The first of Canada's big three grocers to release earnings this year is reporting a double digit increase in profits and a 10% dividend hike for a period that saw food prices rise at the fastest pace in decades.
Metro Inc., which operates both supermarkets and drugstores, reported a net income of $231.1 million in its first quarter of the year on Tuesday, up 11.3% from $207.7 million in the same quarter a year ago.
The profit amounted to 97 cents per diluted share for the 12-weeks ended Dec. 17, up from 85 cents per diluted share a year earlier, prompting the company to raise its quarterly dividend to 30.25 cents per share, up from 27.5 cents per share.
Grocery inflation during the same period from Sept. to Dec. ping-ponged between 11% and 11.4%, according to Statistics Canada.
Grocers have come under intense scrutiny in recent months for posting strong profits as many Canadians struggle with higher food costs. Critics have accused grocers of so-called greedflation, suggesting they are profiteering at a time of spiralling inflation.
But grocers have said the higher costs are being passed through the supply chain from food manufacturers, wholesalers, processors and producers.
"In 2022, Metro received more than 27,000 price increases averaging more than 10% from suppliers for dry groceries alone - nearly three times the annual average,'' Metro CEO Eric La Fleche said during an annual meeting of shareholders on Tuesday.
"This high inflation over the past several months is difficult for everyone to accept, but it is a global reality (and) Canada is faring better than most countries.''
Grocers have also repeatedly said their profit margins on food remain stable.
In fact, La Fleche said Metro is "absorbing some of the (price) increases as our gross food margins are decreasing.''
Yet researchers have said a lack of transparency in the financial results of grocers makes it difficult to determine profit margins on food because companies lump different retail segments - such as food, pharmacy and general merchandise - together. Items such as cosmetics, over-the-counter drugs and apparel are thought to have higher gross profit margins.
Metro's sales in the quarter totalled $4.67 billion, up 8.2% from nearly $4.32 billion a year ago.
But La Fleche said the increase is "mainly due to higher inflation this quarter.''
Food same-store sales rose 7.5% compared with a year ago.
Metro's grocery network of about 975 stores includes full-service supermarkets like Metro Plus and Adonis, discount stores like Super C in Quebec and Food Basics in Ontario, and neighbourhood and specialty stores like Marche Richelieu, Marche Ami and Premiere Moisson.
Pharmacy same-store sales gained 7.7% compared with a year ago. That included a 6.5% increase in prescription drug sales and a 10.2% increase in front-store sales primarily driven by over-the-counter products, cosmetics and health and beauty, La Fleche said.
The company has about 645 drugstores under banners including Brunet, Clini Plus, Jean Coutu and pharmacies within Metro and Food Basics stores.
On an adjusted basis, Metro said it earned $1.00 per diluted share, up from an adjusted profit of 88 cents per diluted share a year earlier.