It was not a great day for Canadian grocery store and pharmacy chain Metro (TSE:MRU), which rolled out an earnings report that featured good and bad news alike. And investors took the report in stride, selling off just a bit to send shares down fractionally in Wednesday morning’s trading. It was indeed a mixed bag for Metro, as earnings came in at $1.31 per diluted share.
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That did not match up well against the previous year, where it came in at $1.49 per share. Sales, however, rose from $6.43 billion in the year-ago quarter to $6.65 billion today. Yet, even here, expenses took a distinct bite out of the operation, with profit coming in at $296.2 million compared to the $346.7 million earned in 2023’s third quarter.
Sales were up across all segments, which suggests that the increase was more due to inflationary price hikes than a jump in consumer shopping. Food same-store sales were up 2.4%, while pharmacy was up 5.2%. Prescription drugs jumped 6.3%, and front-store sales added 3%.
The Rising Tide of Prices
Indeed, reports noted that inflation did hit Metro customers as far back as January. Metro’s CEO, Eric La Fleche, announced in January that customers would see price hikes following the end of an industry-wide blackout period. While Metro negotiated what it could—and its volume buys certainly gave it some leverage—there was only so much that could be done given the cost of inputs to make the products for sale.
Meanwhile, Metro also rolled out a loyalty program for Ontario stores back in April that may have lent a hand in getting customers to buy. The Moi Rewards program had previously done well in Quebec, landing over 2.5 million active members. Hopefully, it will deliver that level of success at other locations.
Is Metro a Good Stock to Buy?
Turning to Wall Street, analysts seem to mostly have Hold ratings on TSE:MRU stock, as indicated by the graphic below. After a 16.58% rally in its share price over the past year, most analysts think that the stock is trading near fair value.
