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Other grocery price increases to be expected, according to the president of Metro



(Montreal) Consumers should expect to experience other price increases at the grocery store in the coming weeks, warns the big boss of Metro, Eric La Flèche. Despite rising profits, he says food inflation “isn’t good news” for the company.

Traditionally, major Canadian grocers do not increase their prices between November 15 and February 1. “In the coming weeks” and the “coming months”, consumers will see other price increases for certain items sold at Metro, warns Mr. La Flèche.

“We received a few thousand requests for increases [de la part des fournisseurs], he said at a press conference on Tuesday, on the sidelines of the shareholders’ meeting. We are doing a lot of work to lessen the impact on consumers. »

To illustrate the extent of inflationary pressures in the food industry, Mr. La Flèche mentioned that Metro has recorded nearly 27,000 requests for price increases of more than 10% on average from its suppliers for food only. (excluding meat and fresh fruits and vegetables) in fiscal year 2022.

During the first quarter (ended December 17), food basket inflation was 10% at Metro. This trend affects the entire industry while food inflation was 11% in December, according to Statistics Canada.

The major Canadian grocers (Metro, Loblaw and Sobey’s) are receiving greater attention from elected officials, the media and consumers, in a context of soaring prices. The three companies are also the subject of a study by the Competition Bureau announced at the end of October.

Metro denies taking advantage of industry concentration to increase its profitability. High food inflation “is not good news” for the company, assures its president and CEO. “It definitely puts pressure on the system and it’s more difficult to manage. »

He adds that grocers are “the last link” in the supply chain. Increases in groceries are more visible to the general public, but the pressure is exerted throughout the chain, he said.

Mr. La Flèche says Metro has also absorbed some of the inflationary pressure. The decrease in the gross margin which fell from 19.9% ​​to 19.6% would be a demonstration of this, according to him. In 2019, before the pandemic, the gross margin was 19.4% in the first quarter.

Results above expectations

Higher prices still helped Metro report better-than-expected first-quarter revenue and profit, according to results released earlier Tuesday.

The owner of the Metro, Super C and Jean Coutu brands announced a net profit of 231.1 million, which represents an increase of 11.3% compared to the same period last year.

Diluted adjusted earnings per share, for its part, amounted to $1. Prior to the earnings release, analysts had expected earnings per share of 98 cents, according to Refinitiv.

Metro sales rose 8.2% to 4.671 billion compared to the same period last year. Same-store sales in the food sector, which excludes store openings and closings, rose 7.5%. In the pharmaceutical sector, comparable sales increased by 7.7%, thanks to a stronger than average flu season while influenza, colds, COVID-19 and syncytial virus were widely circulating.

Overall, Metro slightly beat analysts’ expectations thanks to strong sales and good cost control while margins were under pressure, said CIBC World Markets analyst Mark Petrie. “These are very good results considering inflation and the fact that Metro already has a light operating structure,” he comments.

Chris Li of Desjardins Capital Markets believes the company will be able to increase earnings per share by 8% this year, “despite moderating inflation.” “Its premium valuation at 17.5 times the price-earnings ratio, compared to an average of 16 times, however, encourages us to stay on the sidelines. »

Metro’s board of directors adopted a 10% increase in the company’s quarterly dividend.

Metro shares gained $1.62, or 2.18%, to $76 on the Toronto Stock Exchange in the early afternoon.

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