Metro Inc. Metro is shifting its strategy for filling e-commerce orders for grocery home delivery, as Canadians' appetite to shop for food online grows.
The Montreal-based retailer announced on Wednesday that it will spend approximately $15-million to open a new store next year, dedicated only to online orders. Until now, Metro’s e-commerce strategy has focused on filling delivery orders at existing stores. The company has three such “hub stores” on the island of Montreal, but the new 100,000-square-foot facility – a type of location sometimes referred to in the industry as a “dark store” – will absorb those stores' orders starting next summer. E-commerce orders will still be available for “click and collect” pickup at other store locations.
The intention is to fill online orders more efficiently, Metro president and CEO Eric La Flèche said on a conference call to discuss the company’s earnings on Wednesday. Metro’s online food sales grew by 160 per cent in the fourth quarter, compared with the same period last year.
“We are adding capacity. ... We’ll see how demand evolves,” Mr. La Flèche said. “We think we’ll be in good shape to serve the growing demand more efficiently than we are today with our hub store model in the city of Montreal, where there’s more demand.”
The company will likely build a similar facility in Toronto, where e-commerce demand is also growing, sometime in 2022. Unlike its giant competitor, Loblaw Cos Ltd. – which does the vast majority of its online business through click-and-collect – Metro sees a “large percentage” of e-commerce orders for home delivery. Orders for store pickup have also grown considerably throughout the pandemic. Metro also announced that it plans to more than double the number of stores offering pickup for online orders by the end of next year – from 40 stores currently offering the service to more than 100.
“You need both, I think, to serve the customers well,” he said.
E-commerce competition has grown in Canada’s grocery sector: this summer, competitor Sobeys launched its home-delivery service, Voilà, in the Greater Toronto Area – powered by automated systems designed to speed up order fulfillment at its new 250,000-square-foot distribution centre. Parent company Empire Co. Ltd. is building a second facility in Montreal to offer Voilà under its IGA banner.
While grocers are working to keep up with e-commerce demand, in-store sales still make up the majority of the business. Like other grocers, Metro is incurring more costs during the pandemic to implement safety measures in stores: It reported $27-million in COVID-related costs in the fourth quarter. Store capacity limits have led to lineups at some locations – an unpleasant prospect for shoppers as the cold weather sets in.
“If there are lineups outside, we’ll have to find some ways to put some shelters. We are all preparing for that,” Mr. La Flèche said.
All of Canada’s largest grocers have experienced a surge in sales this year, with public health restrictions deeply affecting the restaurant industry. Many Canadians have restricted outings and are cooking for themselves more at home.
Metro’s sales and profits grew once more in its fourth quarter, as the COVID-19 pandemic continues to provide an unusual level of growth in the grocery sector.
The Montreal-based retailer reported $4.1-billion in sales for the 12 weeks ended Sept. 26, up 7.4 per cent compared with the same period last year. Same-store sales – an important metric that tracks sales growth not affected by new store openings – rose 10 per cent at its grocery banners in the fourth quarter. That trend has continued. Metro reported that grocery same-store sales have grown 11 per cent in the four weeks since the end of the fourth quarter.
Metro’s net earnings for the fourth quarter were $186.5-million, or 74 cents per share, compared with $167.4-million or 66 cents per share in the same period last year.
Metro, which owns the Jean Coutu drugstore chain, reported pharmacy same-store sales growth of 5.5 per cent in the fourth quarter. A labour conflict at the Jean Coutu distribution centre in Varennes, Que. – which began on Sept. 23 and has now been resolved – will likely affect Jean Coutu’s sales in the first quarter, the company said.
For the full 2020 fiscal year ended Sept. 26, Metro reported 7.3-per-cent sales growth, to nearly $18-billion. The company’s full-year net earnings were $796.4-million, or $3.14 per share, compared with $714.4-million or $2.78 per share in the prior year.
Metro also announced a renewal of its share buyback program. Beginning on Nov. 25, the company has the option to repurchase up to seven million or roughly 2.8 per cent of its outstanding shares over the coming year. In the last 12 months, the company has spent $240.8-million to buy back 4.26-million common shares.
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