Canadian food and drug retailer Metro Inc. got a sales boost in its fiscal 2019 first quarter from its acquisition of Jean Coutu Group.
Metro said Tuesday that for the quarter ended Dec. 22, 2018, total sales surged to $3.98 billion (Canadian), up 27.8% from $3.11 billion a year earlier. Excluding $757.1 million in sales for the first quarter of 2019 from Jean Coutu, sales increased 3.5%.
Food same-store sales rose 3.2% year over year, with inflation in the food basket at roughly 1.8%, according to Metro. Comparable pharmacy sales edged up 1.5%, reflecting gains of 0.8% for prescription drugs and 2% in the front end. The number of prescriptions filled climbed 2.2%.
Operating income (before depreciation and amortization) and associates' earnings for the first quarter totaled $320.6 million, or 8.1% of sales, compared with $217.8 million, or 7% of sales, a year ago.
Metro said that during the quarter it divested five pharmacies for a gain of $7.4 million, and in the fiscal 2018 quarter the company recognized $11.4 million in distribution network modernization project costs and $2 million in expenses from the Jean Coutu acquisition. Excluding those items, adjusted operating income (before depreciation and amortization and associates' earnings) for the 2019 quarter was $313.2 million, or 7.9% of sales, versus $231.2 million, or 7.4% of sales, in the 2018 period.
On an adjusted basis, excluding the Jean Coutu, operating earnings (before depreciation and amortization and associates' earnings) were $226.3 million, or 7% of sales, in the 2019 first quarter compared with $231.2 million, or 7.4% of sales, in the year-ago period. Metro said the change stems mainly from a rise in minimum wages, particularly in Ontario, and real estate gains made in 2018.
"We are very pleased with our first-quarter results, which reflect strong execution of our business plans and the success so far of our combination with the Jean Coutu Group,” Metro President and CEO Eric La Flèche said in a statement. “In a very competitive market environment, we are well-positioned to meet our customers' high expectations and continue to create long-term value for our shareholders.”
At the bottom line, 2019 first-quarter net earnings came in at $203.1 million (79 cents per diluted share) from $1.3 billion ($5.67 per diluted share) a year earlier. The 2018 quarter included a $958.9 million after-tax gain from the disposal of investments in associates, a $195.7 million after-tax gain from the revaluation and disposal of an investment at fair value and a $26.7 million after-tax share of an associate's earnings.
Excluding special items, adjusted net earnings for the 2019 quarter were $172.2 million (67 cents per diluted share) versus $126.7 million (55 cents per diluted share) in the 2018 quarter, Metro said.
The adjusted earnings per share were in line with analysts’ estimates. On average, analysts projected adjusted EPS of 67 cents for the 2019 first quarter, according to Zacks Investment Research.
Metro added that during the quarter it realized synergies of $10.7 million from the Jean Coutu purchase, for annualized amount of $28 million.
The 2019 quarter’s results reflected the acquisition of Jean Coutu, which was completed on May 11, 2018, as well as Metro’s disposal of its investment in Alimentation Couche-Tard in the 2018 first quarter.
Overall, Metro’s retail network includes more than 600 food stores under the Metro, Metro Plus, Super C and Food Basics banners as well as of over 650 drug stores under the Jean Coutu, Brunet, Metro Pharmacy and Drug Basics banners.