Metro Inc. Q4: dark store investment to support ecommerce growth

Date : 18 November 2020

Stewart Samuel

Program Director - Canada

We review Metro’s fourth quarter and its plans for further ecommerce investments.

Key numbers

  • Fourth quarter sales increased 7.4% to $4.1bn
  • Food same-store sales up 10.0% and pharmacy same-store sales up 5.5%
  • Net earnings up 11.4% to $186.5m
  • Full year sales up 7.3% to $18.0bn, with net earnings up 11.5% to $796.4m

Source: IGD Research

Conventional growing ahead of discount

Metro finished the year with a strong quarter, with traffic trends improving. However, the decline in traffic year-on-year was more than offset by an increase in the average basket size as customers consolidated their trips. The retailer’s conventional supermarket business continues to grow ahead of its discount business, a trend which has been well documented since the start of the pandemic.

Accelerating ecommerce investments

Online grocery sales increased by 160%. The retailer is accelerating its investment in the channel, adding capacity in Quebec and in the Greater Toronto Area. Next summer, it plans to open a dedicated store for online grocery to serve Montreal. It will convert an existing industrial unit of around 100,000 sq ft to operate as a dark store for home delivery. This will relive pressures on three of its five ecommerce hub stores in the city. Although it will utilise a manual picking model, the building will allow Metro to incorporate micro-fulfillment in the future if it heads in this direction. The retailer will also roll-out its click and collect service to more than 100 stores by the end of fiscal 2021. This is more than double what was originally planned.

Food demand remaining elevated

With some projects delayed this year due to the pandemic, capex for fiscal 2021 is forecast at around $600m. This includes the investment in ecommerce and its supply chain modernisation project. While the outlook is uncertain, Metro expects food retail demand to remain elevated. During the first four weeks of the new financial year, food same-store sales were up 11%. In pharmacy, comparable prescription sales were up 3.6% over the same period, while front-end same-store sales were down 3.4%. The retailer expects pharmacy front-end sales to remain under pressure in Q1.

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