Metro sees profits jump on sales growth as striking workers push for wage gains
Metro Inc. said Wednesday that its earnings surged in its latest results, fuelled by higher same-store sales and a favourable tax ruling, as the company faces calls from striking workers to share more of those gains.
In the quarter ended July 1, the grocery and drugstore retailer said net earnings skyrocketed 26 per cent to $346.7 million from $275 million a year earlier.
Montreal-based Metro said the rise in third quarter profits are due in part to a tax benefit after the Canada Revenue Agency granted capital losses to the company that had previously been disallowed.
Nonetheless, adjusted net earnings rose 11 per cent to $314.8 million last quarter from $283.8 million the year before.
The report of rising profits come as 3,700 Metro workers from 27 Greater Toronto Area stores continue to strike as they push for higher pay and other improvements.
Unifor national president Lana Payne said in a statement that the company’s profits show Metro has “no excuses” not to meet worker demands, as the union called for the company to come back to the table with an improved wage offer.
“Frontline grocery workers deserve their fair share of Metro’s record profits,” Unifor spokesman Paul Whyte in a statement.
“Members simply cannot accept an agreement that leaves them scrambling to make ends meet.”
Workers walked off the job July 29 after rejecting a tentative agreement the union bargaining committee had reached with Metro, despite Payne hailing the proposed deal as a “milestone agreement” that addressed core member concerns.
Metro chief executive Eric La Fleche expressed his frustration about the decision on the earnings call Wednesday.
“We are clearly disappointed, given that we have worked constructively with the union and the employees bargaining committee to reach a very good agreement providing significant pay increases that they unanimously recommended to the employees,” he said.
“We remain committed to the bargaining process and look forward to a resolution and the reopening of our stores as soon as possible, while ensuring the long term competitiveness of our company.”
Metro noted in its results that a one-week strike at a Toronto distribution centre in the third quarter last year led to $5.3 million in direct costs that quarter.
Overall results for the third quarter this year showed sales increased 10 per cent to $6.43 billion from $5.87 billion a year prior, boosted by same-store sales growth of nine per cent.
Adjusted fully diluted net earnings leaped 14 per cent to $1.35 per share from $1.18 per share, while analysts had expected $1.29 per share, according to financial markets data firm Refinitiv.
The results were “very strong” said RBC Capital Markets analyst Irene Nattel in a note. She said the better-than-expected results came from a combination of merchandising strategies, good cost containment and an ongoing shift to discount channels.
The company’s gross margin on food was down slightly from last year as the company absorbed more food inflation costs, and as customers continue to shift to discount brands, said La Fleche.
“There are limits to what we can charge to our customers.”
The company said in its outlook that it is seeing some moderation in food inflation, but that it remains elevated compared with pre-pandemic levels.
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