Metro expects food inflation pressures to ease in future

Metro said food price hikes in its second quarter were driven by a jump in fruit and vegetable costs, but it anticipates that to ease moving forward.

The retailer said its aggregate food basket inflation was three per cent, up from 2.8% over the previous quarter.

"Inflation pressure—it makes it a challenge to offer customers great value,'' said president and CEO Eric La Flèche in a conference call with analysts after Metro reported its latest results.

The company's experience follows the trend of overall food inflation in Canada.

Shoppers paid 3.9% more for food in the country in February compared to the same time last year, according to Statistics Canada. Over the year, higher prices for fresh produce contributed the most to higher food prices, according to the agency.

Inflation can pose a problem for Metro. The company has to deliver value to shoppers while reaching its sales and margins goals, La Flèche said.

But so far Metro has managed to weather inflation well. Its second-quarter profit was up more than 10 per cent compared with a year ago.

La Flèche said he expects inflation growth to ease in the coming quarters, especially as Metro ramps up its purchasing of local produce.

Metro said it earned $124.9 million or 51 cents per diluted share for the quarter ended March 12 compared with $111.6 million or 43 cents per diluted share a year ago.

The increase came as sales grew to $2.88 billion, up from $2.71 billion in the same quarter last year.

Same-store sales increased by five per cent.

La Flèche attributed that growth, which he said resulted in the highest spike in same-store sales for the company since 2009, to effective merchandising, execution and investments.

Metro has more than 600 grocery stores under several banners including Metro, Metro Plus, Super C and Food Basics.

It also has more than 250 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners.