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Metro Inc. (MRU.TO) sales grew 3.5 per cent in the third quarter of the year, fuelled by higher traffic and sales at its discount banners, as Canadian consumers continue to seek savings amid higher cost of living.
“Consumers are looking for value. They’re participating in promotions more. They’re trading down, especially in meat,” Metro chief financial officer François Thibault said on a conference call with analysts on Wednesday following the release of third-quarter results.
Metro saw total sales increase from $6.43 billion last year to $6.65 billion in the third quarter ended July 6. It reported an adjusted profit of $305 million, down from $314.8 million during the same period last year. Same-store sales, a key metric in the retail industry that excludes sales at newly opened stores, were also up 2.4 per cent. Over the last three years, same-store sales have climbed 12 per cent.
“Our discount banners continued to fuel this growth, on top of high (comparables) in discount last year,” Metro CEO Eric La Flèche said on the call, noting that the company opened six Super C discount stores so far this year. Two of those openings were store conversions, where the company changes the stores from a conventional brand like Metro to a discount brand like Super C.
The shift to discount among consumers has been an ongoing trend in Canada, prompting the country’s largest grocery retailers to convert many conventional stores into discount banners. Loblaw, for example, announced in June that it is on track to open 40 new stores this year and convert “dozens more,” with the conversions focused 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 another 10 in the third quarter.
La Flèche noted on Wednesday that the discount market in Quebec is growing faster than in Ontario, because of the additional square footage added in recent months, including “massive conversions by one player.”
“The discount conversations are going to end pretty soon, and then we’ll see where the market settles. We like our position with a good mix of both conventional and discount,” La Flèche said.
“Clearly, there’s been a little more pressure on conventional these last couple years, but we anticipate that at the end of the conversion wave, our Metro banner will be on a good footing to grow again, and we’re confident that with our Super C banner, we will capture the growth on the discount side.”
Canadian grocery retailers have faced public pressure and scrutiny over soaring food prices. Metro says that inflation in its stores continues to decelerate, and that it came in slightly lower than the food Consumer Price Index of 1.1 per cent in the quarter. Still, consumers continue to turn to discount brands. La Flèche also notes that promotional penetration is up, and more shoppers are turning to private-label brands, which tend to be cheaper than national names.
“I would say the search for value continues,” La Flèche said.
“People are searching for deals. Promotional penetration is really high. Private-label sales are doing really well. It’s really the same environment we’ve been describing for several quarters.”
Earlier this year, Metro warned that it would face significant headwinds in 2024 as it launched two new automated distribution centres in Terrebonne, Que. and Toronto. While the centres are expected to help improve productivity, the company expects adjusted net earnings per share to be flat to down 10 cents per share over the year.
Metro’s stock was trading flat as at midday on Wednesday on the Toronto Stock Exchange.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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