Metro Inc. (MRU:CA) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed but generally positive outlook. Financial performance showed growth in online sales and reduced capital expenditures, and the company is addressing inflationary pressures. The Q&A section reveals effective management of past disruptions and plans for further share buybacks, indicating confidence. However, lack of specific guidance and competitive pressures are concerns. Considering the market cap, the stock is likely to react positively, with a potential increase of 2-8% over the next two weeks, driven by positive sales trends and strategic buybacks.
Key Financial Performance
Total Sales $5.3 billion, an increase of 3.3% year-over-year. Sales were negatively impacted by the transfer of one significant pre-Christmas shopping day to the second quarter and the temporary shutdown of the frozen food distribution center.
Food Same-Store Sales Grew by 1.6% in the quarter, and 1.9% when adjusted for the Christmas shift. The temporary shutdown of the frozen food distribution center caused a 30 basis point impact on same-store sales.
Pharmacy Same-Store Sales Grew by 3.9%, supported by a 5.1% growth in prescription sales and a 1.3% growth in front store sales. Adjusted for the Christmas shift, front store sales were up 1.7%.
Gross Margin $1.04 billion or 19.7% of sales, the same percentage as Q1 last year.
Operating Expenses $557.6 million, up 5.5% year-over-year. Excluding $20.8 million of direct costs related to the freezer issue, operating expenses grew by 1.6% year-over-year.
EBITDA $482.6 million, up 0.2% year-over-year. Adjusted EBITDA was $504.2 million, up 4.7% year-over-year, reaching 9.5% of sales.
Depreciation and Amortization Expense $143.6 million, up $10 million year-over-year, mainly due to increased retail investments, new store openings, and supply chain automation technology.
Net Financial Costs $37.3 million compared to $30.7 million last year. The increase was due to the recording of interest receivable in Q1 2025 and higher interest on net debt.
Effective Tax Rate 25%, higher than 18.2% in Q1 last year, driven by the resolution of an income tax position in Q1 2025 and a reduced Terrebonne DC tax holiday.
Adjusted Net Earnings $248.7 million, an increase of 1.3% year-over-year.
Adjusted Fully Diluted Net Earnings Per Share $1.16, up 5.5% year-over-year compared to $1.10 last year.
Capital Expenditures $61.9 million, down from $89.3 million last year.
Online Sales Grew by 25.8%, driven by third-party marketplaces, click-and-collect services, and the launch of delivery in discount banners.
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Operating Highlights
Online sales: Grew by 25.8% in the quarter, driven by third-party marketplaces, click-and-collect services, and the launch of delivery in discount banners.
Discount store openings: Three new discount stores were opened in Q1, with plans for a dozen more in fiscal 2026, including conversions and major renovations.
Market share: Growing market share in a competitive market, driven by new discount store openings.
Frozen food distribution center: Operations fully resumed after a temporary shutdown in Toronto. Contingency plans ensured supply to Ontario food stores, with direct costs of $21.6 million pretax.
Food same-store sales: Grew by 1.6% in the quarter, or 1.9% when adjusted for the Christmas shift.
Pharmacy same-store sales: Grew by 3.9%, supported by 5.1% growth in prescription sales and 1.3% growth in front store sales.
Capital expenditures: Totaled $61.9 million in Q1, with a full-year plan of $550 million to invest in the retail network, including new stores and renovations.
Private label sales: Outperformed national brands, reflecting a strategic focus on value offerings.
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Risk or Challenges
Temporary shutdown of frozen food distribution center: The temporary shutdown of the frozen food distribution center in Toronto caused disruptions in supply, leading to direct costs of $21.6 million pretax and $15.9 million post-tax. This also negatively impacted sales and margins, with an estimated 30 basis points loss on same-store sales for the quarter.
Inflationary pressures: Inflationary pressures on commodity prices, particularly in the meat and grocery categories, continue to challenge the company. These pressures require significant efforts to manage price increases and maintain value for customers.
Competitive environment: The competitive environment in the food retail sector remains intense, requiring the company to focus on discount store openings and market share growth to stay competitive.
Increased operating expenses: Operating expenses increased by 5.5% year-over-year, partly due to the freezer issue. Excluding these costs, operating expenses still grew by 1.6%, reflecting ongoing cost pressures.
Economic uncertainties: Persistent food inflation and economic uncertainties could impact consumer behavior and purchasing power, posing risks to sales and profitability.
Supply chain disruptions: The freezer issue highlighted vulnerabilities in the supply chain, which could pose risks if similar disruptions occur in the future.
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Guidance & Outlook
Capital Expenditures (CapEx): The company expects CapEx in fiscal 2026 to reach approximately $550 million, continuing investments in the retail network.
Discount Store Expansion: Plans to open a dozen discount stores, including conversions and major renovations, in fiscal 2026.
Online Sales Growth: Online sales grew by 25.8% in Q1, driven by third-party marketplaces, click-and-collect services, and the launch of delivery in discount banners. This trend is expected to continue.
Pharmacy Division Growth: Prescription sales are expected to sustain momentum, driven by specialty medications, GLP-1s, and clinical services.
Market Conditions and Competitive Environment: The competitive environment remains intense but rational. Inflationary pressures persist in certain commodity prices, such as meat and grocery, but the company is actively managing these challenges.
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Shareholder Return Plan
Quarterly Dividend: The Board of Directors declared a quarterly dividend of $0.475 per share, which is an increase of 10.1% compared to last year.
Annual Dividend: The annual dividend is $1.63 per share, representing a payout of about 32% of last year's adjusted net earnings.
Dividend Growth: This marks the 32nd consecutive year of dividend growth for Metro.
Share Repurchase: Under the normal issuer bid program, Metro repurchased 1 million shares for a total consideration of $98.7 million, with an average share price of $98.72.
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Key Q&A
Q:Are there any noticeable changes in consumer shopping behavior due to food inflation?
A:No noticeable change in consumer behavior. Discount is growing faster than conventional, with more traffic there. People are buying more on promotion, and private label sales are outpacing national brands. Inflation pressures are a concern, but the company is focused on delivering value to customers.
Q:Can you comment on comp cadence within the quarter?
A:No specific comment other than what was reported for the company on the food and pharma side. Cadence was consistent.
Q:What are you seeing in terms of supplier requests for price increases?
A:On the fresh side, there are commodity price pressures, especially in beef, poultry, and pork. The grocery side has a consistent number of requests compared to prior years, but the quantum of the ask is higher. The company is negotiating and pushing back as much as possible to control inflation.
Q:What is the consumer response to price increases?
A:The company tries to minimize the impact on customers by increasing prices surgically and incorporating them into merchandising strategies. Consumer reaction will be observed in the coming weeks, but the company aims to remain price competitive.
Q:What factors impacted gross margin during the quarter?
A:Gross margins were affected by competitive marketplace, promotional weight, and supplier cost increases. Warehouse investments helped reduce costs, but the freezer issue in Toronto was a drag on gross margin. Overall, gross margin rate was flat this quarter.
Q:Do you expect gross margin to increase for the rest of the year?
A:No guidance was provided. The company focuses on effective merchandising to deliver acceptable gross margins but did not specify whether margins would increase or decrease.
Q:Are there any ongoing impacts from the previous disruption in Q1?
A:The company is back to normal with no lost sales anymore. The contingency plan was effective, and the freezer issue is resolved. The company looks forward to normal sales and margins on frozen products.
Q:How was the refrigeration issue resolved?
A:A faulty heat exchanger was replaced with a new one using different technology. The remaining old equipment is functioning well, and the risk has been managed effectively.
Q:Should we expect margin improvement from pharmacy automation?
A:Yes, over time, margin improvement is expected from pharmacy automation investments. However, the company did not quantify the improvement as it is still in the early stages.
Q:Can you provide more details on the impact of the frozen DC disruption on gross margin?
A:The disruption caused a few million dollars of lost margin and a 30 bps impact on same-store sales. The company also lost a day of Christmas sales, which shifted to Q2. Overall, the impact was about $0.03 per share.
Q:Is the grocery environment normal and accommodative given inflation and consumer stress?
A:The company acknowledges inflation and consumer pressures but believes the grocery environment is stable. Square footage growth is seen as an opportunity rather than a concern, especially in discount stores.
Q:Are new stores meeting expectations?
A:Yes, the majority of new stores are meeting or exceeding sales forecasts. The company is satisfied with their performance and plans to open more stores in 2026.
Q:What is the outlook for the pharmacy side, particularly regarding generics for GLP-1s?
A:The company expects genericization of Ozempic in early 2026 but is monitoring market dynamics and innovation in the GLP-1 category. No specific plans for Pro Doc generics were disclosed.
Q:Is the market more competitive in certain regions?
A:Yes, there is more competitive impact in Quebec compared to Ontario this year due to new competition and square footage growth.
Q:Will the company increase leverage for more buybacks?
A:The company is open to gradually and prudently increasing leverage over time to facilitate more share buybacks.
Q:Can the company return to its growth algorithm despite a slower start to the year?
A:The company remains committed to its financial framework objectives and will work hard to meet them, but no specific guidance was provided.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on gross margin trends for the rest of the year, the exact margin improvement from pharmacy automation, and the potential impact of new generics in the pharmacy business. Additionally, they did not quantify the impact of cost controls or provide detailed insights into competitive dynamics in certain regions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Christmas shift
Director
Executive VP
Metro
Risk
VP CFO
amortization expense
asset
contingency plan
depreciation amortization
distribution center
dividend
division
expectation statement
expense increase
expression
food distribution
freezer issue
freezer sale
income tax
network
percentage
pharmacy
position year
resolution income
sale increase
shutdown food
side store
store sale
supply
tax position
tax rate
WSFS Transcript
Metro Inc. (MRU:CA) Q1 2026 Earnings Call Transcript
Positive1-27
The earnings call presents a mixed but generally positive outlook. Financial performance showed growth in online sales and reduced capital expenditures, and the company is addressing inflationary pressures. The Q&A section reveals effective management of past disruptions and plans for further share buybacks, indicating confidence. However, lack of specific guidance and competitive pressures are concerns. Considering the market cap, the stock is likely to react positively, with a potential increase of 2-8% over the next two weeks, driven by positive sales trends and strategic buybacks.
WSFS Financial Corporation (WSFS) Q4 2025 Earnings Call Transcript
Positive1-27
The earnings call reveals strong financial performance with strategic capital management through buybacks and a focus on CET1 ratio. Despite challenges from rate cuts, the company is optimizing margins and expenses effectively. The optimistic guidance on EPS growth and strong noninterest-bearing deposit growth are positive indicators. The Q&A session indicates a proactive approach to risk management and organic growth, with management showing openness to M&A. Overall, the sentiment is positive, with a focus on strategic growth and financial stability, suggesting a likely positive stock price movement in the near term.
WSFS Financial Corporation (WSFS) Q3 2025 Earnings Call Transcript
Positive10-24
The earnings call highlighted strong financial performance with a 3% portfolio growth, reduced net credit costs, and a significant decline in nonperforming assets and delinquencies. The company also maintained a robust CET1 ratio of 14.39% and returned $56.3 million to shareholders. Despite some uncertainties in macroeconomic conditions, the company demonstrated effective capital and risk management strategies. The optimistic guidance for the Wealth and Trust business and strategic capital management further contribute to a positive outlook, suggesting a stock price increase of 2% to 8%.
WSFS Financial Corporation (WSFS) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call highlights strong financial performance, with core fee revenue and wealth business revenue showing significant growth. Shareholder returns through buybacks and dividend increases are also positive. While there are some uncertainties, such as NIM softening and tariff impacts, management's optimism and strategic focus on C&I growth and buybacks are reassuring. The market cap suggests moderate volatility, leading to a positive stock price prediction over the next two weeks.
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Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
