Metro Inc. sees decline in profits in Q2, ends Air Miles partnership

Metro Inc. has seen profits decline during its second quarter due to elevated expenses in its supply chain. Still, the grocery chain reported sales of $4,655.5 million, up 2.2 per cent.

The news comes after the company chose to end its partnership with Air Miles this fall as it looks to expand its loyalty program, MOI, in all 275 Metro and Food Basics stores in Ontario.

“We are pleased with our sales performance in the second quarter on top of a strong quarter last year and with inflation continuing to decline. Our results met our expectations as we completed the bulk of the transition to our new automated fresh and frozen facility in Terrebonne. Going forward our teams are focused on ramping up productivity and we are now gearing up for the launch of the final phase of our Toronto automated fresh facility this summer. Finally, we are announcing today the launch of our MOI Rewards program in our Ontario food stores later this year, which will provide even more savings to our customers. We are confident that our sustained investments in our supply chain, our retail networks and our digital capabilities will continue to create long-term value for our shareholders,” says Eric La Flèche, president and CEO.

MOI, which was launched in Quebec, has 2.5 million active members, according to a statement, and the company plans to roll the program out across the country. Nevertheless, Metro says customers can keep collecting and redeeming Air Miles until the program ends.

To end the partnership with Air Miles, Metro was forced to pay a $20.8 million impairment charge – the value of the loyalty program’s assets, a statement reads.

Net earnings reportedly dropped to $187.1 million or 83 per cent per share, compared to $218.8 million or 93 cents per share in the same period last year. Meanwhile, net earnings fell by 8.4 per cent to $206.4 million or 91 cents per share, factoring in the loyalty program’s impairment charge and other factors.

Due to investments in its supply chain, Metro predicted a decrease in net earnings and its completion of a new automated distribution centre in Quebec and another in Toronto was calculated in its projections.

Grocery retailers in Canada, including Metro, have been under pressure due to food inflation, which peaked at over 11 per cent in late 2022 and early 2023 but has since slowed. Recent data from Statistics Canada indicates a 1.9 per cent increase in food prices from stores in March compared to the previous year.

Metro’s internal food basket inflation rate was around three per cent in the second quarter, down from four per cent in the first quarter. The measure is not directly comparable to Statistics Canada’s consumer price index, a statement reads.

Despite challenges, Metro’s total sales for the quarter rose by 2.2 per cent to nearly $4.7 billion. Same-store sales, excluding new store openings, remained steady, with a 0.2 per cent growth in grocery stores. Adjusting for timing differences, food same-store sales increased by 2.7 per cent. Meanwhile, sales at pharmacies, including Jean Coutu drugstores, grew by 5.9 per cent.