MONTRÉAL, Aug. 9, 2023
/CNW/ - METRO INC. (TSX: MRU) today announced its results for the
third quarter of fiscal 2023 ended July 1, 2023.
2023 THIRD QUARTER
HIGHLIGHTS
- Sales of $6,427.5 million, up
9.6%
- Food same-store sales(1) up 9.4%
- Pharmacy same-store sales(1) up 5.9%
- Net earnings of $346.7
million, up 26.1%, and adjusted net earnings(1)
of $314.8 million, up
10.9%
- Fully diluted net earnings per share of $1.49, up 30.7%, and adjusted fully diluted net
earnings per share(1) of $1.35, up 14.4%
|
16 weeks / Fiscal
Year
|
(Millions of
dollars, except for net earnings per share)
|
2023
|
%
|
|
2022
|
%
|
Change (%)
|
Sales
|
6,427.5
|
100.0
|
|
5,865.5
|
100.0
|
9.6
|
Operating income before
depreciation and amortization
|
612.3
|
9.5
|
|
565.1
|
9.6
|
8.4
|
Net earnings
|
346.7
|
5.4
|
|
275.0
|
4.7
|
26.1
|
Fully diluted net
earnings per share
|
1.49
|
—
|
|
1.14
|
—
|
30.7
|
Adjusted net
earnings(1)
|
314.8
|
4.9
|
|
283.8
|
4.8
|
10.9
|
Adjusted fully diluted
net earnings per share(1)
|
1.35
|
—
|
|
1.18
|
—
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 weeks / Fiscal
Year
|
(Millions of
dollars, except for net earnings per share)
|
2023
|
%
|
|
2022
|
%
|
Change (%)
|
Sales
|
15,652.9
|
100.0
|
|
14,456.3
|
100.0
|
8.3
|
Operating income before
depreciation and amortization
|
1,521.6
|
9.7
|
|
1,403.2
|
9.7
|
8.4
|
Net earnings
|
796.6
|
5.1
|
|
680.8
|
4.7
|
17.0
|
Fully diluted net
earnings per share
|
3.39
|
—
|
|
2.81
|
—
|
20.6
|
Adjusted net
earnings(1)
|
777.8
|
5.0
|
|
702.7
|
4.9
|
10.7
|
Adjusted fully diluted
net earnings per share(1)
|
3.31
|
—
|
|
2.90
|
—
|
14.1
|
PRESIDENT'S MESSAGE
"We delivered solid results in the third quarter fueled by
strong same-store sales and good operating leverage. With
persistent food inflation, our teams did an excellent job to offer
good value to our customers, resulting in market share gains and
tonnage growth, driven by our discount food stores. Our loyalty
program MOİ was successfully launched this quarter and we are
pleased with the strong customer response so far. This enhanced
program provides even more value to customers by offering multiple
ways to earn and redeem points on food and pharmacy purchases in
Québec. We are clearly disappointed with the current labour dispute
in 27 of our Metro stores in the Greater
Toronto Area given that we had reached a very good agreement
that was unanimously recommended by union representatives. We look
forward to a resolution and the re-opening of our stores as soon as
possible, while ensuring the long-term competitiveness of our
company(2)", declared Eric La Flèche,
President and Chief Executive Officer.
OPERATING RESULTS
SALES
Sales in the third quarter of Fiscal 2023 remained strong,
reaching $6,427.5 million, and
up 9.6%. Food same-store sales(1) were up 9.4% (1.1% in
the third quarter of 2022) driven by the continuing shift to
discount and high inflation. Online food sales(1) were
up 99.0% versus last year (flat in the third quarter of 2022),
mostly driven by higher partnership sales. Our food basket
inflation was about 8.0%, lower than reported food CPI and lower
than the previous quarter. Pharmacy same-store sales(1)
were up 5.9% (7.2% in the third quarter of 2022), with a 6.7%
increase in prescription drugs(1) and a 4.1%
increase in front-store sales(1), with increases across
most categories except over-the-counter products.
Sales in the first 40 weeks of Fiscal 2023 totalled $15,652.9 million, up 8.3% compared to
$14,456.3 million for the
corresponding period of 2022.
OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
This earnings measurement excludes financial costs, taxes,
depreciation and amortization.
Operating income before depreciation and amortization for the
third quarter of Fiscal 2023 totalled $612.3 million, or 9.5% of sales, an
increase of 8.4% versus the corresponding quarter of Fiscal 2022.
Included in the third quarter of Fiscal 2023 are launch costs of
$5.1 million related to our loyalty
program MOİ. Included in the third quarter of Fiscal 2022
are $7.7 million of direct costs
related to the one-week labour conflict and collective agreement
ratification with our distribution center employees in Toronto offset by a non-recurring gain on the
sale of assets of $8.7 million.
Operating income before depreciation and amortization for the first
40 weeks of Fiscal 2023 totalled $1,521.6
million or 9.7% of sales, up 8.4% versus the corresponding
period of 2022.
Gross margin(1) for the third quarter and the first
40 weeks of Fiscal 2023 were 19.6% and 19.8% respectively, versus
19.8% and 19.9% for the corresponding periods of 2022, reflecting
the decline in our food margin. Gross profit for the third quarter
of 2022 included $5.3 million of
direct costs related to the one-week labour conflict with our
distribution center employees in Toronto.
Operating expenses as a percentage of sales for the third
quarter and for the first 40 weeks of Fiscal 2023 were 10.1% versus
10.3% in the corresponding periods of 2022. Operating expenses in
the third quarter of Fiscal 2023 were impacted by $5.1 million of launch costs related to our
loyalty program MOİ as well as fees related to higher online
partnership sales. Included in the third quarter of Fiscal 2022 are
$2.4 million of direct costs related
to the one-week labour conflict with our distribution center
employees in Toronto.
DEPRECIATION AND
AMORTIZATION
Total depreciation and amortization expense for the third
quarter of Fiscal 2023 was $159.5 million versus $154.7 million for the corresponding quarter
of 2022. For the first 40 weeks of Fiscal 2023, total depreciation
and amortization expense was $400.2
million versus $383.5 million
for the corresponding period of 2022.
NET FINANCIAL COSTS
Net financial costs for the third quarter of Fiscal 2023 were
$37.1 million compared with
$35.8 million for the
corresponding quarter of 2022. The increase is mostly due to higher
debt partly mitigated by higher capitalized interests on our
distribution center automation projects. For the first 40 weeks of
Fiscal 2023, net financial costs were $92.5
million compared with $92.3
million for the corresponding period of 2022.
INCOME TAXES
The income tax expense of $69.0 million for the third quarter of
Fiscal 2023 represented an effective tax rate of 16.6% compared
with an income tax expense of $99.6 million and an effective tax rate of
26.6% in the third quarter of Fiscal 2022. The Corporation recorded
tax assets of $40.7 million in the
quarter ($8.2 million of current tax
assets and $32.5 million of deferred
tax assets) with an equivalent reduction of the tax expense
following a favorable judgement at the Tax Court of Canada. Capital losses previously disallowed
by the Canada Revenue Agency ("CRA") on the disposition of shares
of a subsidiary in the years 2012 to 2014, have now been granted.
The CRA subsequently accepted that the Corporation amend a rollover
form filed for the tax year ended March 3,
2018, resulting in an increase in the tax base of intangible
assets.
The 40-week period income tax expense of $232.3 million for Fiscal 2023 and $246.6 million for Fiscal 2022 represented an
effective tax rate of 22.6% and of 26.6% respectively.
NET EARNINGS AND ADJUSTED NET
EARNINGS(1)
Net earnings for the third quarter of Fiscal 2023 were
$346.7 million compared with
$275.0 million for the
corresponding quarter of 2022, while fully diluted net earnings per
share were $1.49 compared with
$1.14 in 2022, up 26.1% and 30.7%
respectively. Excluding the specific items shown in the table
below, adjusted net earnings(1) for the third quarter of
Fiscal 2023 totalled $314.8 million compared with $283.8 million for the corresponding quarter
of 2022 and adjusted fully diluted net earnings per
share(1) were $1.35 versus
$1.18, up 10.9% and 14.4%
respectively.
Net earnings for the first 40 weeks of Fiscal 2023 were
$796.6 million compared with
$680.8 million for the corresponding
period of 2022, while fully diluted net earnings per share were
$3.39 compared with $2.81 in 2022, up 17.0% and 20.6%, respectively.
Excluding the specific items shown in the table below, adjusted net
earnings(1) for the first 40 weeks of Fiscal 2023
totalled $777.8 million compared with
$702.7 million for the corresponding
period of 2022, and adjusted fully diluted net earnings per
share(1) amounted to $3.31
versus $2.90, up 10.7% and 14.1%,
respectively.
Net earnings and fully diluted net earnings per share (EPS)
adjustments(1)
|
16 weeks / Fiscal
Year
|
|
|
|
|
2023
|
|
2022
|
|
Change (%)
|
|
Net earnings
(Millions of
dollars)
|
Fully diluted
EPS
(Dollars)
|
|
Net earnings
(Millions of
dollars)
|
Fully diluted
EPS
(Dollars)
|
|
Net earnings
|
Fully diluted
EPS
|
Per financial
statements
|
346.7
|
1.49
|
|
275.0
|
1.14
|
|
26.1
|
30.7
|
Amortization of
intangible assets acquired
in connection with the Jean Coutu Group
acquisition, net of taxes of $3.1
|
8.8
|
|
|
8.8
|
|
|
|
|
Favorable tax
adjustment in respect of prior years
|
(40.7)
|
|
|
—
|
|
|
|
|
Adjusted
measures(1)
|
314.8
|
1.35
|
|
283.8
|
1.18
|
|
10.9
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
40 weeks / Fiscal
Year
|
|
|
|
|
2023
|
|
2022
|
|
Change (%)
|
|
Net earnings
(Millions of
dollars)
|
Fully diluted
EPS
(Dollars)
|
|
Net earnings
(Millions of
dollars)
|
Fully diluted
EPS
(Dollars)
|
|
Net earnings
|
Fully diluted
EPS
|
Per financial
statements
|
796.6
|
3.39
|
|
680.8
|
2.81
|
|
17.0
|
20.6
|
Amortization of
intangible assets acquired in
connection with the Jean Coutu Group
acquisition, net of taxes of $7.8
|
21.9
|
|
|
21.9
|
|
|
|
|
Favorable tax
adjustment in respect of prior years
|
(40.7)
|
|
|
—
|
|
|
|
|
Adjusted
measures(1)
|
777.8
|
3.31
|
|
702.7
|
2.90
|
|
10.7
|
14.1
|
NORMAL COURSE ISSUER BID PROGRAM
Under the current normal course issuer bid program, the
Corporation may repurchase up to 7,000,000 of its Common
Shares between November 25, 2022 and November 24,
2023. Between November 25, 2022 and
July 28, 2023, the Corporation has repurchased 6,219,700
Common Shares at an average price of $72.23, for a total consideration of $449.3 million.
DIVIDENDS
On August 8, 2023, the Board of
Directors declared a quarterly dividend of $0.3025 per share, the same amount declared last
quarter.
FORWARD-LOOKING
INFORMATION
We have used, throughout this report, different statements that
could, within the context of regulations issued by the Canadian
Securities Administrators, be construed as being forward-looking
information. In general, any statement contained herein that does
not constitute a historical fact may be deemed a forward-looking
statement. Expressions such as "looking forward", "predict" and
other similar expressions are generally indicative of
forward-looking statements. The forward-looking statements
contained herein are based upon certain assumptions regarding the
Canadian food and pharmaceutical industries, the general economy,
our annual budget, as well as our 2023 action plan.
These forward-looking statements do not provide any guarantees
as to the future performance of the Corporation and are subject to
potential risks, known and unknown, as well as uncertainties that
could cause the outcome to differ significantly. Risk factors that
could cause actual results or events to differ materially from our
expectations as expressed in, or implied by, our forward-looking
statements are described and discussed under the "Risk Management"
section in our Annual Report 2022.
We believe these statements to be reasonable and pertinent as at
the date of publication of this report and represent our
expectations. The Corporation does not intend to update any
forward-looking statement contained herein, except as required by
applicable law.
NON-GAAP AND OTHER FINANCIAL
MEASUREMENTS
In addition to the International Financial Reporting Standards
(IFRS) measurements provided, we have included certain non-GAAP and
other financial measurements. These measurements are presented for
information purposes only. They do not have a standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measurements presented by other public companies.
National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure sets out specific disclosure requirements for non-GAAP
financial measures, non-GAAP ratios, and other financial measures,
which are capital management measures, supplementary financial
measures, and total of segments measures, as defined in the
Instrument (together the "specified financial measures").
The specified financial measures we disclose in our documents
made available to the public are presented by measurement
categories below.
NON-GAAP FINANCIAL
MEASURES
Adjusted net earnings is a non-GAAP financial
measurement that with respect to its composition is adjusted to
exclude an amount that is included in, or include an amount that is
excluded from, the composition of the most directly comparable
financial measure disclosed in our consolidated financial
statements.
For measurements depicting financial performance, we believe
that presenting earnings adjusted for these items, which are not
necessarily reflective of the Corporation's performance, leaves
readers of financial statements better informed thus enabling them
to better perform trend analysis, evaluate the Corporation's
financial performance and assess its future outlook. Adjusting for
these items does not imply that they are non-recurring.
NON-GAAP RATIOS
Adjusted fully diluted net earnings per share is a
non-GAAP ratio by where a non-GAAP financial measure is used as one
or more of its components.
We believe that presenting this ratio, in which a non-GAAP
financial measurements is used as one or more of its components,
leaves readers of financial statements better informed as to the
current period and corresponding prior year's period's performance,
thus enabling them to better perform trend analysis, evaluate the
Corporation's financial performance and assess its future outlook.
Adjusting for these items does not imply that they are
non-recurring.
SUPPLEMENTARY FINANCIAL
MEASURES
The supplementary financial measures listed below are, or are
intended to be, disclosed on a periodic basis to depict the
historical or expected future financial performance, financial
position or cash flow of the Corporation.
Food same-store sales and pharmacy same-store sales
(including total, front-store and prescription drugs) are
defined as comparable retail sales of stores with more than 52
consecutive weeks of operations, including relocated, expanded and
renovated locations.
Online food sales are the sum of sales made from all
our online channels.
Gross margin ratio is calculated by dividing gross
profit by sales.
OUTLOOK(2)
We remain focused on offering quality products at competitive
prices as higher than normal inflation and market challenges
persist. While we are not able to predict how the current
macro-economic environment will evolve, we are seeing some
moderation in food inflation, although it is still elevated
compared to pre-pandemic levels. With this backdrop, we remain
resilient and committed to providing the best value for our
customers while delivering on our strategic priorities. In this
respect, we look forward to the launch of our state-of-the-art,
automated distribution center north of Montreal in the coming weeks.
CONFERENCE CALL
Financial analysts and institutional investors are invited to
participate in a conference call for the 2023 third
quarter results at 9:00 a.m.
(EDT) today, August 9,
2023. To access the conference call, please dial (416)
764-8651 or 1 (888) 390-0620. The media and investing public may
access this conference via a listen mode only.
Notice to readers: METRO INC.
third quarter of 2023 interim condensed consolidated financial
statements and management's discussion and analysis are available
on the Internet at www.corpo.metro.ca - Corporate Site
- Investors - 2023 Quarterly Results - 2023 Third
Quarter Results.
(1) See
table in section "Operating Results" and section on "Non-GAAP and
Other Financial Measurements"
|
(2) See
section on "Forward-looking Information"
|
|
SOURCE METRO INC.