MONTREAL — Metro here said last week that an extraordinarily difficult pricing environment in Ontario put pressure on the company's first-quarter sales and earnings.
For the 12-week period, which ended Dec. 22, the Canadian operator reported a gain in net income of 2.7%, to about $69.9 million (U.S.), although excluding one-time gains and write-downs, net income actually fell about 18.6%, to about $58.4 million. Sales in the period were down about 0.3%, to about $2.51 billion, and same-store sales were flat for the period. The company said its stores in Ontario suffered comp-store sales declines in the quarter, balanced by gains in Quebec.
“We're obviously not satisfied with our first-quarter results,” said Pierre Lessard, president and chief executive officer, in a conference call with analysts. “More intense competition, riskier promotional activities, more conversion IT issues and the low-inflation environment have affected our results.”
The company said it saw aggressive promotions by all competitors, as well as new store openings. Promotions included limited-time sales and coupons for up to $25 off.
“It was the most competitive environment we've seen in years,” said Eric La Fleche, executive vice president and chief operating officer.
He said trends seemed to be moderating in the second quarter as the company has improved its ability to make the right margin investments to drive sales.
EBITDA margin for the first quarter was 5.4%, vs. 6.1% a year ago.
In addition to the competitive challenges, Metro also said its results in the quarter were affected by technology issues related to its acquisition two years ago of A&P's Canadian business and by costs associated with warehouse consolidation in its food-service operations.
Metro also reduced its plans for capital expenditures in 2008 from about $300 million to about $250 million, which it attributed to delays in store remodels. It plans 25 major remodels of its conventional stores in 2008, following a model that it said has been effective in Quebec.
Separately, at Metro's annual meeting last week, the company said Lessard will become executive chairman of the board of directors, effective in April, and that Pierre Brunet, who has been a director since 2001, will become lead director. As previously reported, La Fleche is scheduled to succeed Lessard as CEO in April.
