Food prices fall: the worst is over, hopes Metro

Although food deflation – which is good news for consumers – is set to continue in the coming months, Metro believes that the worst is now over.

In the second quarter, the price of the grocery basket in the Quebec grocery store fell by two per cent, which did not prevent it from meeting analyst expectations as it posted net income and a figure Business growth.

“Deflation was clearly the highlight of this quarter,” said Metro President and CEO Eric La Fleche on Tuesday, during a conference call. In addition to commodities, prices for meat and dairy products declined compared to last year. ”

According to Statistics Canada, food deflation was 2.8 per cent in December, 4 per cent in January, 4.1 per cent in February and 3.6 per cent in March.

Asked by financial analysts, the big boss of the third largest supermarket chain in the country said that this situation should continue over the next few months, but added that “the worst was behind”.

“We hope, by the fourth quarter, a return to a more normal situation,” he said. However, we do not have a crystal ball. During the last quarter, our basket deflation was less pronounced than the Consumer Price Index due to the diversity of products sold. ”

For the three-month period ended March 11, Metro (TSX: MRU) posted net earnings of $ 132.4 million, or 53 cents per share, an increase of six per cent over the same period of the year latest.

As a result of food deflation, however, revenues rose only 0.7 per cent to $ 2.9 billion.

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This quarterly performance nevertheless surpassed the expectations of analysts surveyed by Thomson Reuters, which expected a net profit per share of 53 cents and a turnover of $ 2.85 billion.

Investors also reacted positively, as Toronto stock market shares were up $ 2.33, or 5.51 per cent, in the morning, trading at $ 44.61.

At the same time, store sales for at least one year – a key indicator in the retail sector – rose 0.3 per cent.

Peter Sklar of BMO Capital Markets surprised a 0.3 per cent decline in comparable company sales.

“Metro’s second quarter results reflect the company’s ability to manage its costs and suggest that it has gained market share despite a decline in food prices and a competitive environment,” the analyst writes in a note Sent by email.

Adonis Complete Buyout

In addition, once the current financial year is over, the grocer intends to proceed with the purchase of the minority interests in the Adonis chain as well as in the Phenicia distributor. Metro holds 55 per cent of the voting rights of these two subsidiaries.

Mr. La Flèche pointed out that Adonis – which currently operates nine stores in Quebec and two in Ontario – would continue to be managed independently.

“The formula in place is good and we want to keep it. A 12th facility will open in the spring of 2018. With the team in place, we think we can add a few stores a year in the near future, “he said.

The grocer operates a network of more than 600 supermarkets under the Metro, Metro Plus and Food Basics brands, as well as over 250 Brunet, Metro Pharmacy and Drug Basics pharmacies.