Metro Inc. ((TSE:MRU)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Metro Inc. Reports Strong Earnings Amid Operational Challenges
The recent earnings call for Metro Inc. painted a picture of robust performance, highlighted by significant sales growth, improved gross margins, and a thriving pharmacy division. However, the company faces hurdles due to mechanical issues at its Toronto distribution center, which have impacted financials and same-store sales. While efforts to address these challenges are underway, the company anticipates additional costs in the upcoming quarter.
Sales Growth
Metro Inc. reported total sales of $5.1 billion in Q4, marking a 3.4% increase from the previous year. This growth was driven by a 1.6% rise in food same-store sales and a notable 4.8% increase in pharmacy same-store sales, underscoring the company’s strong market position.
Gross Margin Improvement
The company achieved a gross margin of $1.022 billion for the quarter, representing 20% of sales, up from 19.7% the previous year. This improvement was attributed to better shrink management and productivity gains, reflecting Metro’s operational efficiency.
Adjusted Net Earnings Increase
Metro’s adjusted net earnings saw an 8.6% rise, reaching $246 million, with adjusted earnings per share growing by 10.8% year-over-year. This increase highlights the company’s strong financial performance despite operational challenges.
Resumption of Toronto DC Operations
Operations at the Toronto distribution center resumed on November 10, with expectations to return to normal by the end of December. This resumption is crucial for stabilizing operations and mitigating further financial impacts.
Pharmacy Division Performance
The pharmacy division continued to perform well, with prescription sales up by 5.5%, driven by specialty medications and clinical services. This growth underscores the division’s critical role in Metro’s overall success.
Online Sales Growth
Metro’s online sales surged by 19.8% during the quarter, fueled by the expansion of click-and-collect services and home delivery options. This growth reflects the company’s adaptation to changing consumer preferences.
Store Expansion
During fiscal ’25, Metro opened 14 new stores, resulting in a net increase of 294,000 square feet in retail space. This expansion demonstrates the company’s commitment to growing its market presence.
Toronto Freezer Mechanical Issue
A mechanical issue with the Toronto freezer resulted in a $22.5 million after-tax financial impact in Q4, with additional costs of $15-$20 million expected in Q1 of fiscal 2026. This issue also negatively impacted food same-store sales by approximately 30 basis points.
Increased Operating Expenses
Operating expenses rose by 4% year-over-year, partly due to $6.1 million in direct costs related to the freezer issue. This increase highlights the financial strain caused by operational disruptions.
Guidance
Looking ahead, Metro Inc. provided detailed guidance for the upcoming quarters. The company anticipates direct costs related to the freezer issue to impact net earnings by $15 million to $20 million in Q1 of fiscal 2026. However, sales and margins are expected to normalize by the end of December. Metro also plans to invest approximately $550 million in capital expenditures for fiscal 2026, aiming for a net square footage increase of 1% to 1.4% in its food retail network.
In summary, Metro Inc.’s earnings call highlighted a strong financial performance with significant growth in sales and margins. Despite facing operational challenges, particularly with the Toronto distribution center, the company remains optimistic about its future prospects, with plans for continued investment and expansion.