Metro Inc. closed out its 2021 fiscal year with a higher top line and net earnings growth despite tough comparisons to pandemic-fueled gains a year ago.
For the 12-week fourth quarter ended Sept. 25, sales totaled $4.09 billion (Canadian), down 1.2% from $4.14 billion in the fiscal 2020 quarter, when sales climbed 7.4%, Montreal-based Metro reported yesterday. The company noted, however, that overall sales remained elevated from before the COVID-19 crisis.
Full fiscal 2021 came in at $18.28 billion, marking a gain of 1.6% from just under $18 billion in fiscal 2020, when Metro tallied a 7.3% increase.
“We ended the fiscal year on a strong note, with adjusted earnings per share growth of 5.2% in the fourth quarter, despite lower sales as we cycled exceptional sales last year,” Metro President and CEO Eric La Flèche (left) told analysts in a conference call on Wednesday. “On a two-year basis, we delivered sales growth of 6% and adjusted EPS growth of 19.1%.”
Food same-store sales declined 2.9% for the fourth quarter in the wake of a 10% prior-year gain but advanced 6.8% on a two-year stack, according to Metro. Food basket inflation rose to about 2%.
“As expected, with government restrictions easing over the summer, a portion of food consumption transferred back to restaurants. Similar to Q3, transactions were up in Q4 year over year but are still below 2019,” La Flèche said. “Average basket size was down versus last year but remains significantly higher than two years ago. Promotional penetration increased and is now back to pre-pandemic levels. For the quarter, our internal food basket inflation was 2%, up from the 1% in the prior quarter, with the main drivers being meat and dairy products.”
Comparable pharmacy sales, meanwhile, advanced 4.1% in the fourth quarter, building on a 5.5% rise in the 2020 quarter. The increase reflected a 6.7% gain in prescription sales and a 1.1% decrease in front-end sales.
Food comparable sales fell in the fourth quarter but were up nearly 7% on a two-year basis. (Photo courtesy of Metro)
“Turning to pharmacy, comparable sales were up 4.1% [year over year] and 9.8% versus 2019, with prescription drugs up a strong 6.7% in the quarter as we continue to see an uptick in physicians visits,” according to La Flèche. “Front-of-store sales were down 1.1% this quarter and up 4.9% versus 2019. OTC, beauty and cosmetic sales were up versus prior quarters. However, we were cycling significant sales of COVID products such as masks, gels and sanitizers last year.”
Online food sales in the quarter were flat year over year following a 160% surge in the 2020 quarter. La Flèche noted that e-commerce demand remains elevated — with Metro’s online sales up 160% on a two-year basis — but has begun to tail off from peak COVID levels. The company aims to spur e-commerce growth via a “hub store” model, in which selected locations are adapted to serve as fulfillment points for online grocery orders in the surrounding area.
“The online market is still growing, but at a slower pace. We are on track to increase our capacity with the ramp-up of the Montréal drugstore, click-and-collect now available in 180 Metro stores versus 170 originally planned, and new hub stores in Ottawa and Montreal this summer and soon winter. Super C is now on the Cornershop platform for rapid home delivery,” he explained. “So our strategy is providing operational flexibility, and we believe we’re well-adapted to our local markets and demand growth. When fully deployed in 2023, our online service will be available to 85% of the population of Quebec and Ontario.”
Metro’s e-commerce offering also is expanding on the pharmacy side. “This week, we will be launching our click-and-collect service at more than 250 Jean Coutu [drugstore] locations across Quebec, Ontario and New Brunswick,” La Flèche said. “Customers will now be able to order online more than 20,000 products, including over-the-counter medicine, and pick it up the same day at their local Jean Coutu pharmacy. This new service is in addition to the longstanding delivery service for prescriptions and the more recent Cornershop platform for quick delivery of HBA products.”
Key distribution center initiatives also moved forward during the year, La Flèche told analysts in the call.
“Operations in the new produce DC in Toronto are not yet at the expected productivity level but continue to improve every week,” he said. “We are pleased with the service level to our stores and the quality of our products. The new automated frozen DC is in the final commissioning stage, and we expect to start shipping to stores in January. The transition from the existing frozen DC will take place over a four-month period. In Quebec, construction of the new automated fresh and frozen facility in Terrebonne is well under way and is scheduled for a 2023 opening.”
At the bottom line, Metro posted fourth-quarter net earnings of $194 million, or 79 cents per diluted share, compared with $186.5 million, or 74 cents per diluted share, a year ago. Excluding amortization of intangible assets added via the 2018 Jean Coutu Group acquisition, adjusted net income was $200.6 million, or 81 cents per diluted share, versus $193.1 million, or 77 cents per diluted share, in the prior-year period.
Analysts, on average, projected fourth-quarter adjusted EPS of 80 cents, with estimates ranging from 75 cents to 83 cents, according to Refinitiv.
For the 2021 fiscal year, net income totaled $825.7 million, or $3.33 per diluted share, up from $796.4 million, or $3.14 per diluted share, in 2020. Adjusted earnings were $854.2 million, or $3.44 per diluted share, compared with $829.1 million, or $3.27 per diluted share, a year earlier. Analysts’ consensus full-year forecast was for adjusted EPS of $3.45, with projections running from $3.39 to $3.56, according to Refinitiv.
“Looking ahead, while we can’t predict exactly how the pandemic will evolve, we expect our food sales to decline versus last year until the second anniversary of the pandemic in March, but to continue to compare favorably on a two-year basis,” La Flèche said. “Our industry is experiencing cost inflation pressures, mostly cost of goods sold, labor, transportation,” he added. “However, we’re working hard to contain those cost increases and provide the best value possible to our customers.”
Overall, the company’s retail network in Quebec, Ontario and New Brunswick includes 951 food stores under the Metro, Metro Plus, Super C, Food Basics, Adonis, Marché Richelieu and Première Moisson banners as well as 646 drugstores and pharmacies under the Jean Coutu, Brunet, Metro Pharmacy and Food Basics Pharmacy banners.