Metro Sales Rise, Earnings Dip

JON SPRINGER

MONTREAL — Metro Inc. here last week said its net earnings decreased by 8.9% during its fiscal fourth quarter as the retailer waged promotional battles and absorbed costs associated with closing a food-processing facility and a warehouse.

While the competitive environment was largely unchanged from previous quarters, shoppers are buying more sale items than before as conventional stores ramp up hot ads to counter expansion from discounters such as Wal-Mart, Eric La Fleche, chief executive officer of Metro Inc., said during a conference call discussing the results.

“It's aggressive, and front pages and back pages of fliers are penetrating more and more in this environment,” he said. As a result, Metro promotional sales penetration grew during the quarter, leading to some gross margin erosion.

“You have to be there on promo,” LaFleche added. “It's a factor of this market with all the discount square footage being added in the market and a reaction to different players.”

During the eight-week fourth quarter that ended Sept. 24, Metro's sales of $2.6 billion (U.S.) increased by 3.8%, while same-store sales were up 3.2%. Net earnings totaled $84 million, and EBITDA slid 7% to $169 million. Gross margin as a percent of sales slid 40 basis points to 17.9%.

The company absorbed nearly $20 million in costs associated with the closure of a Toronto warehouse facility and a meat processing plant in Montreal. The Montreal facility mainly provided pork and ham for Metro's Quebec stores and required significant investment to update, LaFleche said. Metro is now sourcing those items from a third party.

Excluding the closing costs, earnings per share would have improved by 11.4%, Metro said.

LaFleche said the company would look to expand its newly acquired four-store Adonis chain to as many as 12 or 15 locations in the next five years. The acquisition, he added, would help the chain improve its ethnic offerings at its Super C and Food Basics banners. He described the four existing stores — a fifth is soon to open — as highly productive. “I don't know of any stores in Canada with higher sales per square foot than these four stores,” he said.

For the fiscal year, Metro said total sales improved 0.8% to $11.2 billion (U.S.), while net earnings dipped by 1.4% to $359.4 million.