The head of Metro Inc., which operates one of Canada’s largest retail grocery brands, said Wednesday some food prices are increasing but consumers are continuing to see great promotional deals as retailers fight to remain competitive with Walmart’s expanding grocery presence.
Prices of some regular food items such as milk, bread, meat and some produce have started to increase. But promotional prices have remain unchanged, as have most groceries, he said.
“Promotional prices are very, very aggressive because of the competitive situation,” president and CEO Eric La Fleche said during a conference call to discuss Metro’s second-quarter results.
Walmart is responsible for most of the added grocery store square footage in Quebec and Ontario, while Sobeys rebranded its Price Chopper discount chain to FreshCo. in Canada’s largest province.
Competition is expected to accelerate in Quebec when the world’s largest retailer begins selling a full range of food at Walmart Supercentres – as the U.S. retail giant does in other markets including Ontario.
While promotional deals will continue for now, La Fleche told analysts that prices should eventually rise.
“Consumers will dictate at the end of the day what we can do and we intend to remain very price competitive. But at some point, some of those promotional prices could perhaps increase.”
Metro said its second-quarter profits increased by 3.7% to $83.3 million despite a slight dip in revenues. The chain earned 80 cents a share in the three month period ended March 12. That was up from $80.3 million or 74 cents per share in the first quarter of 2010.
However, Metro’s profits for the period that included the Christmas season were two cents per share below a consensus estimate of 82 cents, compiled by Thomson Reuters.
Metro’s sales declined 0.4% to $2.57 billion, down $11 million but within the consensus estimate.
“We are pleased with our second-quarter results as we were able to grow net earnings and EPS despite a slight drop in sales,” La Fleche said.
The sales drop was mainly caused by lower pharmaceutical sales. Drug sales were affected by lower generic drug prices in Ontario and Quebec, along with lower sales from a couple of key drugs that lost their patent protection.
