Discount banners drive gains at Loblaw, Metro

Canadian supermarket giants Loblaw and Metro reported sales and profit growth this week, as both companies’ discount banners continued to perform well.

Montreal-based Metro Inc. said it invested in maintaining low prices across its banners during the fiscal fourth quarter, which ended Sept. 24.

“Our diversified business model allowed us to maintain stable gross margins in the quarter while delivering good value to our customers, as reflected in overall tonnage growth and market share gains in the quarter, driven mainly by our discount banners,” said Eric LaFlèche, president and CEO, in a conference call with investors.

Food same-store sales were up 8% in the quarter, driven by increased traffic, although average baskets were flat, compared with the fourth quarter of a year ago, he said.

Net income for the fourth quarter was down 13%, to C$168.7 million ($126.6 million U.S.), which included impairment charges, while sales were up 8.3%, to C$4.4 billion ($3.3 billion U.S.) Adjusted net earnings were up 9.4%, to C$219.4 million ($164.7 million U.S.).

The company said consumers continued to seek lower-priced offerings in its core Metro stores, while they flocked in increasing numbers to the company’s Super C and Food Basics low-priced chains.

Related:Metro ushers in MOİ customer rewards program

Looking ahead, the company expects food inflation to moderate in the new year as it cycles the high inflation of 2022, although the outlook remains uncertain.

“We continue to face market uncertainties, labor shortages and higher-than-normal cost inflation,” said LaFlèche.

At Brampton, Ontario-based Loblaw Cos., net earnings available to common shareholders for the fiscal third quarter, which ended Oct. 8, increased 29%, to C$556 million, ($417.3 million U.S.), on revenue gains of 8.3%, to C$17.4 billion ($13.1 billion U.S.).

Same-store sales in the company’s food retail operations grew 6.9%, buoyed by strong sales in the company’s discount banners, including No Frills and Real Canadian Superstore. Overall, food retail basket size decreased in the third quarter, and traffic increased, the company said.

“Performance in our discount banners continued to strengthen as market share and traffic improved year-over-year,” said Richard Dufresne, chief financial officer.

He added that while the current inflationary environment favors the discount chains, Loblaw’s conventional banners are also outperforming their peers. Consumers continued to shift toward the company’s private labels, including President’s Choice and no name.

Dufresne said the company is working hard to ensure that shelf-price increases are in line with the retailer’s own cost increases.

Related:Loblaw freezes prices on no name brand products

“In every quarter since inflation took off last summer, gross margins in food have been essentially flat,” he said. “This gives us the confidence to say categorically that retail prices are not growing faster than cost, and the company is not taking advantage of inflation to drive profit.”

Dufresne also said online sales in the quarter increased 3%, after flat growth last year and 175% sales growth in the third quarter of 2020.