Canadian retailer Metro Inc. sales in the first fiscal quarter rose 8.2% from a year ago, although its margins were squeezed by higher food prices.
Subway’s Super and Food Basics discount banners outperformed the company’s regular banners in the quarter and also outperformed their competitors, Eric La Fl said.ische, president and CEO, in a conference call with experts.
“People are looking for value and stretching their dollars,” he said.
Consumers were also interested in merchandise and private labels, he said, adding that private label sales were growing “significantly” better than regular product sales.
Net income for the 12-week first quarter ended Dec. 17 rose 11.3% to C$231.1 million (US$172.8 million) from the first quarter last year. ninety. Adjusted for gains related to the acquisition of the Jean Coutu Group, net income for the first fiscal quarter rose 10.9% to $177.7 million.
Same-store grocery sales rose 7.5%, driven by 10% domestic basket inflation. Pharmacy same-store sales increased 7.7%, driven by a 6.5% increase in prescription drug sales and a 10.2% increase in same-store sales as HBC.
The FlisChe said Metro’s overall earnings were under pressure in the quarter, however, as the company did not experience all of the food cost increases. Margin pressure has been particularly acute in product categories, he said, citing higher costs from weather-related events such as the California floods.
The company also said its suppliers are continuing to raise prices, indicating continued inflationary pressures in the near term.
“The main reasons for the increase in food prices in the world are still there,” said La Flisthat.
Gross margin accounted for 19.6% of sales in the first quarter, versus 19.9% in the first quarter of 2022.
The company was able to reduce operating expenses as a percentage of sales, but attributed these expenses to tighter controls and enforcement. Operating expenses were 9.8% against 10.2% in the previous year’s quarter. The company attributed the decline to cost control and higher sales.
After expanding its agreements with third-party delivery companies Instacart and Cornershop, Metro said its online grocery sales were up 40% from a year ago. The expansion of click-and-collect services at Super C stores also contributed to the increase in online sales, La FlisChe said.
He also said the company’s ongoing efforts to modernize its supply chain with technology, including automated distribution centers, are paying off.
“We’re doing more with less,” he said.
The company has opened one automated DC in the past two years, which includes a warehouse for frozen foods. A third automated DC for meat, seafood and dairy products is expected to open in Quebec this fall.