Metro CEO responds to government concerns, emphasizing transparency in the face of accusations of inadequate disclosure on food prices and sector competitiveness. (Bloomberg)
The head of one of Canada's leading supermarket chains, Metro Inc., has dismissed criticisms from government officials regarding the lack of transparency in addressing food inflation issues and the perceived lack of competitiveness in the sector. CEO Eric La Fleche, in response to comments from Industry Minister Francois-Philippe Champagne, emphasized the company's cooperation and openness in discussing food pricing decisions and cost management strategies with government representatives.
Champagne had expressed concerns earlier in the week, stating that the industry had not been transparent enough about inflation and the steps being taken to stabilize food prices. Statistics Canada reported a 5% increase in food costs in December compared to the previous year.
In light of these concerns, the minister called for a fresh study of the grocery market by Canada's competition commissioner and advocated for new legislative powers to address potentially abusive practices by dominant firms in the market. Additionally, Champagne mentioned efforts to attract foreign companies to expand their presence in the Canadian food sector.
However, La Fleche countered these claims, asserting that the market is already highly competitive, citing the presence of major players like Costco Wholesale Corp. and Walmart Inc. in Canada. Despite this, Metro reported adjusted earnings of C$1.02 per share for the first quarter, ending Dec. 23, slightly exceeding analysts' expectations. However, the pretax margin slipped from 6.7% to 6.1% compared to the previous year.
While the earnings performance was better than anticipated, the company provided a cautious outlook for fiscal 2024, projecting flat or, at best, marginal profit per share. Metro acknowledged facing significant challenges, particularly related to costs associated with the transition to more modern distribution facilities. The company anticipates a resumption of earnings growth in 2025.
Following the announcement, Metro's shares experienced a decline of up to 2.5% in Toronto, marking its most significant intraday drop in over a month. The subdued outlook and the challenges associated with the transition to updated distribution facilities contributed to the market's response to Metro's financial report.
