Q4 2022 Metro Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Mitcham, Inc. 2020 to fourth quarter results Conference call. At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
Any time during this call you require immediate assistance. Please press star Zero Cardio further this call is being recorded on November 16th 2022, I would now like to turn the conference over to Shanghai, and Kudos manager Investor Relations and Treasury. Please go ahead.
Thank you Julie and good morning, everyone and thank you for joining you guys today, our comments will focus on the financial results of our fourth quarter, which ended on September 24th with me today is Mr. Eric La <unk>, President and CEO and.
Executive VP and CFO .
During the call we will present, our fourth quarter results and comment on its highlights. We'll then be happy to take your questions. Before we begin I would like to remind you that we will use in today's discussion different statements that could be construed as forward looking information in general any statement, which does not constitute a historical fact may be deemed as a <unk>.
Looking statements expressions, such as expect intend or confident that will and other similar expressions are generally indicative of forward looking statements.
The forward looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy, and our annual budget as well as our 2022 2023 action plan.
These forward looking statements do not provide any guarantees as to the future performance of the company and are subject to potential risks known and unknown as well as uncertainties that could cause the outcome to differ materially a description of these risks, which could have an impact on these statements could be found under the risk management section of our 2021 annual report.
As 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 pertinent at this time and represent our expectations and the company does not intend to update any forward looking information except as required.
The applicable law I will now turn the call over to contract.
Yeah.
Thank you Kevin and good morning, everyone before I begin the review of the quarter I want to highlight a few changes we've made in the MD&A and the financial statements.
The MD&A reflects the new requirements with respect to non-GAAP and other financial measures and Youll see additional text to that effect in pages 10, and 11 of the interim report in page five of the press release. We also took the opportunity to provide more details in the consolidated statements of income so cost of goods sold gross profit and operating expenses, which were previously disclosed in our note <unk>.
Information on the nature of earnings are not presented separately in the consolidated statements of income.
Gains or losses from the disposal of assets have been reclassified from operating expenses and are presented in a separate line in the consolidated statements of income and.
And impairment charges are also reclassified from operating expenses and it's important are presented separately in the income statement or otherwise will be part of the depreciation expense.
So turning to the quarter total sales were $4 4 billion, an increase of eight 3% over last year and food same store sales increased by a strong 8% for the quarter, while pharma same store sales were up seven 4%.
Our gross margins stood at 24% of sales stable versus the same quarter last year for the year food gross margin came down slightly but was compensated by stronger margins in our pharmacy division, resulting in stable gross margin overall for fiscal 2022.
During the quarter, we recorded $70 1 million of impairments of assets net of reversals, including $60 million, resulting from our decision to have shopped with you withdraw from the <unk> loyalty program in the spring of 2023.
This impairment of $60 million represents the entire carrying value of this opportunity program asset.
As an adjusting item for net earnings and EPS.
The remaining $10 1 million represents most of the impairment of right of use assets. Furthermore, we recorded $11 2 million of gains on the disposal of assets, mostly real estate.
So operating expenses stood at $476 1 million or 10, 7% of sales versus 10, 5% of sales in the corresponding quarter last year. The increase is due mainly to inflationary pressures on costs, namely labor transportation energy and supplies.
EBITDA for the quarter totaled $441 4 million.
Nine 4% year over year, and as a percentage of sales EBITDA was 10% versus nine 9% last year.
Excluding the gains on sale of assets of $11 $2 million this quarter and the small one last year EBITDA grew 7% and represented nine 7% of sales versus $9 eight last year.
Adjusted net earnings were $219 4 million compared to $200 6 million last year, an increase of nine 4% and our adjusted net earnings per share amounted to <unk> 90 up 13, 6% versus last year's adjusted EPS of <unk> 81.
At the close of fiscal 2022 capital expenditures amounted to $621 million, an increase of 22 million versus last year and for 2023, we are planning to invest a record level of capex of about $800 million, resulting mainly from our ongoing investments in the modernization of our supply chain in both provinces.
On the retail side, we opened five new stores this year, including one conversion. We also relocated a metro store and carried out major renovation in 17 stores, representing a net increase of 141000 square feet or 7% of our food retail network.
Turning to in store technology, we ended the year with 454 stores equipped the self checkouts and we plan on adding another 16 in the coming year.
Electronic shelf labels, we ended the year with 243 stores and we plan on adding another 85 this year.
We completed our annual normal course issuer bid program in November eight repurchasing a total of 7 million shares for total consideration of $482 million, representing an average share price of $68.
81.
In closing the company announced its support for the task force on climate related financial disclosure. So we aimed to increase the resilience of our business to address physical and tradition transition climate related risks by continuing to integrate climate risk and opportunities into our governance strategy risk management and metrics and targets as recommended by the Cfd where.
Convinced that a combined approach to climate change mitigation and resilience will be beneficial to all of our stakeholders. That's it for me I'll turn it over to Eric.
Thank you Francois and good morning, everyone.
R 22 fiscal year ended with a solid performance in the fourth quarter and so our teams worked very hard to offer products at competitive prices in the current high inflation environment, which we know is difficult for many consumers.
Our diversified business model allowed us to maintain stable gross margins in the quarter, while delivering good value to our customers as reflected in overall tonnage growth and market share gains in the quarter, driven mainly by our discount vendors.
Total sales grew by eight 3% that's kind of always said and adjusted EPS by 13, 6%.
Food same store sales were up 8% in the quarter compared to a decrease of two 9% for the same quarter last year when most pandemic restrictions were lifted.
The three year stack is 15, 4% or four 9% CAGR.
Our internal food basket inflation accelerated to 10%.
Up from eight 5% in the prior quarter as the industry continues to experience unprecedented increases in cost of goods sold.
Traffic was up while the average basket remained flat.
Promotional penetration continues to increase as consumers look for the best value.
Two weeks ago, we opened our 100th supersede store in <unk> North of Montreal, a significant milestone for us and the store is off to a great start.
Pharmacy comparable sales were up seven 4% with a six 4% increase in prescription drugs helped by Covid related activities, such as the distribution of rapid tests front.
Front store sales were up nine 9% supported by strong growth in over the counter medications cosmetics and seasonal merchandise.
Turning to online sales were up 33% for the quarter driven by added capacity through our partnerships as well as the expansion of click and collect we started to deploy click and collect service at our Super C stores in Quebec, and we plan on rolling out the service to most of those stores by the end of the fiscal year.
Sure.
On September 27th we announced the launch of more an evolution of Mitsui more our loyalty program in the province of Quebec.
While we will capitalize on the strength and complementary complementary nature of our food and pharmacy networks, where more than 95% of Quebec households already shocks.
Our new loyalty program will also include a co branded visa card with RBC and we are very excited about this new partnership.
The program will provide customers more opportunities to earn points and integrated digital experience and enhanced personalization and close to 900 locations across our metro supersede junk with suite.
And put me on why someone banners in Quebec, we look forward to launching the program next spring.
Turning to our supply chain investments, we are pleased with the productivity gains at our new frozen distribution centre in Toronto.
The additional capacity of the new freezer has also enabled the reduction in direct to store deliveries from certain vendors, resulting in efficiency gains and a better in stock position at store level.
Work on the on the new fully automated fresh and frozen facility in <unk> is advancing well and the startup is scheduled before the end of the 23 fiscal years.
Construction of the second phase of our fresh distribution centre in Toronto is being completed as we speak and the installation of the automation equipment will begin in January .
The operation start date has been pushed by six months to the spring of 2024.
Looking forward, we continue to face market, uncertainties labor shortages and a higher than normal cost inflation.
We expect food inflation to moderate in the new year as we will start to cycle. The high inflation of 2022, but the inflation outlook remains uncertain as we continue to receive many vendor request for price increases in February .
That said, we are confident that our dedicated teams multiple banners strong private label offering effective weekly promotions and loyalty programs.
<unk> position us well to meet the needs of our customers as we navigate through this period of turbulence.
And finally next month's Metro will celebrate its 75th anniversary. We are proud of our roots our success over the long term and our renewed purpose to nourish the health and well being of the communities we serve thank.
Thank you and we will be happy to take your questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
I have a question. Please press the star followed.
On your Touchtone phone.
If you would like to withdraw your question. Please Joseph.
I did too.
Using a speaker phone. Please go ahead Steven.
In any case.
Please please ask your question.
Your first question comes from George <unk> from Scotiabank. Please go ahead.
Yes, hi, good morning, guys I'm, just wondering to what extent did the outperformance of the discount banners kind of accelerates from last quarter was it pretty stable and anything you can share maybe in terms of trade down happening within the.
The conventional stores.
Okay.
Well as I said in my opening remarks customers are searching for value that is accelerating the discount shifts. So we've been talking about it for a few quarters. It continue to accelerate in the past quarter.
From conventional to discount.
Good thing is we are very well positioned in both Quebec, and Ontario, with with our discount vendors and Thats driving.
And that's driving a lot of our growth.
And gains so happy about that.
Conventional vendors metro stores continue to do well.
There is a search for value.
New stores for sure also so private label penetration continues to increase we ever we are aggressive promotional strategies.
And they are trying to serve our customers as best we can in this in this high inflation environment.
But to answer your question.
It's just accelerated in Q4 relative to the suite.
Two quarters, yes.
Thanks for that and on the Opex rate I believe it's up 20 bps.
You guys usually run a tight ship. So can you maybe talk a little bit about where that pressure is coming from and maybe how should we.
Think of that kind of run rate for next year.
Yeah. So yes, there was a there was some inflationary pressures on opex.
Mainly labor transportation energy supplies, those what are the categories, where we saw the increase.
Sales theres, a sales versus last year sorry.
So yeah. This quarter it was a bit of a bit of a catch up in inflation. So inflation is not just in gross margin. There is inflation in that there is inflation in our opex and that's our job.
Our job is to make sure that we continue to as much as possible, but this quarter yeah, there was a bit of a.
A bit of catch up in pressure on that on the Opex.
Okay, and just one last one maybe for you follow on the Capex line that seems to be kind of trending higher as well.
As a percentage of sales I think you call it $800 million of Capex for next year can you maybe just.
Our general trends of Capex, maybe above and beyond next year, and just maybe give us a little bit of sense of what's in the $800 million bucket.
It's mostly while Theres no theres no reduction.
Our retail network investment so that continues the increase over normal levels. If you will is the modernization of our supply chain. So it's all the automated.
Automation of our Dcs in Ontario, and Quebec. So you should expect 23 and 24 to be at a higher than normal levels and then it should taper off somewhat as we move into 2025 26. So this is not new it's it's planned for.
That explains the main variations.
Alright, thanks, guys and happy to answer.
Thank you.
Your next question comes from Mark Petrie from CIBC. Please go ahead.
Hi, this is <unk>.
Filling in for Mike Thanks for taking my call.
<unk> Alright, I wanted to know if you can.
Please talk about the impact of inflation on your stock comp numbers.
<unk> indicated that our inflation was at more normal levels in that 2% range. So I just wanted to know if you could share how that has evolved as the yards and.
And where do you see that trending from 10 fiscal 'twenty three.
Could talk about which categories categories that seen in loss inflation that would be great. Thank you.
Thank you.
So yes, there is inflation in the health and beauty products also.
So that has increased.
The increase in inflation is broad based but clearly at lower levels.
Then on the food side that said there are products that are common between food and pharmacy and thats, having an impact on the general inflation of health and beauty. So the Hilton.
Our inflation for France for health and beauty is in the 5% range. So that is fueling some of the growth in front store sales.
However, I would say.
The main driver is.
Covid related COVID-19 like symptoms cough and cold.
Covid like symptoms are driving traffic for OTC products in general traffic to our stores, which is helpful to our front end sales.
So pleased with our performance.
And on an absolute and on a relative basis over there.
Okay. That's great. Thank you and then my follow up is on the launch of the new loyalty program next spring.
Should we expect a slight ramp in marketing expenses around the launched in Spain, and one <unk>.
Okay.
The program to operate much different move back to what you have now in terms of customer engagement and incentive behavior.
So yes, you can expect some launch costs anytime you launch a major program like that theres going to be is it going to be some marketing and we will have one time expenses, but nothing matter.
Material or that we will manage with so were.
We will take care of that and like I said the program is an evolution of Mitsui. It will include all of our banners food and pharma so.
Our renewed technological platform more and better personalization, so I think theres going to be more there for the customer more chances to earn points with the co branded credit card. They can it can relocate accumulate points.
What points on older purchases elsewhere outside of our networks that can be redeemed in our networks.
So we think that it's going to be well received by our customers as an added benefit.
For us it will be a better tool to personalize our our merchandising.
Okay. That's great. Thank you very much.
Your next question comes from Vishal Shah.
From the National Bank. Please go ahead.
Hi, Thanks for taking my question.
I just wanted a bit more detail first of all if you could on that $10 million impairment on store assets does that is it can be frequently recurring type of thing like how often should we expect this no. It's not there's always some small ups and downs.
Every quarter that we basically don't don't don't mentioned, because it's not not important and in any event, it's always flagged and the cash flow statement, but when it is when it is important that we.
We did flag it in the past and now we want to make sure that it's included in a separate line. So to give you more visibility, but it's not that level is not common.
Common core.
Common.
Out.
Every every quarter every end of year, we look at all our assets, we make impairment tests and it happens that sometimes we have to make to make it right off so that's what happened today, but it's not a that's not a run rate number in any event. We will as I said, we will continue to flag it to make sure that you cannot compare apples to apples.
Okay. Thank you for that and just changing gears here to the.
<unk>.
While loyalty program.
Might be still early days for this question, but I'm wondering how metro is thinking about how Ontario states and add.
This loyalty changed and if there's any thoughts there.
Well it's.
Something that we're going to evaluate and consider so we're really focused on getting a good launch in Quebec.
And then we'll see we'll see what we do next in Ontario. So.
It's something we're going to be evaluating and.
Determining at a later date and we will keep you posted for now we have a we have a relationship with air miles that continues in Ontario.
Okay.
He is someone that I alluded to earlier Metro has a disciplined approach to capital allocation.
There is a proposed spectrum, 2% buyback tax details aren't fully out but wondering if management.
If there's any early thoughts on how management thinks about that if it would alter its capital allocation considerations.
No.
Nothing that nothing that I've read.
Would have us change our capital allocation no change okay.
And maybe just one last one here cyber security is a topical issue is there anything that metro could you.
Needed to further enhance protections and Hudson next I'll think about the risks and potential cost increases if necessary to increase defenses.
So this is something that's.
We've been thinking about for for a long time as most companies and other companies do.
We think we have good defense and we have good systems and good plans, but everybody is honorable.
We are very mindful of that and to make sure. Our contingency plans are updated and tested.
So we're doing everything we can to mitigate the risk, but it's a risk that's out there that we have managed.
Consistently and that we will try to continue to do the same.
So extra.
Extra cost yeah, cyber costs more every year and has been for years.
It's a good part of our it budget and it will remain a good part of the budget, we have a dedicated team and we make sure that we report to the audit Committee and the board regularly on that is it is a topical.
Subject. So we are paying a lot of attention.
<unk>.
Okay. Thank you.
Your next question comes.
Rick.
Capital markets. Please go ahead.
Thank you and good morning.
Eric just in terms of your gross margin performance in quarter.
Modest increase on the various mix shifts can you provide some insight on gross margin in food versus pharmacy retail.
Even just Directionally and then also the biggest drivers of the margin change in each segment.
Well the so that's why I indicated that our gross margin overall is stable due to our diversified mix. So the short answer is the gross margin in food is slightly down in gross margin in pharmacy is slightly up and net net we can look pretty stable.
On the food side.
The search for value.
Promotional penetration is putting pressure on gross margin.
The other side of that is private label sales were doing really well are doing really well and thats. Good on the gross margin rate.
So a lot of puts and takes and ups and downs, but shrink levels tend to vary in high inflationary times and produce when prices get out of whack in the sticker shock theres a more shrink.
Our teams are like I said, working really hard to offer competitive prices.
Great weekly promotions.
To deliver value to our customers and to manage our gross margins as best we can so there is pressure on the gross margin for sure due to cost of goods sold and our ability to pass those costs.
And our pricing and we don't we don't pass it all.
All at once or.
And in some cases, we don't pass it all it all and we absorb some of those cost inflations, because we want to be.
At a price.
We will attract customers and.
And do the job to deliver value. So it's a it takes experienced managers good merchandisers too.
<unk>.
Build the pricing program that promotional program.
To come pick them up with the margin that.
That will deliver results that said there is pressure on the food side.
I hope that helps.
It does thank you Eric and then just on the topic of food inflation, we saw CPI numbers just hit the type for October .
Very modest tooling.
11% from 11 full Pryor can you provide some insight just how challenging it is has become to continue managing double digit inflation and also are you seeing indications that.
<unk> can continue to call or perhaps even see an acceleration of the cooling over the next number of months given.
All of the various neighborhoods that have been called thank you.
Yes for sure double digit 10% inflation or so is challenging.
As I said, our ability to pass those cost increases through is very difficult. So.
I'm not going to repeat the previous answer, but careful management experienced management.
As required to to manage through inflationary turbulence like this.
As far as going forward the cooling we.
We hope it will cool we certainly are.
Expect we don't expect because we don't know we don't have a crystal ball. There is a lot of global phenomenon is impacting your food inflation globally, so far for me to predict but.
Typically historically when we've had inflation peaks are higher inflation year over year that it tends to it tends to come down.
Simply because of the supply and demand. So we expect that as we cycle high inflation in the next month.
And quarters, we'd expect year over year inflation on food.
To moderate but.
I don't want to say this is more hope than expectation, but it's.
It's based on our experience, that's what usually happens, but it doesn't mean it will happen. This year. It will be that we will see what the what the pressures are on global food supply and how our vendors our manufacturers are coming through like I said in my opening statement. We still we have continued to receive cost increases effective.
Next February were negotiating hard with our suppliers to mitigate that.
We want them to justify that and were pushing back because there is resistance for sure from retail or from customers.
And our ability to merchandise so.
If the vendors want to want to keep the volumes.
The cost increases we will have to moderate so it's a challenging time and we're managing through it.
Alright, Thank you Eric I'll get back in queue.
Yes.
Your next question comes from Michael <unk> from TD Securities. Please go ahead.
Hi, good morning.
The question on the French or the pharmacy, the beauty and cosmetics has been.
Rebounding really strong over the past year and I'm curious as to when you start cycling your tougher comps in these categories and then on top of that yes.
<unk>.
What level of economic sensitivity have you seen in this category.
Yes, so cosmetics have been doing well ever since the pandemic restrictions.
Lifted basically and people started to socialize and return to the office or go out so.
That was that was basically Q4 last year and like like you see today, we're reporting good good front store of our year over year, there's a bit of inflation, there, but theres strong demand. So we're confident that we can we can maintain that.
<unk> side.
The COVID-19 symptoms or cough and cold that's another that's another issue, but on the cosmetics, we're pretty confident that that will remain that will remain pretty strong.
Even in recessionary times.
Is that.
That's that's that's the small pleasure that people will keep for risk first let me say again.
That's something that will be cut.
So.
We're confident that cosmetic sales can remain very healthy.
Okay. That's helpful. And then you exited the UGI buying group.
I'm just curious why what the rationale would be for exiting if there was no significant financial impact.
Well, we I think we have reached.
Scale that allows us to reach.
The same for more.
Volume rebates.
That we were entitled with through UGI. So it's just a question of more efficiency for us more independents.
We're trying to simplify our business anytime we can.
It was a it was a great association for for many many years it was helpful.
But as we as we grow and as we evolve.
We're at a point now where we think we're best to go on our own.
Does it require you to add more capabilities in house.
Offsetting some of that.
But it may be potentially better purchasing.
Capabilities I am not sure I got it but just.
Defining Gabe moreen staff, our preferred procurement.
If youre not buying.
I don't know or are sent our central procurement team.
Handles all procurement basically.
The UGI.
Association stuff so they will have.
That left to do.
And focus directly on the vendors.
Okay, and finally on the guidance.
It's a pretty.
Outlook statement is relatively short.
Not completely unusual, but there's no comment on long term, 10% EPS growth expectations are.
Definitely nothing.
Year coming up so I'm wondering.
Are you expecting growth in fiscal 'twenty three on an earnings standpoint, and maybe if you could discuss some of the high level.
Expectations pluses and minuses.
More detail.
So Michael I'll, just start by saying that we have not change are our annual growth targets.
<unk> targets sale.
Sales of two to four operating income 46 in EPS eight to 10. Those are not changed those are are those are medium long term targets on an annual basis. So the outlook was not meant to give guidance. The outlook was yes, we can give more detail on the outlook during the pandemic.
Where things were very very uncertain and volatile but.
No change in our growth targets, so we've never given guidance.
We set our targets remain the same and we're confident that we can continue to grow exactly.
Okay excellent. Thank you very much thank.
Thanks, Michael.
Your next question comes from Peter Sklar, BMO capital markets. Please go ahead.
Good morning, Francois just type of arithmetic question to start on that on the comp so.
Your comp was 8% for food and I think youre, saying that.
Youre inflation, you experienced was 10%.
Sure.
Doing the subtraction implies about.
Negative, 2% tonnage, but I think during your commentary and in the write up you said you had positive tonnage growth. So I'm just wondering if you could reconcile the two.
Yeah, I know you're right.
That simple equation works well.
Works better when things are stable and when the inflation and sales are at lower amounts of debt.
At those levels, the math is a bit skewed, especially given the significant consumer shift to discount private label promotion, so that formula against it gets to the guests to be less.
Less precise so we had tonnage growth.
Validated by external agencies and in fact shows that we not only have grown will be grown more than market.
And we always validate our own shipments from warehouse and this quarter. They were up for the first time this year. So.
That's why we were confident to say that our tonnages up despite yeah. That's the simple arithmetic that would imply it's down 2%.
Right and also you'll see that the data that we don't see the market share data that some of the consultants gather and sell to you. So.
Can you comment just a little bit like how you think youre doing in terms of market share in conventional and discount.
So like I said in my opening statement were very pleased with our market share performance in food.
So we're not going to segregated segregate before.
Scanlon and conventional but overall our market share is up.
We're very pleased with that.
No secret that it's driven by the discount growth.
Okay and then just my last question just back on cost.
Cost pressure vendor as et cetera.
I know, we're still inflating at a high level and the vendors are still asking for.
These increases but.
Kind of.
I guess you'd call it a second derivative effect.
The rate of increases that they're demanding it like is it starting to level off and diminished a little bit like are you seeing some of that is beginning to tail off or is it just.
These cost pressures continue to accelerate.
Well I wouldn't say accelerate but they remain at elevated levels in terms of rates. So that's what we're challenging because in 2022.
Accepted quote unquote, we had to take some several increases.
Multiple times during the year and that's significant.
Higher rates so.
Those that are coming back for more at higher rates.
That's why I said, we're pushing back on.
On those.
So it's leveling off in terms of rates and we hope that it will start to decline.
So again, it's our job to mitigate negotiate and protect our cost as much as much as we can that said vendors have pressures they have cost increases.
And we have to sit down with them and come to come to an understanding.
Okay. That's all I have thank you.
Thank you Peter.
Ladies and gentlemen.
Should you have a question please.
Followed by one your next question comes from Chris <unk>.
Please go ahead.
Hello, and good morning, everyone.
<unk>.
Are you seeing any notable changes in the competitive environment remains intense but rational overall.
Yes.
It remains.
Very competitive as always.
Intense rational yes that's.
Still applies.
With the accelerating discount shift.
All other vendors are trying to protect their share their sales. So they are aggressive very aggressive.
And we will defend obviously and we will do our own.
To keep the.
Some.
Decent sales and growth in commercial vendors, but short answer it's very competitive.
Okay. Okay, that's great Thanks, Eric and maybe.
We also had a very strong quarter in terms of e-commerce sales lag some of your peers.
Can you talk a little bit about muscle. The performance has been mostly driven by capacity expansion or are you actually seeing some nice organic.
Both within your existing customer base.
It's driven by additional capacity, that's what I tried to point out in my opening statement.
We have expanded click and collect so that's additional capacity and we have signed.
Our new second partnership.
So we have two third party delivery partners corner shop, and as the cart and that has contributed to the growth you see on a same store basis or.
Ziv.
Yes.
<unk> growth has been.
It's been pretty flat the total E comm market is flat or somewhat slightly declining so.
Our growth is driven by what I just said.
And that's helpful and in terms of jobs. They can see both in terms of final system and warehouse employees are you seeing any improvement.
On that front.
It remains very challenging.
Province of Quebec, especially labor shortages.
Lynn employees in the stores.
A lot of open positions, so and Dcs it remains challenging labor pharmacists and Tech lab technicians again theres pressure there so the labor shortages.
Situation has not changed so it remains very challenging something that's structural and permanent for awhile that we have to manage with so.
We're doing a lot of work to.
Attract retain.
People that has.
Some put some pressure on wages, but it's a reality so we.
We are we.
To fill those vacant positions as much as we can and working hard to do it.
Okay. Thanks for that and maybe a quick one for Sean.
Just.
Your Capex is going up can you give us a sense of what we should pencil in for depreciation for next year I think we'll stop kind of ammonium sulfate for fiscal 'twenty two just directionally.
Is it a reasonable number for next year. Thank you.
Sorry, Chris I didn't hear the first but what went up.
Was it.
Capex going up.
Depreciation is also going to go up next year as well and just wondering if you can give us some guidance on what to pencil in something cheerful for DNA.
Yes, you're.
You're right Capex will go up so you should expect to.
To see some impact on depreciation I will say that most of those capex are in long.
Long term assets in the terms in terms of the depreciation life. So it's not going to be it's not going to be as impactful as the increase in capex may suggest but you've seen you've seen an increase in depreciation this year, it's going to be some it's going to be something similar to what we've seen this year and we are as I said, where we're at.
We do all of this to have.
Benefits, which are our aim is certainly due to compensate that are more on the on the opex side.
Okay, Thanks, very much and all the best guys.
Thank you.
Presenters there are no further questions at this time. Please proceed.
Thank you all for your interest in Metro and we will speak again soon to discuss our first quarter results on January 24th Thank you.
Ladies and gentlemen, this concludes your conference call for today, we thank you for joining and ask that you. Please disconnect your lines. Thank you.