Metro Q1 Earnings Call Highlights

Core Viewpoint - Metro has successfully resumed operations at its Toronto frozen food distribution center after addressing a significant mechanical issue, which had financial implications but did not prevent the company from achieving sales growth and higher adjusted earnings per share in its fiscal first quarter [4][6]. Financial Performance - For the fiscal first quarter, Metro reported total sales of CAD 5.3 billion, reflecting a year-over-year increase of 3.3%. Adjusted diluted earnings per share (EPS) rose to CAD 1.16, up 5.5%, and adjusted EBITDA reached CAD 504.2 million, an increase of 4.7% [5][7]. - The gross margin remained steady at 19.7%, with operating expenses rising to CAD 557.6 million, up 5.5% year-over-year. Excluding direct costs related to the distribution center shutdown, operating expenses increased by 1.6% [8][9]. Operational Updates - The mechanical failure at the Toronto distribution center resulted in direct costs of CAD 21.6 million pre-tax (CAD 15.9 million post-tax), which were excluded from adjusted results. The disruption was estimated to have a negative impact of about 30 basis points on food same-store sales [6][8]. - The company has fully resumed operations at the distribution center, and management expressed confidence in the effectiveness of their contingency plan to secure supply across Ontario [2][4]. Growth and Investment Strategy - Metro is focusing on growth and capital allocation, with a fiscal year 2026 capital expenditure guidance of approximately CAD 550 million. The company plans to open a dozen new discount stores and has reported a 25.8% increase in online sales [5][13][16]. - The company has also repurchased 1 million shares for CAD 98.7 million and declared a quarterly dividend of CAD 0.4075 per share, marking a 10.1% increase and the 32nd consecutive year of dividend growth [17]. Market Trends and Consumer Behavior - Management noted that consumer behavior trends show a growing preference for discount shopping and promotions, with private label products outpacing national brands. Internal food basket inflation was reported to be below the overall food Consumer Price Index (CPI) of 4.1% [10][11]. - Supplier cost pressures are evident, particularly in fresh food categories, with ongoing negotiations to manage grocery price increases. The competitive landscape remains intense but rational, especially in Quebec [11][12].