Worst food inflation in 13 years
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Metro Inc. reported quarterly profits of $198 million on sales of $4.3 billion, though the grocer warned that surging inflation could start eating into its margins.
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Canada’s third-largest grocer, which also owns Food Basics and the Jean Coutu chain of Quebec pharmacies, made gains in its food and drug-store businesses despite the latest Omicron wave of COVID-19 infections and labour shortages throughout the food supply chain, the company said in an earnings update on April 21.
Metro’s profits in its second quarter, ended March 12, represented a 5.3 per cent increase year over year. Earnings per share grew 9.3 per cent to 82 cents, just shy of forecasts of 83 cents, according to a preview report from Bank of Nova Scotia analyst Patricia Baker. Metro’s same-store sales in food retail — a metric that gives a clearer year-over-year picture by removing results from recently opened or closed stores – grew by 0.8 per cent.
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The report comes amid the worst food inflation in 13 years, with grocery bills up almost 9 per cent in March compared to the previous year, according to Statistics Canada’s latest consumer price index. Metro’s internal gauge on food-basket inflation for the quarter was just below 5 per cent.
“Our industry continues to experience higher than normal inflationary pressures and our teams remain focused on providing quality products at competitive prices to our customers,” CEO Eric La Flèche said in a letter to shareholders on Thursday.
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Soaring dairy prices drive steepest rise in food inflation in 13 years
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Canada’s inflation rate comes in much hotter than expected
Baker expected Metro to take slightly thinner profit margins in the quarter, passing on “some, but not all, cost increases to consumers to remain competitive.” Metro’s gross margin was 20.1 per cent, compared to 20.2 in the same quarter last year. Baker forecast a gross margin of 20 per cent.
If inflation persists, along with labour shortages, Metro forecast that it “could put pressure” on the company’s margins.
“In the short term, we expect food sales to remain relatively stable versus last year while we expect continued growth in our pharmacy business although somewhat moderated versus the first half of the year,” Metro said in its earnings report.
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