Total Sales: $4.9 billion, up 5.5% year-over-year. Food Sales: Increased by 5.2%. Same-Store Sales (Food): Up 3.9% after adjusting for calendar shift. Same-Store Sales (Pharmacy): Increased by 7%. Gross Margin: 20% of sales, up from 19.9% last year. Operating Expenses: $521.3 million, representing 10.6% of sales. EBITDA: $461 million, up 5% year-over-year. Depreciation and Amortization: $136.1 million, up 5.1%. Net Financial Costs: $33.4 million, down from $34.1 million last year. Effective Tax Rate: 24.5%, down from 26.5% last year. Adjusted Net Earnings: $226.6 million, up 9.8% year-over-year. Adjusted EPS: $1.02, up 12.1% from $0.91 last year. Store Expansion: Net increase of 18,100 square feet in food retail network. Online Sales Growth: Increased by 26% for the quarter. Prescription Sales: Up 7.8%. Share Repurchase: 2.849 million shares for $264 million.

Warning! GuruFocus has detected 2 Warning Sign with CFG.

Release Date: April 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Metro Inc (MTRAF) reported a 5.5% increase in total sales, reaching $4.9 billion in the second quarter. The company achieved a 9.8% increase in adjusted net earnings, amounting to $226.6 million. Online sales grew by 26% for the quarter, driven by the expansion of click and collect services and third-party marketplaces. Pharmacy division recorded solid same-store sales growth of 7%, with prescription sales up 7.8%. Metro Inc (MTRAF) maintained a strong focus on local and Canadian products, which outpaced total sales growth.

Negative Points

Operating expenses were $521.3 million, representing 10.6% of sales, slightly down from 10.7% last year, but still a significant cost factor. Energy costs in Ontario increased due to cold weather, impacting overall expenses. The company faced increased fees related to online partnerships, affecting operating margins. Depreciation and amortization expenses rose by 5.1% due to investments in supply chain and automation technology. The economic environment remains uncertain, with potential impacts from tariffs and counter tariffs on consumer behavior and business operations.

Q & A Highlights

Q: How has consumer behavior changed in response to recent tariffs, and what is Metro's outlook for the rest of the fiscal year? A: Eric La Fleche, President & CEO, stated that consumer behavior has not significantly changed, with a continued focus on value. The macroeconomic environment remains uncertain, but as a retailer of essential goods, Metro is well-positioned to continue growing despite volatility.

Story Continues

Q: Can you provide more details on the growth in the pharmacy business and its impact on gross margins? A: Francois Thibault, CFO, explained that while the pharmacy business continues to grow, it did not have a material impact on Metro's overall gross margin. The mix between food and pharmacy has remained consistent.

Q: Why was the 8% to 10% long-term EPS growth target absent from this quarter's outlook statement? A: Francois Thibault clarified that the omission was because the company has moved past its transition year and no longer needs to reassure investors of its long-term growth target, which remains intact.

Q: Are customers shifting their shopping preferences towards Canadian-made products, and is this affecting market share? A: Eric La Fleche noted that customers are indeed favoring Canadian products, which are selling better than the rest of the store. However, there is no clear indication that this is drawing customers away from American-owned retailers.

Q: How are counter tariffs affecting Metro's pricing and vendor relationships? A: Marc Giroux, COO, explained that the impact of counter tariffs has been limited so far. Metro is working with vendors to mitigate costs and is sourcing products from alternative suppliers when possible to minimize price increases.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments