We review Metro Inc.’s second quarter performance, including the impact of the coronavirus (Covid-19) pandemic on its results.
Sales up $125m due to pandemic
Metro’s sales increased by 7.8% to $4.0bn in Q2, with the last two weeks of the quarter impacted by the pandemic. Same-store food sales were up 9.7%, while pharmacy same-store sales increased 7.9%. Adjusted net earnings were up 17.9% to $182.8m. The retailer estimates that it gained an additional $125m in sales due to the pandemic in the quarter.
Source: IGD Research
Deal with Cornershop to offer two-hour delivery
As with other retailers in Canada, Metro saw strong demand for its ecommerce service, with its online volume doubling almost immediately. It has continued to add capacity in Montreal, Toronto, and Quebec City. The retailer has also partnered with Cornershop, a third-party delivery specialist, which will also support its efforts to add online capacity. To support senior shoppers, it has also launched priority ordering service which is live in 220 stores.
Elevated sales continue
Metro continues to experience higher food sales, with same-store sales up 25% in the first four weeks of Q3, ending April 11. It expects sales on a weekly basis to be up 10-20% year-on-year. The retailer is experiencing a significant reduction in customer visits, but a significant increase in basket size. This is a trend which the business expects to be sustained. The largest increases are being driven by grocery and meats departments. Promotional participation was down in the quarter as the retailer focused on simplifying store operations and several suppliers requested to stop or reduce promotional activities. Metro is planning to return to a more normal page count in its weekly flyer in the next week.
Rising operating costs
However, operating expenses have also increased, driven by higher labour costs, safety measures and store cleaning. Many of these new measures are expected to remain in place. However, Metro expects the stronger sales growth to offset the cost increases. Pharmacy front-store same-store sales are down 9% over the same period and have trended further downwards in recent weeks. This is mainly due to reduced customer access to its drugstores.
In line with government restrictions, all retail capital expenditure projects in Quebec are on hold, however, it expects all its store projects in Ontario to be completed this year. The retailer is also delaying the integration of its warehousing and distribution activities in its pharmacy business. Consequently, the remaining synergies from the Jean Coutu acquisition will be delivered later than planned. There will also be some additional delays with the development of new automated grocery distribution centres in Ontario.
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