Amid intense competition in the Canadian grocery industry, Metro Inc. ended its 2014 financial year “with a bang,” reporting a 45 per cent surge in fourth-quarter profit on higher sales and increasing food prices.
Shares of the Montreal-based supermarket chain hit a record high Wednesday after the grocer announced it earned $115.6 million, or $1.32 per share, in the three months ended Sept. 27, the end of its fiscal year.
That was up from $79.5 million, or 83 cents per share, a year earlier when the company was hit by restructuring costs related to the reorganization of its Ontario retail network, which closed or converted 15 Metro stores to its successful Food Basics discount brand.
“The competitive environment in the fourth quarter can be described as intense but stable,” Eric La Fleche, Metro’s president and chief executive, told analysts on a conference call.
Metro reported revenue rose 3.9 per cent to $2.7 billion amid strong same-store sales growth of 3.1 per cent in its latest quarter, plus a 2.5 per cent rise in food prices.
“We expect things to be very competitive into the holidays,” he said, noting that “when prices spike up, consumers trade down,” to the major chains’ discount banner stores, along with Walmart and Target.
The recent industry trend has been to grow square footage in the discount end of the market, said La Fleche. “I see the shift continuing … but stabilizing, with higher growth in the conventional” supermarket space such as Metro stores in future.
During the fourth quarter of 2014, Metro completed the acquisition of the Premiere Moisson bakery business, which accounted for about half a percentage point of increased sales.
Analysts had expected Metro to earn a profit of $1.27 per share on $2.66 billion in revenue.
“We are encouraged by the improved sales performance across all banners,” said La Fleche.
He said the company’s strategies, including improving its fresh food offerings, are “gaining traction in our very competitive industry.”
The positive results sent Metro’s shares to an all-time high Wednesday, up $8, or 9.7 per cent, to close at $90.50 on the Toronto Stock Exchange.
Irene Nattel of RBC Capital Markets said Metro is ending the year “with a bang” on success of strategies implemented through the early part of 2014, aided by higher food prices and the Premiere Moisson acquisition.
For the full financial year, Metro earned $456.2 million or $5.07 per share on $11.6 billion in revenue. That compared with a profit of $703.9 million or $7.28 per share on $11.4 billion in revenue a year earlier
On an adjusted basis, the company earned $460.9 million, or $5.13 per share, from continuing operations in 2014, up from $460.7 million or $4.73 per share the previous year.
Meanwhile, former CEO Pierre Lessard’s 24-year career with Metro will end in January with his retirement as board chairman after reaching the mandatory retirement age. He will be replaced by former National Bank CEO Real Raymond, who joined Metro's board in 2008.
Also resigning are vice-chairman Paul Gobeil and John Tory, due to his successful bid for the Toronto mayoralty.
Metro spent $450.6 million to repurchase seven million shares for cancellation over the last year. Its board authorized a new plan to purchase up to 5.7 million shares over the coming year, representing about 6.7 per cent of outstanding shares. Between Sept. 10 and Oct. 31, it repurchased 755,200 shares for $56.1 million.
The grocer employs more than 65,000 people in Quebec and Ontario and operates a network of almost 600 stores under several banners, including Metro, Metro Plus, Super C and Food Basics, as well as over 250 drugstores under the Brunet, The Pharmacy and Drug Basics banners.
- With files by The Canadian Press