Metro (MRU) Q3 2024 earnings summary

Executive summary

• Total sales for the quarter reached CAD 6.65 billion, up 3.5% year-over-year, with food same-store sales up 2.4% and pharmacy up 5.2%.

• Adjusted net earnings were CAD 305 million, down 3.1% from last year, with adjusted EPS flat at CAD 1.35; net earnings were CAD 296.2 million, down 14.6%, and fully diluted EPS was CAD 1.31, down 12.1%.

• Gross margin was stable at 19.6% of sales, while operating expenses increased to 10.2% of sales due to new distribution center costs and higher e-commerce fees.

• Market share gains were achieved in both dollars and tonnage, driven by strong performance in discount banners and effective merchandising.

• Transition to new automated distribution centers in Terrebonne and Toronto completed, with productivity ramping up as planned.

Financial highlights

• EBITDA was CAD 620.2 million, up 1.6% year-over-year, excluding asset sales impacts; operating income before depreciation, amortization, and impairments was $620.2 million (9.3% of sales), up 1.3%.

• Depreciation and amortization rose to CAD 174 million, mainly from new distribution center investments.

• Net financial costs increased to CAD 46.6 million due to higher debt and interest rates.

• Online sales grew 35% year-over-year, supported by third-party delivery and expanded click-and-collect services.

• Effective tax rate for the quarter was 25.9%, up from 16.6% last year due to a prior-year favorable tax adjustment.

Outlook and guidance

• Results are tracking well to fiscal 2024 guidance, with expectations to return to usual profit growth targets in fiscal 2025 as distribution center transitions complete.

• Operating income before depreciation and amortization and impairments expected to grow by less than 2% for Fiscal 2024.

• Adjusted net earnings per share forecasted to be flat to down $0.10 for Fiscal 2024 versus Fiscal 2023.

• Medium- and long-term annual net earnings per share growth target maintained at 8% to 10%.

• Food inflation is decelerating, and cost pressures are expected to ease as automation ramps up.