Yahoo Finance Metro hikes dividend as profit climbs 11% amid inflation
Quebec grocery giant Metro Inc. reported that profit rose by about 11 per cent in the first quarter and boosted its dividend, as inflation continued to ratchet up household food bills across the country.
Inflation was the main force driving higher sales across the Montreal-based retailer, chief executive Eric La Flèche told shareholders in a financial update on Jan. 24. Metro, which also owns Food Basics and the Quebec pharmacy chain Jean Coutu, reported better-than-expected sales of $4.7 billion in the quarter ending Dec. 17, up 8.2 per cent compared to last year, “mainly due to higher inflation this quarter,” La Flèche said.
Inflation in grocery stores has stayed stubbornly high this winter, at around 11 per cent, even as the overall Consumer Price Index has cooled to 6.3 per cent.
As inflation has soared Metro and its competitors have faced intense public scrutiny over their steady profit growth and accusations of price gouging. The chains, including Loblaw Companies Ltd., and Sobeys’ parent Empire Co. Ltd., have strongly denied the accusations. In its latest quarter, Metro said higher costs from suppliers actually forced it to slightly reduce its margin.
Metro’s gross margin — a telling metric in any conversation about price-gouging, because it shows how much profit is left after subtracting only the grocer’s cost of goods — dropped 30 basis points to 19.6 per cent, compared to 19.9 per cent last year.
Metro’s internal measure on food inflation was about 10 per cent in the quarter, well below Statistics Canada’s Consumer Price Index (CPI). Royal Bank of Canada analyst Irene Nattel said inflation is forcing consumers to shop sales and switch to cheaper options, like frozen over fresh, or private label over a national brand. Metro’s calculations on inflation reflect that reality in the store, unlike the “theoretical” basket of goods that CPI uses to measure inflation, Nattel said in a note earlier this month.
Metro reported adjusted profit of $237.6 million, up 10.9 per cent. Adjusted earnings per share of $1.00 beat forecasts of 97 cents, “thanks to better-than-expected revenue,” Scotiabank analyst George Doumet wrote in a note to clients.
Metro also increased its dividend by 10 per cent to 30.25 cents per share.
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