Metro Inc. (MRU.TO) revenue rose 3.5 percent in the third quarter of the year, driven by higher footfall and sales at discount retailers as Canadian consumers continue to look for ways to save money amid the increased cost of living.
“Consumers are looking for good value for money. They are more likely to take part in special offers. They are buying cheaper products, especially meat,” Metro CFO François Thibault said on Wednesday in a conference call with analysts following the release of third-quarter results.
Metro reported revenue in the third quarter ended July 6 rose to $6.65 billion from $6.43 billion a year earlier. Adjusted profit was $305 million, down from $314.8 million in the same period a year earlier. Store sales, a key retail metric that excludes sales at newly opened stores, also rose 2.4 percent. Over the past three years, store sales have risen 12 percent.
“Our discount banners have continued to drive this growth, in addition to the deep discounts (of comparable products) last year,” Metro CEO Eric La Flèche said on the conference call, noting that the company has opened six Super C discount stores so far this year. Two of those new openings were store conversions, in which the company converts the stores from a conventional brand like Metro to a discount brand like Super C.
The trend toward discount stores is an ongoing one in Canada, prompting the country’s largest grocers to convert many traditional stores into discount stores. Loblaw, for example, announced in June that it would open 40 new stores this year and convert “dozens more,” with a focus on expanding the company’s Maxi and No Frills discount brands. In Quebec alone, Loblaw converted 10 Provigo stores to Maxi stores in the second quarter and plans to convert 10 more in the third quarter.
La Flèche noted on Wednesday that the discount market in Quebec is growing faster than in Ontario, citing the addition of residential space in recent months, which included “massive renovations by a single player.”
“The discount talks will end soon and then we will see where the market settles. We are happy with our position, with a good mix of conventional and discount products,” said La Flèche.
“There has clearly been a bit more pressure on the conventional brands in recent years, but we expect our Metro banner to return to good growth at the end of the conversion wave, and we are confident that our Super C banner will capture the growth on the discount side.”
Canadian grocers have come under public pressure and criticism over rising food prices. Metro says inflation in its stores continues to ease and was slightly lower than the 1.1 percent consumer price index for groceries during the quarter. Still, consumers continue to turn to discount brands. La Flèche also notes that penetration of special offers is increasing and more shoppers are turning to private labels, which tend to be cheaper than national brands.
“I would say the search for value continues,” said La Flèche.
“People are looking for bargains. The penetration of special offers is really high. Private label sales are doing really well. It’s basically the same environment we’ve been describing for several quarters.”
Earlier this year, Metro warned it would face significant headwinds in 2024 as it opened two new automated distribution centers in Terrebonne, Que., and Toronto. While the centers are expected to help boost productivity, the company expects adjusted net income per share to be flat or down 10 cents per share for the year.
Metro’s share price was unchanged on the Toronto Stock Exchange on Wednesday afternoon.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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