business news in context, analysis with attitude

Global notes & commentary from

Major Canadian grocer Metro has announced that its net earnings for the fiscal year ended increased by 1.2% to CAD168.8 million, meaning that the company’s net earnings have increased for the 14th consecutive year. Sales were up 4% in fiscal 2004 to CAD5,998.9 million, despite low inflation in retail food prices. Comparable sales increased by 0.5%. Metro’s pharmaceutical sector’s sales grew 9.3% in fiscal 2004 to CAD491.3 million, largely the result of organic growth. Total investments reached CAD158.3 million in fiscal 2004, for a net expansion of 33,740 square metres representing a 3.8% increase in total retail floorspace. Major renovations and expansions of 26 stores were completed and 18 new stores were opened. “The key to this strong performance lies in effective merchandising, an important retail investment program and the commitment of its retailers, employees and partners. We are confident that these elements will continue to ensure positive results in the next fiscal year,” stated Metro’s President and Chief Executive Officer, Pierre H. Lessard.

These are a creditable set of results given the increasing competitiveness of the Canadian grocery sector, with Metro pursuing initiatives such as ongoing private label development and the conversion of Metro stores to the enhanced Metro Plus format. Metro appears to be getting its strategy right, as same store sales growth accelerated to 2.7% for the fourth quarter on the back of new merchandising programmes (improved grocery merchandising at the Metro, Metro Plus and Super C banners) implemented in the second quarter complemented by the company’s long-term retail network development strategy.

Metro’s decent showing will see it attain a 2004 modern grocery distribution market share of around 7.1%, forecast by M+M Planet Retail to climb to nearly 8% in 2008, based on Metro’s recent tempo of expansion and store openings. This will still leave it well short of the 14% taken by Sobeys and the 32% market-leading share of Loblaw, but these forecasts do not account for any potential M&A activity. Metro has already stated that it will “remain vigilant” for potential takeover targets, and it is worth remembering that these could be in the drugstore market as well as in the grocery sector.
KC's View: