Q3 2021 Metro Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to day Metro 2021 third quarter results at this job all lines are in listen only mode salaried and presentation. We will conduct a question and answer session. If at any time during this call and you're quite immediate assistance. Please press star zero for the operator that was really crowded on Wednesday August 11th 2002.
What do you want and I would now like to hand, the conference so much and Mr show on Kadosh. Please go ahead.
Thank you and a good morning to everyone and thank you for joining US today My comments will focus on the financial results of our third quarter, which ended on July 30.
With me today is Mr. Eric La Fleche, President and Chief Executive Officer, and answer to your book Executive VP and Chief Financial Officer during.
During the call we will present, our third quarter results and comment on its highlights and will then be happy to take your questions.
Before we begin I would like to remind you that we will use and today's discussion different statements that could it be construed as forward looking information and general any statement, which does not constitute a historical fact may be deemed as a forward looking statement expressions, such as expect intend and are confident that will and other.
And similar expressions are generally indicated are forward looking statements.
The forward looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, and the general economy, and our annual budget as well as our 2020.2020 one action plan.
These forward looking statements do not provide and guarantees as to the future performance of the company and I subject to potential risks known and unknown as well and certainties that could cause the outcome to differ materially and.
A description of these risks, which could have an impact on these statements could be found under the risk management section and that were Twenty-twenty annual report and with the preceding risks. The COVID-19 pandemic constitutes a risk that it could have an impact on the business operations project synergies and performance of the company. We believe these statements to be.
Reasonable and printing and at this time and represent our expectation.
The company does not intend to have debt to update any forward looking information, except as required by applicable law I will now turn the call over at accounts at all.
Thank you shove and and good morning, everyone on this.
This quarter, we cycled very strong sales and earnings last year at the height of the pandemic and.
And in order to provide a better indication of performance. We're also highlighting sales and earnings growth over the third quarter of 2019.
And so for the quarter, our total sales.
We're at $5.7 billion versus $5.8 billion last year, a decrease of 2%, but up nine 4% when compared to the third quarter of 2019.
Food same store sales declined by three six per cent for the quarter, but grew 11, 4% on a two year basis for an annual compounded growth rate of five 6%.
Pharmacy same store sales were up seven 6% versus last year.
Our gross margin stood at 19 eight per cent of sales versus 20 per cent for the same quarter last year.
Operating expenses represented 10 five per cent of sales versus 10, 7% last year and COVID-19 related expenses amounted amounted to 38 million for the quarter and that includes an $8 million Oh, the amount and gift cards that were given to frontline employees versus $107 million of Covid expenses and last quarter last year.
And third quarter last year, the decrease of $69 million and Covid costs was partly offset by an increase and other operating expenses mainly related to activities and services that had been reinstated. After initially being paused I just started a pandemic such as a mature and HR Hot foods advertising and marketing et cetera.
Operating expenses also include nonrecurring costs of approximately $8 million incurred and the transition to our new fresh D C and Toronto.
Due to early inefficiencies and the dedication of certain tasks as both Dcs. We're operating at the same time for a few weeks.
EBITDA for the quarter total $533.6 million a decrease of one 7% versus last year and represented nine point your percentage of sales. That's the same margin as last year on a two year basis EBITDA was up 26, 1%, which represents a solid annual compounded growth rate of 12, 3%.
Adjusted net earnings were $261.2 million compared to $72.3 million last year, a decrease of four 1%.
Our adjusted net earnings per share were $1.06 down to 1.9% versus last year's adjusted EPS of $1 eight and again when we compare this to fiscal 2019 adjusted EPS grew by 17, 8% for an annual growth rate of eight five per cent.
Our capital expenditures for the third quarter total $174.2 million up $38.4 million versus last year as expected higher Capex is mainly the result of our ongoing investments and the modernization of our supply chain as well as in store technology.
And the retail level since the beginning of the fiscal year, we opened two metro plus stores wanted honest and province of Quebec, One food basics and Ontario, We also relocated and other food basics and carried out major renovations and eight stores, representing a net increase of 236.8 square feet thousands square feet or 1.1.
Percentage of our food retail network.
As I mentioned earlier investments and technology at store level are also ongoing at.
At the end of the third quarter, we had about 300 stores equipped with self checkouts and 140 stores with electronic shelf labels.
Under our current normal course issuer bid program, we have repurchased between November 25 of last year and July 30th of this year 5.8 hundred 75 million shares for a total consideration of $333.6 million, representing an average share price of $56.78.
That's it for me I'll now turn it over to Eric.
Thank you Francois and good morning, everyone.
We are pleased with our solid third quarter results as we cycled and exceptionally strong performance last year at the height of the pandemic sales.
Sales and earnings declined slightly versus Q3, 2020, but on a two year basis, we delivered sales growth of nine 4% EBITDA growth of $26 one per cent and adjusted earnings per share growth of 17, 8%, which we believe is more indicative of our underlying performance.
For the quarter as Francois said food same store sales were down three 6%, but up 11, 4% when compared to fiscal 2019.
Our internal food basket inflation was 1% half of what we experienced in Q2.
With the rollout of the vaccine and the gradual lifting of restrictions we saw traffic improve year over year for the first time since the beginning of the pandemic.
Basket size, however was down as customers increase their store visits.
Promotional penetration continues to increase quarter over quarter, and we are getting close to pre pandemic levels.
Online grocery sales increased by 19% versus last year and more than five times over 'twenty and 19, as we added capacity by expanding the service to new regions, deploying click and collect and with our partnership with corner shop and.
In June we opened our first dedicated online store to serve customers and Montreal, replacing three of our hub stores.
And this centralized facility will offer more delivery windows to customers and improved operating efficiencies, while delivering the same quality assortment and freshness that customers expect when shopping in store.
We are on track with our deployment plan for the click and collect service with 119 Metro stores now offering the service out of the 170 planned by the end of this fiscal year.
This along with the recent expansion of home delivery and click and collect and the Ottawa region will expand our reach to more than 75 per cent of Quebec and half of the Ontario populations.
We remain confident and our strategy, which allows us to add capacity with reasonable and investments to meet the pace of demand growth.
Turning to pharmacy comparable sales were up seven 6% in the quarter and eight 6% versus 2019 with prescription drugs up a strong nine 3% driven by higher prescription counts as medical consultations resumed.
Commercial sales were up three 8% with most pharmacies gradually returning to regular opening hours.
Our pharma performance was also positively impacted by the administration of vaccines and the new medical services and now offered by pharmacist.
We proudly contributed to the vaccination effort through our network of pharmacies.
And for Central vaccination sites, we sponsored with other corporate partners, which altogether administered over 500000 doses.
The month of June marked the completion of two other important milestones with the integration of our pharmacy distribution activities and the deployment of shock with your retail system to our between net pharmacies.
As mentioned on our last call in April we anticipate annual recurring savings of about 10 million and starting next year and distribution and warehousing costs as we will service, our pharma network as well as the Metro and Super C stores and.
And Quebec for health and beauty products from one facility.
Turning to the modernization of our supply chain, our new semi automated produce D. C and Toronto is now fully operational as we completed the transfer of all of our stores from the old produce warehouse debt.
Transition and ramp up of the new facility generated additional costs and the quarter, which we expect will partially remain and Q4 and hopefully be behind us by the end of the fiscal year.
The new fully automated frozen D. C is almost complete and we will soon start the commissioning of the new automation systems and time for a January 2020 two opening.
Looking ahead, while we can't predict exactly how the pandemic will evolve we expect our food sales to decline in Q4 versus last year last year's high levels.
But to compare favorably to fiscal 2019.
And our pharmacy Division, we expect continued growth from prescriptions and the easing of restrictions should have a positive impact on certain categories that were negatively affected by the pandemic such as beauty cosmetics and coal.
And through products.
We'll now take your questions. Thank you.
Thank you.
Ladies and gentlemen, let me now begin the question and answer session should you have any questions. Please press star followed by one on you touched on salad, you'll have data on prompt acknowledging quest and your question on default and your did you ever see should you wish you like life on Nepali process. Please press star followed by Chill.
And a speaker phone please lift your handset before pressing any keys one moment for your first question. Your first question comes from Aileen Natal with RBC. Please go ahead.
And good morning, everyone. If we could just start on very quickly.
And you said Eric on on pharmacy.
And we're hearing from others that acute Rx is still down about 10% to 15% is that the case at P. J C or are we starting to see better recovery there.
Acute Rx I'm sorry.
Just on the prescription count for.
Sure as opposed to the the chronic conditions, but debt.
So basically overall Rx volumes per pharmacy are still below pre pandemic levels recovery is that what you guys are seeing and.
In other words should we see an acceleration performance and T. J C. As we move through the next couple of quarters, well were very happy with the performance of P. J C and grew net in the quarter are there, they're not and a nice comeback, especially and prescription drugs versus last year you have to remember last year. If pharmacy doctors' offices are there was a lot of.
And closures and and restricted go opening hours restricted restricted access so prescription counts were except for the loading upfront and in the quarter prescriptions accounts were softer.
I think we're back to pretty normal more much more normal levels I don't have a split between acute and chronic to be honest Irene, but we're very pleased with the nine 3% Rx growth and.
And we expect it to have good growth going forward.
That's great. Thank you and net.
Just moving on to take our bench strength.
Inflation, you noted was basically half of prior quarters' levels, what kind of discussions are you having at this point with the supplier community and.
And recognizing that it's challenging to answer.
Dissipate, what's your general expectation around inflation and image.
New store and into 2020 two.
So on the inflation number is down this quarter, mostly on the driven by produce deflation and.
And it's aggressive out there and produce and and there are market conditions that debt support that aggressiveness and the general market.
That's the main driver our discussions with our suppliers, where we're a hearing for for the.
Demands for increases and packaged goods and.
On the.
There were there were some cost increases and the meat department. There this past quarter its at its a tight market is volatile and so some weeks.
Supply and supply can be tightened and there are some cost increases that we that we have to live with and try and try to pass on and I.
I would say generally the expectation is that and.
Given all the cost.
Cost increases that are.
On labor and other aspects of of supplies and transportation I think we can expect generally this fall that there should be some more inflation at retail, but again, we will have to wait and see.
We fully intend to remain competitive it's a competitive market out there I don't expect king flushed installation and our fourth quarter to be that much different from our third quarter bookings are are in place and merchandising plans are in place.
But I would expect some some.
Some some inflation to be reflected at retail and a more pronounced way this fall.
That's great. Thank you.
Thank you. Your next question comes from Mark Petrie with CIBC. Please go ahead.
Yes, good morning.
Obviously.
There's been a significant shift in consumer behavior through the course of the pandemic and I'm just wondering.
As restrictions have been lifted over the last number of months.
And have you seen overall behavior sort of moves closer to some semblance of normalcy and sort of pre pandemic you touched on traffic and basket, but I'm wondering about stuff like promo penetration private label as well as category mix.
Yes, we are seeing a gradual shift to more a normal pre pandemic behavior and.
And I think the discount channel in general as aesthetic benefit benefiting from that versus conventional whereas conventional the had a big uplift during.
During the pandemic as you all know.
Promotional levels or are back to almost pre pandemic levels, we're very close to that as I said and my my opening remarks. So I think you can going forward expect that to be to be back to normal levels or private label penetrations are up.
And I think that private label penetration increase throughout the pandemic and this and this continued continuing to stay at a higher level, which is a good thing.
And we're pleased we're pleased with that so and I would say yeah. The consumers are shopping around a little more with the easing of restrictions, we're seeing that and.
And the number of visits we're seeing that and the lower basket year over year and traffic is not back to.
And to where it was two years ago and the basket is higher than it was two years ago, but we're seeing a shift for sure.
And and discount is still below what it would have been pre pandemic, but is growing faster than conventional today is that is that fair to say.
In general terms, yes.
But.
Okay and.
And then just with regards to gross margin on top.
Modestly from two years ago can you just share some commentary on the moving parts behind that I mean, I know you don't segment between.
And between food and pharmacy, but obviously theres a lot of variables between the segment mix as well as category mix. So any commentary would be would be helpful. Just with regards to the drivers and unnecessary.
Este inability or outlook for gross margin.
Well the gross margin is down slightly 20 basis points over versus last year and the quarter food.
Food is.
Gross margin was down and that we.
He said clearly last year that the large basket with lower promotional ratios Ah was favorable to gross margin. So as we cycle that with with a smaller basket and more promotions.
You do that you can do the math, it's it's it has an impact on gross margin.
The good news is that pharmacy was strong and the quarter and.
And and helped us on the gross margin. So so net net we're pleased with our performance.
Uh huh.
The diversification of our business model as you know.
As a benefit and and we're pleased with that going forward you know I'm not going to give you guidance on gross margin but.
And we are we will be competitive and we will we will balance the top line and the bottom line as best we can.
Alright, and then just a follow up just to clarify with regards to the food gross margin I.
And I understand sort of down versus the elevated levels of last year, but is it fair to say, it's still elevated from sort of pre pandemic levels and and the main driver of that would be the higher sales level or is there something else to consider.
It's getting comparable to pre pandemic levels are you other baskets and baskets higher than pre pandemic levels, but the margin is in the same ballpark. So again I wanted to give you too much.
Precise details like that I think the comment I made is the answer.
Uh huh.
And I understood I appreciate all the comments and all the best.
Thanks Mark.
Thank you. Your next question comes from Vishal <unk> with National Bank. Please go ahead.
Hi.
Thanks for taking my questions.
Just wanted to get your comments on.
The acquisition and the Opex on the that you've seen the market and semi I know.
And that's just an opportunity and and consolidating and dependence on oil.
And I was wondering if that's something that would occur from next year or do you have other sites and other types of deals.
I'm, sorry, Michel and I could not hear your question.
A lot can you can you hear me better now, but yeah, that's a little better you said acquisitions and then what sorry.
So sorry about that so I was just referring to the acquisition market and what and Metro CS I know, there's a pharmacy.
It appears that our.
Consulting rural markets and I'm wondering if that appeal to metro or if there's other types of deals that are appealing to metro.
So you know we're always on the lookout for acquisition opportunities and food and pharma and Canada. So that there's no change there no announcements to make yet yes, we were aware of.
A new quote unquote player consolidating small rural pharmacies and Ontario.
And.
[laughter].
We are interested in making acquisitions that make sense for us.
And and we'll be it will be we continue to be on the lookout, but there's nothing there's no change and nothing imminent.
Okay. Thank you for that color and.
With respect to Adonis I know during the height of the pandemic it had a little bit of challenge with respect to the prepared food categories and.
Perhaps labor availability I'm wondering how that batteries performing now and if it's back to pre pandemic levels or above.
Yeah, Dan it's a with the mix of stores, which is largely in urban areas, Montreal and Toronto and.
And mostly Montreal, and it's not it's been a it's been a challenge throughout the pandemic and remains at a bit of a challenge today because of all of our some of our urban stores or are seeing lower and lower traffic. These days with the summer and the restaurants opening up and vacations and whatnot. So.
And.
Banner's still doing well, but we're not quite back to pre pandemic levels and.
And we're confident that we're going to get there we're going to get there sooner.
Covid restrictions ease more and more and people are getting their shots. So.
I will leave it okay. Thanks for that color.
Thank you.
Thank you. Your next question comes from Peter Sklar with BMO. Please go ahead.
Thank you.
Noticed that you.
You mentioned that your online sales were up 19% year over year.
And that's big.
As we emerge from Covid.
Do you expect that that sales like that that sales growth is going to slow and.
You know, we're going to see some negative growth rates and online because you are up against some big quarters and I'm just wondering if youre seeing any evidence of that kind of trend.
Okay.
Yes, yes, we are Peter Thank you for the question. So yes, you can expect online sales growth to to slow down again and the growth. This quarter came from additional capacity as we as we cycle that capacity quarter over quarter, we expect sales to decline so.
<unk> versus the peak of the pandemic are still sales remained elevated versus pre pandemic. So we clearly skipped a few years of E com growth and and but you can expect that the E com sales are.
It should come down a bit and that said I think we're very confident and our model.
The hub stores for for the large and.
Urban areas and excuse me the dark store for their larger urban areas the hub stores for the.
For the medium density areas, where we can now have delivery and click and collect and the rest of our stores. So I think we're well positioned with our model to capture.
The demand that's out there and we expect that demand to level off a bit from the from the peak of it depends on it.
And lastly, Eric on the.
The dark store that I believe you said you started ramping it and June alright.
I mean is it too early to make any comments or are there any learnings or is there anything you can tell us about how and how that model is performing versus the hub stores.
So you know it opened in June and Montreal, and it's a ramp up there too and but we're pleased with the progress we're using the same technology as we did and our hub stores and its a more efficient picking and.
And the environment and it's a more efficient delivery environment and so we're confident that we're going to gain the efficiencies that we are we are planning for it.
We're not we're not there yet after a few weeks, but we are very confident that we will get there.
And there are always learnings so every week.
If something changes and we tried to improve the test and learn as is the norm and E com and as you know and we're continuing to test and learn and fine tune to improve are the economics and improve the customer experience the customer satisfaction scores that we are getting are pretty low.
<unk> and so you know the in stock position.
And the orders with them and missing items. So all of those metrics are improving and the dark store versus the hub stores as we expected and as we hoped for so I'm looking for more of that going forward.
Okay. Thank you.
Thank you next question comes from Ken <unk> with <unk> capital. Please go ahead.
And.
Thank you and good morning.
Eric I Wonder if you could help us just understand taps on the cosmetic and beauty journey.
Where are those businesses today versus where they were pre pandemic.
And how much room do you have to go out and get back to prior levels and how material, even just directionally from a margin perspective could a recovery or let's call. It normalized a cosmetic sales potentially be as we look through 2020 two.
So cosmetics and our pharmacies grew nicely in the quarter versus the same quarter last year.
We expect that to continue going forward.
More and more people I guess returned to work and return to the office and so I won't give you a number.
And but I think it's a tough.
Upside for sure in the front end sales and of our pharmacy is going forward.
We expect that category to do better as it did this past quarter.
And you have to remember that and our and our front and at this time last year and pharmacies, where we're selling a lot of COVID-19 items like masks and gels at full prices.
So selling less of that so that has that's a bit of a headwind headwind for our front end and and pharmacy, right now, but cosmetics and confectionery and other departments are.
And we're confident there are going to see some some benefit from.
Those are that's my that's my answer.
Thank you Eric and then just one other quick follow up on consumer behavior can you provide any insight on a cross markets how different the responses may or may not have been.
And a terror vs, Quebec for consumers and the shift between full service and desk on have you seen a more marked shift between channels and either markets or how has the consumer response varied across Europe same market and.
And the channel shift ferried across certain markets.
So I wouldn't call it a huge channel shift and and a huge shift between the two I said earlier, we're seeing the general uptick and.
And.
Traffic and discount stores or sales of the discount stores versus conventional stores and general as we see and there and in the market and the whole market and.
You can expect that our discounts should be advantage going forward, whereas whereas it was disadvantage last year. So I would just leave it at that.
Thanks, Eric I'll leave at that.
Thank you. Your next question comes from Mike and Vin <unk> with TD Securities. Please go ahead.
Hi, good morning.
Firstly on the brand D C.
<unk> been open for a little bit now.
And what has to be done between now and I guess the start of next year to get the $10 million and and annualized savings.
Well operating.
And <unk> and.
The big decisions and the big savings or are made and we're gonna be operating we are operating from when do you see as opposed to two.
David Mcmahon and had a another little D C and Quebec City. So we will we will have that savings also so it's it's occupancy and its fixed costs associated with running a D. C. And then the the labor is variable and so there's not there's you know there's a transfer of labor from one to the other but overall, we expect to save.
And about 10 million Bucks, a year and distribution. So everything is in place to to achieve that and our plan next year.
And some of it trickle into <unk> and <unk>.
Q4.
There could be some yeah, it would be some benefit in Q4 yeah.
Okay and.
And then COVID-19 costs.
And definitely down year over year, but they've been relatively stable lately. So.
Excluding.
The gift card bonuses, how much COVID-19 cost you expect to stick around long term due to the permanent changes and operating practices.
Michael I'll take that one.
And listen I don't know about long term, it's a it's a it's hard to predict long term I think looking and in the short term at least are moving into the fourth quarter.
The way, we see things, we expect Covid expenses will probably be.
Max of $5 million, a month going forward and in the short term excluding gift cards.
Okay, and those gift card balances or are they pretty much done.
For now they day, there they're done and we'll have to see again it depends if we will get back into a situation like we had this year, but for enough for now they're they're they're they're behind us.
Okay. So.
You mean, you're two year EPS and normalized EPS growth is comfortably.
Within your 8% to 10% EPS growth targets. So you must be happy with that but can we expect.
And <unk>.
The pharmacy, DC consolidation savings and the new Dcs to push that two year, CAGR and a little bit above your normal targeted range and the coming.
Over the next year or so or is it just not meaningful enough from your savings well, let's see so that's the plan and obviously there has to be able to maintain our or our targets that we give to the street in terms of our profit growth.
Whether it's sales or EBITDA.
EBITDA and EBITDA and net earnings yesterday, and that's the plan that we want to be and make sure that we make the investments to be to be able to deliver that 8% to 10% EPS growth a year, we will have to see how the other productivity levels are on improving how fast, but that's the plan, but I will I will reserve and was reserved.
Comment on until we can actually demonstrated.
Okay. So on the savings, though on these programs are.
To help you achieve the 8%, 10% rather yes.
Absolutely, yes, absolutely it's a it's a way yes. So you use in terms of reduction in operating expenses and better in store service. That's that's these are all the investments that we make to make sure that we remain competitive and that we did we continued to grow our earnings as we had in the past and meet our financial targets yes.
Okay and just finally on.
On your cash flows have been good and your and CIB has been pretty active.
And it looks like if you continue the pace you've done so far you had and Orion you you'd hit that $7 million or 70.
909 share limit be.
And before November and.
Are there are you expecting to.
And stop it and renew it.
And they get more room or should we just expect it to continue to go to the 7 million and then in Europe.
Remember.
Well, we'll see a you're right we're ahead of pace.
And almost 6 million done a out of a sudden and program with us with a few months ahead of us. So we'll see those options are available to us we haven't made a decision yet but are there that that could be possibility, but for now.
And as I said before we will we will finish the program and we will see about additional capacity, but we have made that decision yet.
Great. Thanks very much.
Yeah.
Thank you. Your next question comes from Patricia Baker with Scotiabank. Please go ahead.
Yes. Good morning, everyone. I just have one small question left you referenced the fact that relative to last year, we opened.
From a services and store and the hot meals and HR.
What was the experience when you reopen and both from a customer perspective, how quickly did the customer pick up on on those other categories.
Patricia so the H M on the hot foods counters or a backup but it's not at levels of 2019. So they have reopened and the offer is adapted to a to a post COVID-19 environment, but sales are or are starting to starting to.
To increase and we're happy about that and.
And.
A color that by saying a lot of our H M are our sales are and urban stores.
Downtown Toronto downtown Montreal, and those stores traffic is down and especially this summer.
And with restaurants opening up and people are leaving for vacation.
And those stores are quiet so each of them are.
A big part of their sales is affected by that net net and we see H M are trending up continuing to trend up and we expect this fall to two to be at a higher level and will we will we be back to 2019 and not sure, but we certainly expect more sales from our HR.
As a as people come back come back to the city students office workers and everything like that.
Okay. Thank you very much Inc.
Okay.
Thank you and your next question comes from Chris Li with Desjardins. Please go ahead.
Hi, good morning, just that and see.
And quick questions, especially now that the fresh D C and on schedule has been integrated just wondering what is the time line in terms of starting to achieve some of the efficiency and cost benefits.
So we're working very very hard the teams are working extremely hard to wrap up on productivity. So we're we're in that phase of learn to work with the new system. It's it's paresh its semi automated it's not a fully automated facility, but it's semi automated which is new for produce for us.
And it's new period, but it's it makes it a little tougher and produce.
And so we operated with two warehouses for awhile transferring the store. So it there have been some costs as we said and in our remarks of $8 million and the quarter. We expect some some additional cost again in Q4, not not at that level, but some costs and.
And we hope to be back to two of our expected productivity and for the new fiscal year again, it's a it's execution and and and and it's making all the adjustments to get there so were.
Working really hard like I said two to be at the expected levels for the new fiscal year and and improving from there. So we'll see we'll see how we do and we will keep you posted but that's that's.
The plant.
Okay. That's helpful and maybe just a follow up on debt just to help us frame the opportunity from a cost perspective would you say the opportunity is similar.
To the benefits that you're going to guess on buy from the junket unit D. C integration of 10 million and just sort of ballpark.
Well the debt the 10 million a zone could chew was part of that and we're all synergy target. It was just not just our warehousing. It was a it was everything is G&A procurement warehousing, which was part of the acquisition business case.
And it's it's it's it's if we take the same approach and we value. These big investments as they were looking for the same cash on cash return on our investments are whether it's the the acquisition or whether it's the a new warehouse. So same approach you expect on a on the on the on the long term.
Turning on that project bearing debt rate of return.
So yes at the end of the day, it's part of that I try and achieve that same rate of return and the same at achievement on on on on our profit growth.
Okay. That's helpful and then just.
And typically these types of benefits from the D. C. You will we will see them at the gross margin line is that correct.
Both the in store benefits will be a in the gross margin, but the operating expenses will be a reduction in labor and the warehouse will be and the operating expenses. So it's across the two are the two levers, but but a lot of it will be SG&A.
Okay got it and and would expect that the frozen D C that some sort.
Coming on line in January of 2022, do you expect to incur similar onetime costs as you had with the fresh D C.
Yeah well.
We there's always a as I say a ramp up period and.
And I think it will be a simpler operation the frozen D C and so we're preparing and and doing everything we can to have a two other successful transfer.
And like I said I I don't expect the same.
Level of costs and the fruit frozen D. C next January.
But we'll see.
We're planning and.
Working to minimize the ramp up costs, there will be some but I don't think it's gonna be and the same that and at the same level as what we're seeing and the fresh D C.
Okay, Great and maybe a quick question on pharmacy I already mentioned.
And in the box and I think the vacs vaccination revenues did have an impact during the quarter.
Did that benefit show up in this prescription growth same store sales number.
Yes.
And would you be able to just quantify for us because I'm guessing that's probably not going to be recurring at least at the same magnitude next quarter.
Explanations close.
And what we would have to get back to you on that Chris the penalty.
And the contribution of vaccinations to the Rx number is.
And it's there, but I don't have it as precise number it's not that significant no no that's not on my somewhat true.
And my last question and involve a longer term question I think Eric from site and you mentioned last call that you're exploring maybe launching on advertising platform.
Monetize your online business longer term and I was wondering if there's any update you can provide us on on that initiative book plan.
No I said on the last call that a we're aware of some large retailers are well.
And doing that or are planning.
And to monetize their platforms for advertising, so it's something our marketing and digital teams are working on a.
No announcements to make it it's on our radar screen, but we'll keep you posted.
Okay. Thanks, a lot.
Thank you there and no further questions at this time Mr. Kadosh you May proceed.
Thank you all for your interest and Metro and we will speak again soon to discuss our fourth quarter results on November 17th Thank you.
Yeah.
Ladies and gentlemen, this concludes your conference call for today and we thank you for participating and ask that you. Please disconnect your lines have a great day.
Yes.