Metro: metronome-the grocer still defies expectations

Sport 17 November, 2016

grafEric LaFleche the CEO of Metro (Tor., MRU), retains a smile whenever journalists questioned him about food inflation or competition. The fourth quarter again shows where did it this quiet confidence.

Obviously, Mr. LaFlèche has seen other grocer and adapts well to the situation and its competitors.

While analysts were concerned that disinflation in food detrimental to the income, comparable sales and margins, the grocer Metro (Tor., MRU, $ 42.99) still has exceeded expectations in the fourth quarter.

Up 15.4%, earnings of $ 0.60 per share is 5.5% better than expected, thanks in part to a lower tax rate, while operating profit increased by 7% 221,6M to $, or 1% more than expected by the consensus of analysts.

A growth track mark, sales of stores open for more than a year, rose 2.8%, better than the 2.5% increase expected by Peter Sklar, BMO Capital Markets. The average bill also advanced 2.1%.

And to adjust to the price decline in the impact of certain foods and more frequent promotions, which have reduced its gross margin from 0.16 to 19.8%, Metro has done what she has mastered: the grocer has reduced general expenses, administrative and sales of 0.40% notes Mr. Sklar.

Result: his action returned 5.5%, in the morning on November 16, bringing its appreciation of the past 12 months to 17%.

Before the quarterly teleconference with analysts, Mr. Sklar does not touch its target price of $ 43 or to its neutral recommendation.

“Metro has not benefited from the problems faced by Safeway grocery stores ( Sobeys-IGA ) since the Quebec grocer has no stores in the West. Metro has not suffered either of the reduction in prices of 8500 consumer goods by IGA in Quebec, which began in April, “notes Keith Howlett for its part, Desjardins Capital Markets.

The Desjardins analyst also maintained its target during a year of $ 46 and recommends retaining the title.

Prospects of Metro analysts divide: 43% of fourteen analysts who track title recommend its purchase.

Its relatively modest growth, its valuation of 16.5 times expected earnings in 12 months and no expansion project keep more of them on the sidelines.

Their average target price of $ 46.64 suggests a further 8% gain.

More growth at Loblaw

The annual summit of $ 48.19 as of July, after which investors preferred his rival Loblaw (Tor., L, $ 64.80) and more cyclical stocks. Loblaw also has also just unveiled in the scores for his troiaièeme trimstre: earnings of $ 1.26 per share, up 28.6% far exceeds the forecast. This is 12.5% more than expectations.

Comparable sales at Loblaw grew modestly by 1.4% largely due to the decline in food prices. “The new SAP software helps the shopkeeper to find the balance between promotions and profits,” says Mr. Howlett.

Loblaw has probably benefited from the laborious integration of Safeway Sobeys far.

However, in the next quarter, we will have a first look at the effect of Loblaw response to price reductions at Safeway, he warns.