday that profit fell 1.2 per cent in the latest quarter. The grocery store operator also said it was raising its quarterly dividend.

Christinne Muschi/The Globe and Mail

Metro Inc. says it's contemplating switching from Air Miles to its own loyalty program in Ontario grocery stores following a consumer backlash against its long-time partner.

The Quebec-based supermarket says negative reaction to an Air Miles reward points expiry policy, which was later abandoned, is a factor in whether the chain will renew its contract.

"It has been rocky this fall with Air Miles, no doubt about that," CEO Eric La Flèche told reporters Tuesday following Metro's annual meeting.

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Read more: 'A whole new … frustration': Air Miles faces fresh backlash

Read more: Air Miles backs off from plan to let points expire

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While switching is a big decision given that some loyal Air Miles members are also loyal Metro shoppers, he said the company felt pressure from its customers over the handling of the expiry controversy, which would have seen all reward miles collected before 2012 disappear at the end of last year.

"For sure it makes us think," he said. "It's one more element that will go into the decision when the time comes."

Company spokeswoman Marie-Claude Bacon added that Metro will consider all its options, which is normal when considering a contract renewal and doesn't mean a change will be made.

Metro has accepted Air Miles in its Ontario stores since acquiring A&P in 2005. The company launched its own Metro & moi loyalty program in Quebec in 2010 and now has 1.6 million members.

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La Flèche declined to say when Metro's Air Miles contract expires.

He said the controversy was hard for retailers and members, but that LoyaltyOne, which runs the points program, made the correct decision in December to walk away from the policy, citing an uncertain legislative environment throughout the country.

Air Miles said Metro continues to be an important partner.

"We recognize that partners and collectors alike were frustrated in 2016, and we are now focusing on expanding the value both our partners and collectors receive from the program," spokeswoman Kahina Haffad said in an e-mail.

Meanwhile, La Flèche said he's watching closely to see if U.S. President Donald Trump's policies will cause the greenback to appreciate, resulting in higher costs to purchase fruit and vegetables that have fallen in recent months.

Metro increased its sales during the first quarter despite experiencing a challenging environment because of a decline in food prices and intense competition.

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Lower prices are continuing in its current quarter but La Flèche said he expects they will return closer to normal in the second half of its fiscal year, starting in April. Some analysts foresee food price deflation continuing in Ontario through much of 2018.

Sales were $2.97-billion for the 12 weeks ended Dec. 17, up 0.3 per cent from $2.96-billion a year ago.

Same-store sales increased 0.7 per cent even though the chain experienced a one-per-cent decrease in food prices, a swing from a 2.8 per cent increase a year ago.

La Flèche said Metro tries to pass along the price swings to consumers but said sometimes there is a time lag, especially as prices decrease.

He said prices fell most for fresh fruit and vegetable, eggs and butter. Lower meat prices also prompted customers to buy better cuts of beef.

Despite the stress on sales, Metro's profits increased when excluding a $6.7-million lower contribution from its stake in convenience store operator Alimentation Couche-Tard.

Including this investment, it earned $138.1-million or 58 cents per share, compared to $139.8-million or 56 cents per share a year earlier.

Meanwhile, Metro hiked its quarterly dividend to 16.25 cents per common share as of March 13, up 2.25 cents from the dividend paid in November and up 16.1 per cent from a year ago.

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