MONTREAL -- Canadian supermarket and drug store operator Metro here plans to spend $121.5 million this year to open, expand, or renovate 30 stores in Quebec and Ontario. It sees bigger stores and a better selection as key in competing against Wal-Mart Canada, Loblaw and other competitors.
In addition, the company may consider expansion in Ontario via an acquisition, said Pierre Lessard, president, at Metro's annual meeting here last week. However, he noted there are few takeover candidates.
Quebec's largest grocery chain, with 500 stores under the Metro, Super C and Loeb banners in Quebec and Ontario, has less than $8.9 million in debt and assets of $1.3 billion.
Lessard said the company will continue to expand its high-end Metro-Plus banner, either through new stores or conversion of existing outlets, which offer more prepared and organic foods, health and beauty products, and other nonfood merchandise. The plans are to have 55 by year's end, up from two a year ago.
The grocer rebranded its Super C box-store banner with an emphasis on everyday-low prices and fewer weekly specials. New stores will be more clearly divided into fresh-food and nonfood sections, said Lessard.
Metro operates 38 Loeb stores in Ontario, where it opened a 24-hour outlet. It plans to add six or seven more this year, including Loeb-Plus stores.
Last year, Metro's string of 53 consecutive quarters of profit growth was broken with two straight quarters of declining profit, hurt by a price war launched by Loblaw, which owns the Provigo banner in Quebec.
For the first quarter ended Dec. 18, 2004, net income grew 13.5% from a year ago to $31.2 million, or 32 cents per share. Sales increased 3.9% to $1.17 billion. Same-store supermarket sales grew by 3% for the quarter. A labor dispute at two stores reduced sales by $16.2 million.
While applauding Metro for returning more cash to shareholders, Karim Salamatien, analyst at Toronto-based BMO Nesbitt Burns, pointed out that most of the company's profit growth in the quarter came from its stake in Alimentation Couche-Tard. Metro's original $60 million investment in Alimentation Couche-Tard.
Perry Caicco, analyst, CIBC World Markets, Toronto, noted that after six consecutive quarters of margin deterioration, Metro saw a slight margin improvement in the first quarter.
"With Metro-Plus working, Ottawa reformatting [its Loeb stores with Loeb-Plus], and Super-C stabilizing, we see a possibility of further margin improvements for the remainder of fiscal 2005 and early 2006," Caicco stated.
