What we learned from Metro's 2020 first-quarter results
Though its earnings fell just short of analysts' expectations in the first quarter of 2020, Metro CEO Eric La Flèche says the grocery and pharmacy chain is off to a "good start."
The Quebec-based company reported a profit of $170.2 million compared with a profit of $203.1 million in the same quarter the previous year, when its results were boosted by the sale of its investment in Colo-D Inc.
On the plus side, sales were up slightly in the quarter on a year -over-year basis, from $3.98 billion to $4.03 billion--an increase of 1.2%. Food same-store sales were up 1.4% and would have been up 2% had it not been for the shift in the important Christmas week. Tonnage and traffic in the quarter were down slightly as a result of the shift.
During a conference call earlier this week, La Flèche said he was very pleased with the grocery company's performance during the holidays. He told analysts on the call he believed Christmas sales would be positively reflected in the company's second-quarter results.
Though he wouldn't share specifics, La Flèche said e-commerce sales continued to grow and are "incremental to the Metro banner as we gain share of wallet from existing customers and attract new customers."
In the quarter, Metro opened four stores including two relocations, converted two Metro locations to Food Basics, and expanded or remodeled eight stores, resulting in an additional 86,000 net square feet.
La Flèche addressed some other key areas related to the company's performance. Here are a few takeaways:
MissFresh missed the mark
Metro said it recognized a $4.2 million loss on the sale of its stake in MissFresh--a ready-to-cook meal delivery subscription service based in Montreal. Metro purchased a majority interest in August 2017 and announced the divestiture in December 2019.
La Flèche said Metro overestimated the potential of the meal-kit business, especially at store, and in the end MissFresh didn't meet the grocer's business objectives. Until the sale, MissFresh subscribers were able to pick up their meal kits in store, and Metro even sold MissFresh meal kits in store alongside its own prepared meal offerings.
Competition was intense, but not that intense
In his opening remarks, La Flèche said the first quarter was competitive, but at a level that was comparable to previous quarters. It was "intense," he said, and "highly promotional" but not out of the ordinary for that time of year.
The shift in Christmas aside, tonnage was flat following "four years of growth," one analyst pointed out. A competitive market played a role in that, answered La Flèche--"Nobody is giving us a free ride. We have to fight for every dollar."
Tonnage in produce is strong despite a slight deflation, said La Flèche, "so I think we will continue to develop effective merchandising programs and I'm confident we'll be fine. this is the result of one quarter."