Grocery chain Metro commits to pass low food inflation savings to customers

TORONTO – The CEO of Metro said Friday the grocery chain is committed to passing savings on to its customers if food inflation continues to subside.

Eric La Fleche said food prices continued falling in the third quarter as more fresh produce is purchased from local sources and the foreign exchange rate stabilizes.

“The quarter was marked by rapidly declining food inflation,” La Fleche said in a conference call with analysts following the release of Metro’s results.

The Montreal-based company’s internal food inflation measure fell to 1.5 per cent — down from 2.8 and three per cent in its first and second quarters, respectively.

La Fleche cited meat costs as one example where the company, which operates more than 600 grocery stores in Quebec and Ontario, lowered prices for customers.

“We will give back to our customers as the market, you know, plays out,” he said.

The low-inflation environment has led other grocery chains, like Loblaw (TSX:L), to negotiate lower rates from suppliers.

Earlier this month, Loblaw notified its suppliers that it will apply an automatic 1.45 per cent price deduction on all incoming shipments beginning Sept. 4 and reject any future increases with few exceptions related to costs such as fuel charges or foreign exchange rates.

La Fleche did not say whether Metro plans or has made a similar move.

“If something is happening in the market, we make sure we get our fair share,” he said. “You can count on us to continue to negotiate fairly but hard with our suppliers to make sure we have the right consumer offer in the right prices — as we’ve always done.”

Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University in Halifax, said grocery retailers have been under some pressure to keep their prices as low as possible and that has reverberated down the supply chain.

“That is why we’re seeing a lot of distributors asking vendors to reduce their own prices of products,” Charlebois said.

Another factor at play is greater competition from the likes of retail giants Walmart and Costco, he added.

Metro (TSX:MRU) reported an eight per cent increase in its net profit from last year’s third quarter, rising to $176.5 million or 72 cents per share. That’s up from $163.5 million or 64 cents per share.

Revenue was up 4.5 per cent year-over-year, growing by $173.1 million to just over $4 billion.

In addition to the performance of its grocery stores under the Metro banner, the company was helped by its investment in Alimentation Couche-Tard — operators of Mac’s, Circle K and Couche-Tard convenience stores and gas bars. Couche-Tard contributed $15.5 million to Metro’s results, up from $8.7 million last year.

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Note to readers: This is a corrected story. A previous version had an incorrect spelling for Alimentation Couche-Tard.