Q2 2024 Metro Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Metro Inc. 2024 second quarter results conference call. Please note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session, and if at any time during this call you require immediate assistance, please press star zero for the operator. Also, please note that this call is being recorded on Wednesday, April 24, 2024. At this time, I would like to turn the call over to Estelle Riva. Please go ahead.
Good morning, ladies and gentlemen, and welcome to the Metro Inc. 2024 second quarter results Conference call.
Note that all participant lines are in a listen only mode.
Following the presentation, we will conduct a question and answer session and if at any time. During this call you require immediate assistance. Please press star zero for the operator also note that the call is being recorded on Wednesday April 24th 2024 at this time I would like to turn the call over to tell everybody. Please go ahead. Thank.
Estelle Riva: Thank you, Sylvie. Good morning, everyone, and thank you for joining us today. I'm standing in for Sharon Kadoche, who is absent today.
Speaker Change: That gets you there.
Speaker Change: Good morning, everyone and thank you for joining us today, I'm selling into Shanghai that frees up tons a day.
Estelle Riva: Our comments will focus on the financial results of our second quarter, which ended on March 16th. During the call, we'll present our second quarter results and comment on their highlights. We will then be happy to take your questions.
Speaker Change: Our comments will focus on the financial results of our second quarter, which ended on March 16th.
Speaker Change: During the call we'll present, our second quarter results and commentary highlights. We'll then be happy to take your questions.
Estelle Riva: Before we begin, I would like to remind you that 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 a forward-looking statement. Words or expressions such as expect, intend, are confident that, will, and other similar words or expressions are generally indicative of forward-looking statements. Such forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy, our annual budget, and our 2024-2025 action plan.
Speaker Change: Before we begin I would like to remind you that we are using today's discussion different statements that could be construed as forward looking information.
Speaker Change: In general any statement, which does not constitute a historical fact may be deemed forward looking statements.
Speaker Change: Well other expressions, such as expect intend I'm confident that will and other similar words artificial are generally indicative of forward looking statements.
Speaker Change: The forward looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries the journey.
Speaker Change: That really kind of neat.
Speaker Change: When you touch it allowed twenty-twenty called 2025 action plans.
Speaker Change: 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.
Estelle Riva: 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. Risk factors that would cause actual results or events to differ materially from our expectations as expressed in or implied by our forward-looking statements are described in the Risk Management section of our 2023 Annual Report. We believe these forward-looking statements to be reasonable and pertinent at this time and represent our expectations. The company does not intend to update any forward-looking statement except as required by applicable law. I will now turn the call over to Eric LaFleche.
Speaker Change: Risk factors that could cause actual results or events to differ materially from our expectations as expressed in or implied by our forward. Looking statements are described another richman for fiction now 2023 annual report.
Speaker Change: We believe these forward looking statements to be reasonable and personnel at this time and represent our expectations.
Speaker Change: The company does not intend to update any forward looking statement, except as required by applicable law.
Speaker Change: I will now turn the call over to I think about cash.
Eric Richer La Fleche: Good morning everyone. Today, Francois and I are joined by Marc Giroux, CEO of All Our Food Banners, and Jean-Michel Coutu, President of our Pharmacy Division. You had a chance to meet them at our Investor Day last year, and we thought it would be helpful if they participated on the analyst call going forward. Francois will lead off as usual with the review of our financials, and I will follow with the quarter's highlights. The four of us will then answer your questions. So far, so good.
I: Yes. Good morning, everyone. Today, So that's why and I are joined by Max you see of all our food vendors and Michel Coutu President of our Pharmacy Division you had a chance to meet them at our Investor day last year, and we thought it would be helpful. If they participated on the analyst call going forward.
I: So that's why we lead off as usual with the review of our financials and I will follow with the quarter's highlights. The four of US will then answer your questions. So first what do you.
Francois Thibault: Thank you, Eric, and good morning, everyone. For the quarter, total sales reached $4,655,000,000, an increase of 2.2% versus the same period last year. Food stamps to our sales were up 0.2%, and as we mentioned on our last call, sales in the second quarter were negatively impacted as the week preceding Christmas fell in the first quarter, whereas last year it fell in the second quarter. When we adjusted for this shift, food same-source sales increased by 2.7%. On a year-to-date basis, which neutralizes the Christmas effect, food-safe store sales stand at 3.1%.
Max: Thank you, Eric and good morning, everyone.
Max: For the quarter total sales reached $4.605 billion, an increase of two 2% versus the same period last year.
Speaker Change: Food same store sales were up 2% and as we mentioned on our last call sales in the second quarter were negatively impacted as the week preceding Christmas fell in the first quarter, whereas last year. It fell in the second quarter when.
Speaker Change: When we adjusted the shift food same store sales increased by two 7% on.
Speaker Change: On a year to date basis, which neutralizes the Christmas effect food same store sales stand at three 1% on.
Francois Thibault: On the pharmacy side, similar to our sales, we're up 5.9% for the quarter. Our gross margin stood at 19.9% of sales in the second quarter compared to 20.1% last year due to a slightly lower food margin. Operating expenses amounted to $496.2 million, up 6.1% versus last year, and as a percentage of sales, they were at 10.7% versus 10.3% in the same quarter last year. The higher ratio is mainly due to the startup of our new automated distribution center for fresh and frozen products in Dublin.
Speaker Change: On the pharmacy side same store sales were up five 9% for the quarter.
Our gross margin stood at 19, 9% of sales in the second quarter compared to 21% last year due to a slightly lower food margin.
Speaker Change: Operating expenses amounted to $496 2 million up six 1% versus last year and as a percentage of sales. They were at $10 70 versus 10, 3% in the same quarter last year.
Speaker Change: Hi ratio was mainly due to the startup of our new automated distribution center for fresh and frozen products in Dubai.
Speaker Change: We also continue to have higher third party E comm fees in last year.
Francois Thibault: We also continue to have higher third-party e-com fees than last year. We realized a gain on this photo of an investment in an associate company of $7 million in this quarter, and we have adjusted our net earnings by removing this. It would be done for the quarter total of $439.1 million, down 1.8% year over year and down 3.5% when we remove the gains on disposal of assets of $7.2 million that we recorded this year versus a small loss of $300,000 last year.
Speaker Change: We realized a gain on disposal of an investment in an associated company of $7 million in this quarter and we have adjusted our net earnings by removing this game.
Speaker Change: EBITDA for the quarter totaled $439 1 million down one 8% year over year and down three 5% when we removed the gains on disposal of assets of $7 2 million that we recorded this year versus a small loss of 200000 last year.
Speaker Change: During the second quarter of fiscal 'twenty four the company reported $28 million of impairment of assets, resulting from the decision to have metro stores in Ontario withdraw from the air miles loyalty program later this year.
Francois Thibault: During the second quarter of Fiscal 24, the company recorded $20.8 million of imperative assets resulting from the decision to have Metro stored in Ontario withdraw from the Air Miles Lofty program later this year. This impairment represents the entire carrying value of the Loyalty Program asset and is part of our adjustment to net earnings. Total depreciation and amortization expense for the quarter was $129.5 million, up $8.9 million versus last year, and a significant portion of the increase is due to our new tail bond, the. Net financial costs for the first quarter were $34.1 million, compared with $28.3 million last year.
Speaker Change: This impairment represents the entire carrying value of the loyalty program asset and as part of our adjustment to net earnings.
Speaker Change: Total depreciation and amortization expense for the quarter was $129 5 million up $8 9 million versus last year and a significant portion of the increase is due to our new <unk> D C.
Speaker Change: Net financial cost for the first quarter were $34 1 million compared with $28. Three last year. The increase is mainly due to an increase in debt and lower capitalized interest related to our distribution center automation project.
Francois Thibault: The increase is mainly due to an increase in debt and lower capitalized interest related to our distribution center automation. Adjusted net earnings were $206.4 million, compared to $225.4 million last year, an 8.4% decrease. And our adjusted net earnings per share amounted to $0.91, down 5.2% versus last year's EPS of $0.96. After two quarters in fiscal 24, capital expenditures amounted to $224.8 million versus $288.5 million last year, and we are revising our capital outlook for the year downward to a level of about $650 million, in large part due to some real estate transactions that are either postponed or no longer considered.
Speaker Change: Adjusted net earnings were $206 4 million compared to $25 4 million last year and eight 4% decrease in our adjusted net earnings per share amounted to 91 cents down five 2% versus last year's EPS of <unk> 96.
Speaker Change: After two quarters of fiscal 'twenty, four capital expenditures amounted to $224 8 million versus $288 five last year, and we are revising our capex outlook for the year downward to a level of about $650 million in.
Speaker Change: In large part due to some real estate transaction that are either postpone or no longer considered.
Francois Thibault: We are not reducing the investments in our retail network and our supply chain. On the retail side, in the first 24 weeks of Fiscal 24, we opened four Super C stores and carried out major expansions and renovations of five stores for a net increase of 243,000 square feet, or 1.1% of our food retail network. Turning to in-store technology, we ended the quarter with 511 food stores and 109 pharmacies equipped with self-checkout technology. And as for electronic shelf labels, at the end of Q2, we had 336 food stores and 48 pharmacies equipped with that technology.
Speaker Change: We are not reducing the investments in our retail network and our supply chain.
Speaker Change: On the retail side in the first 24 weeks of fiscal 'twenty. Four we opened four Super C stores carried out major expansions and renovations of five stores for a net increase of 243.
Speaker Change: Square feet or one 1% of our food retail network.
Speaker Change: Turning to in store technology, we ended the quarter with 511 food stores and 109 pharmacy is equipped with self checkout technology and as for electronic shelf labels at the end of Q2, we had 376 food stores and 40 pharmacies equipped with that technology.
Francois Thibault: Under a normal course issuer bid program, as of April 5th of this year, we have repurchased 3,945,000 shares for a total consideration of $276.9 million, representing an average share price of $70.18. In closing, our second quarter results are tracking well to the guidance we provided in November for Fiscal 24, that is, it deducted growth by less than 2% versus the level reported in Fiscal 23, and adjusted net earnings per share to be flat to down 10 cents versus the level reported in Fiscal 23. That's it for me. I'll now turn it over to Aaron.
Speaker Change: Under our normal course issuer bid program as of April 5th of this year, we have repurchased 3.945 million shares for a total consideration of $276 9 million, representing an average share price of $70 18.
Speaker Change: In closing our second quarter results are tracking well to the guidance. We provided in November for fiscal 'twenty for that as EBITDA grew by less than 2% versus the level. We reported in fiscal 'twenty three and adjusted net earnings per share to be flat to down 10 cents versus the level. We were born in fiscal 'twenty three that's it for me I'll now turn it over to Eric.
Eric Richer La Fleche: Thank you, Francois, and good morning, everyone. Our second quarter was a very busy one, with the bulk of the transition completed to our new automated fresh and frozen distribution center in Terrebonne. In that context, as we were cycling a strong quarter last year and with declining inflation, we are pleased with our sales performance, and our results met our expectations. When adjusted for the Christmas shift, food same-store sales were up 2.7%. Our discount banners continue to fuel this growth on top of the high comps in discounts recorded last year.
Eric: Thank you Francois and good morning, everyone.
Eric: Our second quarter was a very busy one with the bulk of the transition completed to our new automated fresh and frozen distribution center instead of a button.
Eric: In that context, as we were cycling a strong quarter last year and with declining inflation. We are pleased with our sales performance and our results met our expectations.
Eric: When adjusted for the Christmas shift food same store sales were up two 7% our discount banners continued to fuel this growth on top of the high comps in discount recorded last year.
Eric Richer La Fleche: Our internal food basket inflation decelerated to about 3% down sequentially from 4 and 5.5% recorded in the previous two quarters. Our food tonnage was flat in the quarter, with higher transaction counts in all banners, while the average basket declined.
Eric: Our internal food basket inflation decelerated to about 3% down sequentially from four and five 5% recorded in the previous two quarters.
Eric: Our food tonnage was flat in the quarter with higher transaction counts and all banners, while the average basket declined.
Eric Richer La Fleche: Facing cost of living pressures all around, customers continue to shop carefully and search for value. Additionally, similar to previous quarters, promotional penetration remains elevated. We see trading down in some categories, and private label sales continue to outpace national brands. Our online food sales grew by 51% versus last year, while the market was stable. Growth continued to be fueled by third-party partnerships for same-day delivery and the expansion of our click-and-collect service to our discount band. Service is now deployed at Super C and in progress at Food Basin.
Facing cost of living pressures all around customers continue to shop carefully and search for value.
Eric: Similar to previous quarters promotional penetration remains elevated we see trading down in some categories and private label sales continue to outpace national brands.
Eric: Our online food sales grew by 51% versus last year, while the market was stable.
Eric: Both continued to be fueled by third party partnerships for same day delivery and the expansion of our click and collect service to our discount banners. The service is now deployed at Super C and in progress at food basics.
Eric Richer La Fleche: We are now lapping the start of these initiatives, so we expect the year-over-year growth of online sales to moderate in the coming quarter. On the pharmacy side, we delivered a very strong performance with comp sales of 5.9% on top of 7.3% recorded in the same quarter last year. Commercial sales were up 5.8% on top of 12.2% in Q2 last year, driven by a strong cough and cold season, effective merchandising, as well as continued growth in HABA and cosmetics. Prescription sales were up 6%, driven by organic growth, specialty medications, and professional services.
Eric: We are now lapping that started these initiatives. So we expect the year over year growth of online sales to moderate in the coming quarters.
Eric: On the pharmacy side, we delivered a very strong performance with comp sales of five 9% on top of seven 3% recorded in the same quarter last year.
Eric: Commercial sales were up five 8% on top of $12. Two in Q2 last year, driven by a strong cough and cold season effective merchandising as well as continued growth in harbour and cosmetics.
Eric: Prescription sales were up 6% driven by organic growth specialty medications and professional services. We continue to record significant growth in pharmacy services and in the first 24 weeks of this fiscal year, we documented more than $1 9 million clinical acts and services performed.
Eric Richer La Fleche: We continue to record significant growth in pharmacy services, and in the first 24 weeks of this fiscal year, we documented more than 1.9 million clinical acts and services performed through our network, a level in line with our leading position in Quebec. We are well positioned to deliver on the expanded role of pharmacists with our dedicated pharmacist owners and our leading footprint across Canada. We continue to be pleased with our Moi loyalty program in Quebec, which now reaches close to 70% of Quebec households.
Eric: Throughout our network.
Eric: A level in line with our leading position in Quebec, we are.
Eric: Well positioned to deliver on the expanded role of pharmacists with our dedicated pharmacist owners and our leading footprint across Quebec.
We continue to be pleased with our more loyalty.
Eric: Program in Quebec, which now reaches close to 70% of Quebec households.
Eric Richer La Fleche: As members become more digitally engaged with our channels and offers, engagement metrics increase while providing more value to our customers. Most recently, the 2024 Léger Wow survey recognized Moi as the most widely used loyalty program in Quebec, with 79% of Metro customers actively engaging with the program. Building on the successful launch of the Moi loyalty program in Quebec, we are pleased to announce today the launch of Moi Rewards in Ontario at all 275 Metro and Food Basics stores later this year.
As members become more digitally engaged with our channels and offers and engagement metrics increased while providing more value to our customers.
Eric: Most recently the 'twenty 'twenty four la Z, while survey recognized more as the most widely used loyalty program in Quebec with 79% of Metro customers actively engaging with the program.
Eric: Building on the successful launch of what loyalty program in Quebec, We are pleased to announce today the launch of what rewards in Ontario at all 275 Metro and food basic stores later this year.
Eric Richer La Fleche: My rewards will allow members to realize greater savings by accumulating points in our two Ontario banners. More details will be communicated in due course. Turning to our Terrebonne Automated DC, as I said earlier, our second quarter was very busy for our teams with the transfer of the fresh meat, deli, and ice cream volumes to our new facility. We also closed two older distribution centers in Montreal.
Eric: More rewards will allow members to realize greater savings by accumulating points in our two Ontario banners more details will be communicated in due course.
Eric: Turning to our tableau in an automated D C.
Eric: As I said earlier, our second quarter was very busy for our teams with the transfer of the fresh meat Deli and ice cream volumes to our new facility. We also closed two older distribution centers in Montreal.
Eric Richer La Fleche: We have now completed the bulk of the transition to our new Tabon DC, with only dairy products left to be transferred. We are on track with the planned expenses, and we are pleased with the service level in our store. Going forward, our teams are focused on ramping up productivity, and we are now also gearing up for the launch of the final phase of our Toronto Automated Fresh Facility next summer. So, to conclude, Fiscal 24 is a transition year with the start-up of two large new automated distribution centers, but we are confident that our sustained investments in our supply chain, our retail networks, and our digital capabilities will position us well for the future and create long-term value for shareholders Thank you, and now we'll be happy to take your order.
Eric: We have now completed the bulk of the transition to our new tab bonded D C with only dairy products left to be transferred.
Eric: We are on track with the planned expenses and we are pleased with the service level to our stores.
Eric: Going forward. Our teams are focused on ramping up productivity and we are not we are now also gearing up for the launch of the final phase of our Toronto automated fresh facility next summer.
Eric: So to conclude fiscal 'twenty four is a transition year with the startup of two large new automated distribution centers, but we are confident that our sustained investments in our supply chain, our retail networks and our digital capabilities will position us well for the future and create long term value for shareholders.
And now we'll be happy to take your questions.
Speaker Change: Thank you, ladies and gentlemen, if you would like to ask questions. At this time. Please press star followed by one on your Touchtone phone you will hear a tone prompt acknowledging of your request.
Operator: Thank you. Ladies and gentlemen, if you would like to ask questions at this time, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you should wish to withdraw from the question queue, simply press the star followed by two. And if using a speakerphone, please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. And your first question will be from George Doumet at Scotiabank. Please go ahead.
Speaker Change: You should wish to withdraw from the question queue simply press star followed by two and if you're using a speaker phone. Please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions.
Speaker Change: And your first question will be from George do Max at Scotia Bank. Please go ahead.
George Doumet: Yeah, good morning. Eric, I thought you were a little bit cautious on the front floor performance for this quarter, but it was very strong. Can you talk a little bit about what you call effective marketing strategies and what really happened there? Thanks.
Speaker Change: Yes, hi, good morning, Erika I thought you were a little bit cautious on that front store performance for this quarter, but it was very strong.
Speaker Change: Can you talk a little bit about I guess, what you called out effective marketing strategies and what really happened there. Thanks.
Erika: Well the number one driver is a strong cough and cold season, which really started in mid December so Q2 benefited.
Eric Richer La Fleche: Well, the number one driver is a strong cough and cold season, which really started in mid-December. So, Q2 benefited from that and the increased traffic that that brings to our stores. So, combined with effective merchandising, we were able to record really strong front store sales, on top of really strong last year, which was a trifecta with COVID and all those symptoms. So, I think the teams did a great job
Erika: That benefited from that in the increased traffic that that brings to our stores. So combined to our effective merchandising and we were able to.
Record really strong front store sales on top of really strong last year, which was the tri sector with Covid and all of those symptoms. So I think the teams did a great job of maybe Michel if you want to add some color.
Michel Coutu: I won't get into all the different tactical initiatives, but we we reviewed completely our merchandising strategy.
Jean-Michel Coutu: Maybe, Jean-Michel, if you want to add some color?
Michel Coutu: We adjusted for the market as it's evolving and and and the team did a great job anticipating the customer demand.
Jean-Michel Coutu: Yeah, I won't get into all the different tactical initiatives, but we completely reviewed our merchandising strategy. We adjusted it for the market as it was evolving, and the team did a great job anticipating customer demand, and that shows in the results.
Michel Coutu:
Michel Coutu: That shows in the results okay.
Michel Coutu: Okay. How much was that if you look at pricing for how about how about category how much was it this quarter.
Michel Coutu: You're talking about inflation and how is that correct yes.
Michel Coutu:
Michel Coutu: Lower single digits.
Unknown Attendee: Okay, how much was it, if you look at pricing for HABA, the HABA category, how much was it up this quarter?
Michel Coutu: Yeah, that's that's our internal reporting and based on the way we calculate it.
Michel Coutu: Okay. Okay. Thanks for that and frankly, I can you give us a little bit more color on the on the lower capex.
Unknown Executive: You're talking about inflation? A lower single digit.
Michel Coutu: You mentioned Capex is expected to come down next year, but as you look beyond can we see perhaps some more investments in an automated dry goods without having a similar return overall and then fresh and frozen.
Unknown Executive: Yeah, that's our internal reporting and based on the way we calculate it.
Unknown Attendee: Okay. Okay, thanks for that.
Unknown Attendee: And Francois, can you give us a little bit more color on the lower CapEx? I think you mentioned CapEx is expected to come down next year. But as you look beyond, can we see perhaps some more investments in automated dry goods? And would that have a similar return overall than fresh and frozen?
Michel Coutu: Well, we as I said that we are revising our outlook.
Michel Coutu: <unk> hundred 50, because of some real estate transaction with chef for competitive reasons I won't go into and now.
But as I said, we're not reducing any investments that are stored at work or disease.
Speaker Change: So no no no nothing to announce on any other automation projects.
Francois Thibault: Well, as I said, we're revising our outlook down to $650 because of some real estate transaction, which for competitive reasons, I won't go into, and now, as I said, we're not reducing any investments in our store network or DC. So, nothing to announce on any other automation projects. If we do, we'll do it in due course, but nothing to announce right now.
Speaker Change: If we do we'll do it in due course, but nothing to announce right now.
Speaker Change: Okay I got one last question.
Maybe a bit of a crystal ball question, but.
Speaker Change: We've seen inflation come in below 2% for March is.
Speaker Change: Is your view that maybe disinflation continues towards one or zero or do you think we stabilize at these levels given kind of the whether it's geopolitical factors, etc.
Unknown Attendee: Okay, I got one last question. Maybe a bit of a crystal ball question, but we've seen inflation come in below 2% for March. Is your view that maybe this inflation continues towards 1 or 0, or do you think we stabilize at these levels given the kind of weather, geopolitical factors, etc.
Speaker Change: Well it is a crystal ball question, yes, our inflation is decelerating.
Speaker Change: Quickly in March we'll see we'll see we'll see going forward as we told you before we planned for 3% inflation for the year it might it was and it's slightly above that.
Eric Richer La Fleche: ?
Eric Richer La Fleche: Well, it is a crystal ball question. Yes, inflation is decelerating quickly in March. We'll see going forward. As we told you before, we planned for 3% inflation for the year. It was slightly above that in the first portion of the year, but it looks like it may be a little below that going forward. But again, we don't have a crystal ball. There's still some CPG cost inflation. It's back to more normal levels, but it's not zero. So, you know, two to three percent sounds like a... A crystal ball number that I would go with, but again. Speculation
Speaker Change: The first portion of the year it looks like it may be a little below that for going forward, but again, we don't have a crystal ball.
Speaker Change: Theres still some some CPG cost inflation is back to more normal levels, but it's a it's not zero. So you know.
Speaker Change: 2% to 3% it sounds like like Oh.
Speaker Change: Crystal ball number that I would go with it again.
Speaker Change: It's all speculation.
Speaker Change: Okay. Thanks for answers offline.
Speaker Change: Thank you next question will be from Irene Mattel at RBC capital markets. Please go ahead.
Thanks, and good morning, everyone just up just sticking with the kind of store wondering what perhaps the beneficial impact of.
Unknown Attendee: Okay, thanks. Your answer is all possible.
Irene Ora Nattel: The <unk> program in P. J C. Might've bedroom was that a contributing factor to the final store print.
Operator: Thank you. The next question will be from Irene Nattel at RBC Capital Markets. Please go ahead.
Irene Ora Nattel: Thanks and good morning everyone. Just sticking with the front of store, wondering what perhaps the beneficial impact of the MWAA program and PJC might have been and was that a contributing factor to the front of store print?
Irene Ora Nattel: Definitely yes, lionsgate is gaining traction in our pharmacy network every month, so more people sign up more people get engaged so it's still work in progress it's not at the same level as Mitchell, which admittedly was you know Irene for for a long time.
Eric Richer La Fleche: Definitely, yes. Moi, it's gaining traction in our pharmacy network every month, so more people sign up, more people get engaged, so it's still a work in progress. It's not at the same level as Metro, which had Metro et Moi, as you know, Irene, for a long time, but we're pleased with the engagement. There's a lot of cross-shopping going on between our banners, so yeah, I'm sure that was a contributing factor to pinpoint the exact... The percentage of the lift that was caused by MOIS is really hard to do, but it's a contributing factor, no doubt.
Irene Ora Nattel: We're pleased with the engagement and there's a lot of cross shopping going on between our banners. So yeah sure that was a contributing factor to pinpoint the exact.
Irene Ora Nattel: The.
Irene Ora Nattel: Percentage of them. They lift it was caused by an wise is really hard to do but it's a contributing factor no doubt.
Speaker Change: And just following up on that Erik Thank you.
Erik: Is it also safe to assume that aircraft and shipping packaging better funded start demand that at the <unk> stores.
Erik: Yeah.
Erik: Yes.
Erik: Yes, and it's less of a percentage of sales front store in between that versus could shoot, but it's significant and what it is is gaining traction there as well there wasn't a loyalty program in between that before could you add another program and they switch to tomorrow, but that.
Eric Richer La Fleche: And just following up on that, Eric, thank you, is it also safe to assume that it's a contributing factor to better fund store demand at the Brunei stores?
Eric Richer La Fleche: Yeah, yes, it's a less of a percentage of sales in the front store in Brunet versus Coutu, but it's significant, and Moi is gaining traction there as well. There was no loyalty program at Brunet before. Coutu had another program, and they switched to Moi. Brunet didn't have one, so it was a plus for customers, and they're engaging with them.
Erik: It didn't happen and so it was a plus for customers and they are engaging with it.
Speaker Change: That's great. Thank you and then just you know I guess my my usual question.
Speaker Change: It is a little bit of commentary or color on your commentary but.
Speaker Change: In terms of consumer behavior competitive intensity.
Irene Ora Nattel: That's great, thank you. And then just, you know, I guess my usual question, you provided a little bit of commentary or added some color to your commentary, but in terms of, you know, consumer behavior, competitive intensity, you noted that private label was growing faster than national brands, but can you talk a little bit about maybe incremental penetration of promotional items, some of the trade-down behavior, and again, competitive intensity? Thank you.
Speaker Change: You noted that private label growing fast in national brands, but can you talk a little bit about maybe incremental penetration of promotional items some of the trade down behavior.
Speaker Change: And yanking test intensity. Thank you.
Speaker Change: Well, let me I'll, let Mackie you want to comment on that.
Speaker Change: I think you've said it well in your introduction the market continues to be competitive.
Speaker Change: While food inflation is stabilizing overall economic context is putting a lots of pressure on Canadian consumers. So consumers are continuing to.
Marc Giroux: Well, maybe I'll let Marc do that. Do you want to comment on that?
Marc Giroux: I think you've said it well in your introduction. The market continues to be competitive. While food inflation is stabilizing, overall, the economic context is putting lots of pressure on Canadian consumers, so consumers are continuing to trade down in some categories, meat in particular. They're also moving to private label. The growth of our private label is twice the growth of our national brand, and promo penetration is back to pre-pandemic levels and is elevated, and the discount growth in our discount channel is greater than conventional, so a similar trend as the previous quarter, but we're well-positioned with our commercial strategy and our store network to capture customer demand.
Speaker Change: To trade down and in some categories meat in particular.
Speaker Change: They're participating to private label the growth of our private label is twice the growth of our national brand.
Speaker Change: And and promo penetration is back to a pre pre pandemic level and our and our elevated and the discount growth in our in our discount channel is greater than conventional so similar trend as the previous quarter.
Speaker Change: But we're well positioned to what our commercial strategy in our in our store network to capture to capture customer demand.
Speaker Change: That's great and just in terms doesn't show that the depth of the competitive activity are you seeing any step up in the magnitude or that's I guess housekeeping questions are thats pretty stable.
Unknown Attendee: That's great. And just in terms of the sort of the depth of the competitive activity, are you seeing any step up in the magnitude or the, I guess, you know, how deep the promotions are? That's pretty stable. I'd say that's pretty stable. It's a competitive market.
Speaker Change: I'd say, it's pretty stable, it's a competitive market, but stable to previous quarter.
Speaker Change: That's great. Thank you.
Speaker Change: Thank you Ned.
Speaker Change: The next question will be from Ann lethal at BMO capital markets. Please go ahead.
Ann Lethal: Alright, good morning.
Unknown Executive: I'd say that's pretty stable. It's a competitive market, but stable compared to the previous quarter.
Ann Lethal: So that for us that turbine.
That's most of the car rates are.
Operator: Thank you. The next question will be from Emily Fu at BMO Capital Markets. Please go ahead.
Ann Lethal: Except for Gary.
Ann Lethal: Hum.
Emily Fu: Hi, thanks, and good morning. So that's for the Terrebonne DC, now that most of the categories are completed except for dairy. Have you, is all the volume up to full production? Like, is there any execution risk in the ramp up now to full productivity, or is this already in? We just wanted to know if there are any, if these categories are de-risked.
All of the volume up to full production.
Ann Lethal: There any execution risk and the ramp up now it's your fault, partly because they are or is this already and I'm always just want to kill it.
Ann Lethal: These category, Turkey restaurant.
Ann Lethal: Well the execution risk is largely behind us because we have completed most of the transition and it's going well like I said in my opening statement.
A huge heavy lifting by our teams in coordinating with our stores and our merchandising to to be seamless at store level. So very pleased with the with the transition. So far some some work ahead of us for dairy, but the focus is now on productivity. So.
Eric Richer La Fleche: Well, the execution risk is largely behind us because we have completed most of the transition and it's going well. Like I said in my opening statement, a huge, heavy lifting by our teams and coordination with our stores and our merchandising to be seamless at store level. I am very pleased with the transition so far. We have some work ahead of us for dairy, but the focus is now on productivity. The execution risk is, there's always an execution risk, but I think the teams are executing really well.
Ann Lethal: The execution risk is.
Ann Lethal: Theres always an execution risk, but I'd say the teams are executing really well service levels to our stores are good and now it's a question of adapting and adjusting and ramping up productivity. So as planned. So we're ahead of where ahead of our our plan on duplication inefficiencies, yes, there are some but it's just slightly.
Eric Richer La Fleche: Service levels in our stores are good, and now it's a question of... Adapting and adjusting and ramping up productivity, so we're ahead of our plan on duplication and efficiencies. Yes, there are some, but it's slightly better than we expected, and we're confident that we're going to get through this and be in great shape coming out for next year.
Ann Lethal: Better than we expected and we're we're confident that we're going to get through this and be in great shape.
Ann Lethal: Coming out for next year.
Speaker Change: Okay great.
Speaker Change: Remind us how and when Brexit costs will roll off from now when should we see these concessions to games.
Speaker Change: Well if.
Speaker Change: You'll see efficiency gains are going forward. So every month, we improve our productivity or we aim to improve our productivity. So next year will be a better year with less duplication and inefficiency. So we're going to see us we're going to see a lower expenses next year.
Eric Richer La Fleche: Okay. Great. Can you also remind us how and when the duplicative costs will roll off, and when we should see these efficiency gains?
Eric Richer La Fleche: Well, you'll see efficiency gains going forward. So every month we improve our productivity, or we aim to improve our productivity.
Speaker Change: For sure we will we will plan accordingly, but it's it's a it's a big investment with.
Eric Richer La Fleche: So next year will be a better year with less duplication and efficiency. So we're going to see lower expenses next year, for sure. We will We will plan accordingly. But it's It's a big investment with depreciation, less capitalized interest, so that's staying with us. That's going to be around next year. We're going to be more efficient in our logistics, so confident that we're going to be meeting our objectives for these large projects.
Speaker Change: Depreciation.
Speaker Change: Capitalized interest so that's staying with us that's gonna be around next year, we're going to be more efficient in our in our in our.
Speaker Change: Logistics.
Speaker Change: And so I'm confident that we're gonna be a meeting our objectives for these large projects.
Speaker Change: Okay. Thank you very much.
Emily Fu: Okay, thank you very much.
Speaker Change: Thank you next question will be from Chris Lee at <unk>. Please.
Operator: Thank you. The next question will be from Chris Lee at Desjardins. Please go ahead.
Christopher Li: Please go ahead.
Christopher Li: Good morning, everyone. Eric, you mentioned that transaction counts were up across all banners, which obviously wouldn't include conventional. Just curious, is that partly because inflation is moderating? And more specifically, did the increase in transaction counts at conventional stores kind of pick up in the latter part of the quarters as inflation continued to moderate?
Christopher Li: Alright, good morning, everyone. Eric you mentioned that transaction counts were up across all banners, which obviously include conventional just curious is that partly because inflation is moderating and more specifically the increase in transaction counts at conventional source kind of pick up in the latter part of the quarters as inflation continued to.
Christopher Li: Moderate.
Eric: I don't think it is linked to inflation and I think as people shopping around and searching for value.
Eric Richer La Fleche: I don't think it's linked to inflation. I think it's people shopping around and searching for value. So, you know, the traffic has been up for the whole year in all of our banners, conventional also. The basket decline is a bit steeper in conventional, but I think it's just people being very careful shopping around, so we have to be really competitive week in, week out, and we are, and our conventional stores are holding up well relative to their peers. So, I'm pleased with that.
Eric: And so.
Eric: It is that you know where.
Eric: The traffic has been up.
Eric: For the whole year.
Eric: In all of our banners conventional also so the basket declined it is a bit steeper and.
Eric: And and conventional but I think it's just people being very careful shopping around until we have to be really competitive weekend. We go in.
Eric: And we are in our conventional stores or are holding up well relative to their peers. So I'm.
Pleased with that.
Speaker Change: Okay. So no really big improvement in terms of the consumer I guess is that like everything you just said that trade down and all of that is still very good.
Christopher Li: Okay, so no really big improvement in terms of the consumer, I guess this is, like everything you just said, the trade-on, and all that is still very, very relevant right now. Yes, sir. Okay, that's helpful. And then the question I have is, I think this is maybe the first time in a while where your food basket inflation was slightly ahead of food CPI, whereas before, I think it was averaging around 1% below. Is there any reason for that? Or am I just reading too much into this?
Speaker Change: Yep Yep relevant right now yes, Sir.
Okay. That's helpful. And then another question I have is I think this is maybe the first time in a wild bird.
Speaker Change: Food basket inflation was slightly ahead of food CPI, whereas before I think it was averaging about 1% below is that any reason for that or am I, just reading too much into your into this.
Eric Richer La Fleche: Don't read too much into it. 3%, 2.5%, it's within a pretty narrow band. This is what we sell in our stores, it's our mix, it's a function of promotion year over year. The dollar, rather, the 99 cent add-on discount is pushed by a week; it has an impact on inflation on the border. I would say it's pretty much in line with CPI.
Speaker Change: Don't read too much into it 3% two and a half where.
Speaker Change: It's within a pretty pretty narrow band. This is what we sell in our stores. It's our mix. It's it's it's a function of promotions year over year. So.
Speaker Change: Let's say the 19th the dollar rather the 19th sent a 99 cent, adding discount is pushed by week. It has an impact on inflation in the order so I.
Speaker Change: I would say, it's pretty much in line with CPI.
Eric Richer La Fleche: Okay, that's helpful. And Francois, maybe one for you. I know I asked you this last quarter, just curious, you know, would your SG&E expense rate be largely stable versus last year if you excluded these duplicative costs and learning curve efficiencies?
Speaker Change: Okay. That's helpful and Francois maybe one for you I know I asked you. This last quarter just curious what your SG&A expense rate to be largely stable versus last year. If you exclude Easter duplicative cost and learning curve efficiencies from the disease.
Francois Thibault: Yeah, so similar to what I said in Q1, Chris, is that when you remove these duplicated costs and then extra expenses, SG&A as a percentage of sales will be quite similar to last year. So we're pleased overall with a 6.1% increase given all this in the context we're in.
Francois: Yes, so similar as what I said in Q1, Chris is that when you remove these duplicate costs and then an extra expenses.
Francois:
Francois: G&A as a percentage of sales it will be quite similar to last year. So we're we're pleased overall with a six 1% increase given all of this in the call.
Francois: Next we're in similar similar conclusion to what I said in Q1.
Francois Thibault: So similar
Christopher Li: Okay, that's helpful. I mean, the last one for me as well: first of all, just on CapEx, now that you have revised down your outlook for the year, I know in the past you've mentioned that for fiscal 25 and beyond, you'll go back to that $500 million level. For next year, should we expect that to be up higher than $500 million because you kind of pushed back some of these real estate transactions? Perfect. Okay. Thanks very much.
Speaker Change: Okay. That's helpful and maybe the last one for me as well first of all just on Capex now that you'll be lifestyle. You all know for the year I know in the past you've mentioned that for fiscal 'twenty five and.
Speaker Change: And beyond you'll go back to that $500 million level for next year should we expect that to be higher than that because you've kind of pushed back some of these real estate transactions.
Speaker Change: So to make sure.
Speaker Change: If you give an update.
Speaker Change: For next year, but our run rate would be.
Speaker Change: Hi, mid five hundred's and rather than mid 500 level a normal run rate.
Operator: Thank you. The next question will be from Vishal Shreedhar at National Bank. Please go ahead.
Speaker Change: Okay. Okay. Thanks very much.
Speaker Change: Thank you.
Speaker Change: Thank you next question will be from Vishal <unk> at National Bank. Please go ahead.
Vishal Shreedhar: Hi, thanks for taking my questions. Turning to Jean Coutu, the front store performance, very strong, as has been noted, was the performance strong across the board, or was it OTC that lifted that comp above what probably most
Vishal: Hi, Thanks for taking my questions.
Vishal: Uh huh.
Vishal: Turning to the chunk of cheated front store performance are very strong as has been noted would split the performance is strong across the board or was it OTC that lifted a lift at that comp to what probably most expected.
Vishal: So I'm sure as Eric mentioned in his opening those fourth is strong across the board. So OTC, obviously through the cough and cold season, <unk> cosmetics a program also our all our core categories are growing very well.
Unknown Executive: As Eric mentioned in his opening notes, performance is strong across the board, so OTC obviously, due to the cough and cold season, HABA, and cosmetics are performing well, so all our core categories are growing very well.
Vishal: Okay, and then the consumer weakness, which is causing them to.
Unknown Attendee: Okay, and consumer weakness, which is causing the shift towards promotion and the shift towards discount. Are we seeing similar trends in Jean Couture or some of the categories like beauty, which are a bit more resilient?
Vishal: The shift towards promo and and the shift towards discount.
Vishal: Or are we seeing similar trends in Shonka tour some of the categories like beauty a bit more resilient.
Unknown Executive: We like to think there's a bit more resilience, but we are seeing consumers shopping for value. We are in an advantageous position. Value perception is very strong with the Jean Couture brand, particularly, but we are seeing a lot of conversion to private label and promotions.
Speaker Change: We'd like to think there is a bit more resilient, but we are seeing consumers shopping for value. We are in a minute.
Speaker Change: To just position our value perception is very strong with the Jong soo brand, particularly but we are seeing some a lot of conversion to private label and promotional.
Speaker Change: Okay. Thank you.
Unknown Attendee: Okay, thank you. Moving on to the MWAA program, for the Ontario launch, should we expect that to be somewhat of a duplicate of the Quebec program in terms of capability and in terms of the offer of what's going to be presented to the consumer?
Speaker Change: Moving onto to the Moi a program.
Speaker Change: For the interior launched should we expect that to be somewhat of a duplicate of the Quebec program in terms of his capability and.
Speaker Change: In terms of the offer what's going to be presented to the consumer.
Speaker Change: It will be similar to the details of the program will be communicated as we get closer to launch for competitive reasons, but yeah. It's it's our platform proprietary program in Quebec.
Eric Richer La Fleche: It will be similar. The details of the program will be communicated as we get closer to launch for competitive reasons. But yeah, it's our platform proprietary program in Quebec, which we launched and we're happy with, and we control, and we own. So we thought it was the best for us to go forward in Ontario to provide a strong program to our customers so they can generate even more savings in all of our banners. So, yeah, so. We're pleased to extend it. It's a good program. I think consumers will like it, and we will communicate the details as we get going.
Speaker Change: Which we launched and we're happy with and we control and we own. So we thought that it was the best for us to do to go forward in Ontario to to provide a.
Speaker Change: Strong program to our customers. So they can they can generate even more savings in all of our banners.
Speaker Change: So yeah. So.
Speaker Change: We're pleased to extend it it's a good program I think consumers will like it and we will communicate the details as we get closer.
Speaker Change: Okay and in terms of the.
Eric Richer La Fleche: Okay, and in terms of In Moi's interest to even expand further, obviously, strong traffic on Metro's banners, is there an opportunity at some point in the future to entertain or engage in some sort of coalition program bringing in partner retailers, or is that not on the radar?
Speaker Change: I was interested to even expand further obviously strong traffic at Metro's banners is there opportunity at some point in future TV to entertainer engagements. Mr. Hu Coalition program bring again partner retailers or is that not on the radar for now.
Speaker Change: None at the present time.
Marc Giroux: Not at the present time, but you never know. We have a good program in high-frequency channels of drug and food and pharmacy in Quebec, and we'll be in food in Ontario, so you never know. There could be potential for partners that join and leverage that, but not for now.
Speaker Change: Not in the present time, but you never know.
Speaker Change: We have a we have a good program and in high frequency channels of drug in the pharmacy.
Speaker Change: Food and pharmacy, so and Quebec and will be the food in Ontario. So you don't get you you never know there could be there could be.
Speaker Change: Partners that joined in and levers of that but not for now.
Speaker Change: Thank you first step of our strategy was to bring loyalty under one program across Quebec, Ontario, New Brunswick.
Marc Giroux: The first step of our strategy was to bring loyalty under one program across Quebec, Ontario, and New Brunswick for all of our pharma and food customers, and that's what we'll be completing by the end of the year. And we'll see you then.
Speaker Change: For all of our pharma and food customers and that's what we'll be completing by our by the end of the year.
Speaker Change: And we will see after that.
Vishal Shreedhar: I appreciate that color, Marc. Thanks.
I appreciate that color Mark.
Operator: Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. And your next question will be from Michael Van Elst at TD. Please go ahead.
Speaker Change: Thank you once again, ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone.
Speaker Change: Your next question will be from Michael Van <unk> at TD. Please go ahead.
Speaker Change: Okay.
Michael Van Aelst: Hey guys, it's Evan in for Michael. Most of my questions have been answered, but I guess I just wanted to touch briefly on the food gross margin. Where is the pressure coming from? Is it all market factors? Or did the DC ramp up contribute to that? Or was there something else as well?
Speaker Change: Hey, guys, it's Evan in for Michael.
Evan: Most of my questions have been answered, but I guess I just wanted to touch briefly on our on the fill it gross margin.
Evan: Where where is the pressure coming from is it all market factors or get the DC ramp up but contribute to that or was there something else as well.
Eric Richer La Fleche: Well, you know, the pressure on gross margin is 16 basis points year-over-year for the company. Food is a bit.., cc wouldn't read too much into it we were we were cycling a and normal quarter is a competitive market no question about that and we we we are competitive uh... district was a you know a bit bigger little bigger issue in this quarter managing it but it was it it is to be a little more to that to the decline the discount mix you know it's as we uh... over-performing discount that's affecting the gross margin line a bit and like you pointed out to the inefficiencies in tab 1 that's also a small contributing factor so uh... a bunch of puts and takes uh... you know overall uh... it's not a huge concern but we're monitoring very closely the gross margin
Speaker Change: Well you know the pressure on gross margin is up 16 basis points year over year for the company our food as it is.
Speaker Change: Is causing are driving it so I wouldn't read too much into it we were we were cycling a normal quarter. Its a competitive market no question about that and we are competitive.
Speaker Change: And shrink was a you know a bit of a bigger a little bigger issue in this quarter managing it but it was it did contribute a little more to the to the decline the discount mix.
Speaker Change: As we are over performing discount that's affecting the gross margin line a bit and like you pointed out to the inefficiencies and turbine. That's also a small contributing factors so.
Speaker Change: A bunch of puts and takes.
Speaker Change: All the it's not a huge concern, but we're monitoring very closely the gross margin for sure.
Unknown Attendee: Great, thanks. And in terms of the duplicate overhead costs, could you give us, maybe like, a percentage of how much was in the first half numbers versus how much is expected to be in the second half numbers? And are all those costs in OPEX, or some of them in cost of goods sold as well?
Speaker Change: Great. Thanks.
Speaker Change: And in terms of the duplicate overhead costs.
Speaker Change: Could you give us.
Speaker Change: Maybe like a percentage of how much it was in the first half numbers versus how much you expect it to be in the second half numbers and are.
Speaker Change: Are all those cost in opex or some of them and in cost of goods sold as well.
Unknown Attendee: So we're not going to break it down in percentages; what we said was that in the first part of the year, there would be more pressure than in the latter part, and as I said for the first two quarters, when you remove those costs, the percentage of SG&A on sales is very similar to last year. So we're not going to be providing a breakdown, but what's the last part of your question?
Speaker Change: So we're not going to break it down in percentages. What we said was that the first part of the year, there will be more pressure than the latter part.
Speaker Change: And as I said for the first two quarters when you remove those costs.
Speaker Change: The percentage of SG&A is on sale.
Speaker Change: <unk> is very similar to last year or so.
Speaker Change: So we're not going to be providing a breakdown.
Speaker Change: What's the last part of your question Sir.
Speaker Change: What were they all in Opex or were there some in.
Unknown Executive: The bulk of it is in OPEX, but there's a slight portion in gross margin, as Eric said, which explains a bit of the pressure on the gross margin.
Speaker Change: Think of it as <unk> as a slight a slight portion in gross margin.
Speaker Change: As Erik said, which explains a bit of the pressure on the gross margin.
Operator: Thank you. The next question will be from Marc Petrie at CIBC. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks, Eric.
Eric: Yes. Thank you.
Eric: Thank you next question will be from Mark Petrie of CIBC. Please go ahead.
Mark Robert Petrie: Yeah, thanks and good morning. Eric, I know you called out flat tonnage, but I think it was up probably slightly last quarter. I'm guessing it's not a material change in trend, but just hoping you can comment on unit growth overall. I know it's been tough for the industry. Just wondering if you're seeing trends shift.
Mark Robert Petrie: Yeah. Thanks.
Mark Robert Petrie: Good morning, Eric I know you called out flat tonnage I think it was up probably slightly last quarter I'm guessing, it's not a material change in trend, but just hoping you can comment on unit growth overall I know, it's been tough for the industry, but I'm just wondering if youre seeing trends shift at all.
Eric Richer La Fleche: Well, if you look at tonnage as inflation is stabilizing, tonnage will most probably start to increase again. But overall, tonnage is growing in discount and slightly declining in conventional. So overall, our tonnage was flat.
Mark Robert Petrie: I'll, let mark take that well if you look at tonnage is as inflation is stabilizing tonnage, we'll most probably start to to increase again, but overall.
Mark Robert Petrie: The tonnage is growing and discount slightly a slightly.
Mark Robert Petrie: Slightly declining in conventional so overall, our tonnage was was flat.
Mark Robert Petrie: Yeah.
Mark Robert Petrie: Understood, Okay, and I know you've spoken about the consumers continuing to seek to seek out value I'm, just curious if and discount oak flooring full service just curious if that gap.
Mark Robert Petrie: And I know you've spoken about consumers continuing to seek out value. I'm just curious if, and with discount outperforming full service, if that gap between the two growth rates has changed at all, if it's expanding or narrowing or not.
Mark Robert Petrie: Between the two growth rate has changed at all but it's expanding or narrowing or consistent.
Eric Richer La Fleche: When we look at industry data, the gap between the growth of discount and conventional is stable, 24 weeks, 12 weeks, 4 weeks. So, I think we talked about the consumer looking for value, so that trend has not changed. We're experiencing significant growth in discount last year, so that's contributing, and we've opened new stores in discount, that's also contributing to discount.
Mark Robert Petrie: When we look at industry data the gap between the growth of discount in conventional is stable 24 weeks 12 weeks four weeks.
Mark Robert Petrie: So I think we talked about the consumer is looking for value should that trend has not changed we're comping a significant growth in and discount last year.
So so that's contributing and we've opened new stores and discount that's also contributing to a discount broker.
Mark Robert Petrie: Yeah, understood. Okay, that's helpful. Thank you. And then just one, I'm not sure how much you can say, but, you know, with e-commerce growth normalizing and some of the sort of big shifts in the rearview mirror, would you expect that that would have any impact on your P&L and either of the margin rates?
Speaker Change: Yeah understood. Okay. That's helpful. Thank you and then just one notch.
Speaker Change: I'm not sure how much you can say, but.
Speaker Change: With e-commerce growth normalizing and and some of the sort of big shifts in the rearview mirror what do you expect that that has any impact on your P&L in either of the margin rates.
Unknown Attendee: Do you mean the EECOM stabilizing factor? Could you clarify your question? Yeah.
Speaker Change: You mean, the e-commerce stabilizing could you clarify your question.
Speaker Change: Yeah, Yeah with e-commerce growth.
Unknown Attendee: Yeah, yeah, with e-commerce growth slowing down, and you guys sort of, you know, having added partners and expanded all your banners and all that, all those sorts of shifts, do you expect that a more modest growth rate in e-commerce will have any impact on your P&L and your margin?
Speaker Change: Slowing down and you guys sort of having added the partners and expand into your all your banners and and all that all those sorts of shifts do you expect that a more modest growth rate in E. Commerce will have any impact on your P&L and your margin rates.
Unknown Executive: For sure, and the mix, if e-comm is stabilizing, it will help for sure. Our online sales have continued to grow, as Eric has mentioned, fueled by a third-party partnership and our click-and-collect services that have been deployed in Quebec and are in ongoing deployment in Ontario. We see the growth in e-comm moving to discount and click-and-collect services, so we're satisfied with that growth as well, but as we are accompanying these new initiatives, we expect that growth to stabilize.
Speaker Change: For sure in the mix if E. Comm is stabilizing it will it will it will help for sure. Our online sales is continuing to grow does Eric has mentioned that are fueled by a third party partnership and our click and collect services that have been deployed and Quebec as an as an ongoing deployment in Ontario, we see we see the growth in.
Speaker Change: Discount moving to we see the growth in E com moving to discount and click and collect services. So we're satisfied with that growth as well, but as we are comping. These new initiatives, we expect that grow too to stabilize.
Speaker Change: Yeah understood. Okay I appreciate all the comments.
Unknown Executive: Yeah, understood. Okay, appreciate all the comments. Just to finish on that, so the impact on our P&L, as we get better at it, as the business stabilizes, the P&L picture improves. So it's improving year over year, and we suspect that that should continue.
Speaker Change: Just on that so the impact on the P&L.
Speaker Change: As we are as we get better at it as we as the business stabilizes.
Speaker Change: Part of the P&L picture improves so its.
Speaker Change: Year over year, and we expect that that should continue.
Mark Robert Petrie: Yeah. I understand. Got it. Okay. Thanks for the comments, guys.
Speaker Change: Yeah understood got it okay. Thanks for the comments guys all the best.
Operator: Thank you. Next is a follow-up from Chris Lee at Desjardins. Please go ahead.
Thank you next is a follow up from Chris Li of Deutsche Bank. Please go ahead.
Christopher Li: Oh, hi, good morning. Just maybe a follow-up to the last question, discussion on e-commerce. I'm just wondering more of a big picture question, like what do you think needs to happen for the industry's e-commerce penetration in Canada to get closer to the US or to the UK? Or do you believe there are structural reasons that would keep e-commerce adoption low for longer in Canada?
Christopher Li: Alright, good morning, just maybe a follow up to the last question discussion on E. Commerce I'm, just wondering more of a big picture question like what do you think needs to happen for.
The industry ecommerce penetration, Canada to get closer to that.
Christopher Li: So to the UK or do you believe there are structural reasons that would keep ecommerce adoption lower for longer in Canada.
Christopher Li: Hey, this is a big picture question. So like we've said before we try to stay ahead, we want to serve our customers wherever they want to be served online or in store the share of a V. Common in Canada is lower than some other countries are there there is some growth, but it's it's it's model.
Eric Richer La Fleche: Hey, this is a big picture question. So like we've said before, we try to stay ahead; we want to serve our customers wherever they want to be served, online or in store. The share of e-commerce in Canada is lower than some other countries. There is some growth, but it's modest growth. It's a Canadian consumer, so we want to serve our customers as best we can. Those who want to be online, we will serve them, but that number is a lower number. Will it grow?
Christopher Li: Growth is the Canadian consumers. So we want to we want to serve.
Our customers as best we can those who wanted to be online we will serve them, but that number is a it's a lower number will it grow well it varied by geography, where we're actively involved and we're trying to meet that demand as it comes but that said we're pleased with how we went to market we have a.
Eric Richer La Fleche: Will it vary by geography? We're actively involved, and we're trying to meet that demand as it comes. That said, we're pleased with how we went to market. We have a hybrid model. We have our own functions to pick, store, and deliver. We have a dark store. We have a third party. We have pick and collect. Same day, next day; we try to cover the range of services that customers want and do it in a way that will not be too diluted in earnings and eventually contribute at a better level.
Christopher Li: Hybrid model.
Christopher Li: We have our own functions to pick in store and deliver we have a dark store we have a third party we have click and collect so same day next day. We tried it we tried to cover the range of services that customers want and and do it in a in a way that will not be too dilutive to earnings and eventually.
Christopher Li: Eventually contribute.
And at a better level.
Eric Richer La Fleche: You know, it's hard to say the reasons why it's a bit lower in Canada, but I think it's the search for value, the convenience of food shopping, defining behavior. Give the numbers that we have, so we'll see how it evolves, and we intend to participate.
Christopher Li: It's hard to say the reasons why it's a bit lower in Canada that I think that search for value the convenience of food shopping the buying behavior.
Christopher Li: And.
Christopher Li: Get to the numbers that we have so we'll see.
Christopher Li: How it evolved and we intend to participate.
Christopher Li: Okay, that's great. Eric, and maybe another one for you.
Speaker Change: Okay. That's great and then maybe another one for you just I understand you may not be able to comment on this but as you know there have been media reports that the government is looking to entice new entrance into Canada had a fuss about competition.
Eric Richer La Fleche: I understand you may not be able to comment on this, but as you know, there have been media reports that the government is looking to entice new entrants into Canada to try to foster more competition. For those of us who are not as familiar with the industry, practically speaking, how easy or how hard do you think it would be for a foreign player to come in?
Speaker Change: Those of US who are not as familiar with the industry you know practically speaking, how how easy or how hard do you think it would.
Speaker Change: It would be for a foreign player to come in.
Eric Richer La Fleche: Well, all I can say is that the Canadian food market is very competitive. Any assertion that our industry is not competitive, we disagree with that completely. We compete with large global players. We have strong... We have strong regional and national competitors, we have strong local independents, we have discount dollar stores, you name it, Amazon, Walmart, Costco. This is an extremely competitive market. It's a large geography with a growing population, but for the geography, a pretty small population. We'll see; we'll see if anybody wants to come. It's an open market, and if someone wants to come in, they will do what they have to do, but it's a very competitive market. Okay, thanks.
Speaker Change: Well all I can say is that the Canadian food market is very competitive any are any of them affirmation that our industry is not competitive we disagree with that completely we compete with large global players are.
Speaker Change: We have strong yet.
Speaker Change: Regional and national competitors, we have strong local independents, we have.
Speaker Change: Discount dollar stores.
Speaker Change: Name at Amazon, Walmart Costco and this is an extremely competitive market.
Speaker Change: It's a large geography with a growing population, but for the geography is a pretty small population. So.
Speaker Change: Hum.
Speaker Change: We'll see we'll see if there's anybody who wants to come it's an open market and if someone wants to come in they they they will do what they have to do but it's a very competitive market.
Speaker Change: Thanks for that and maybe last one for me for Francois.
Christopher Li: Okay, thanks for that. And maybe the last one for me, for Francois, just more for modeling purposes. As we look out for fiscal 25, I want to just touch on two things quickly. I guess first, I want to confirm that some of these DC duplicated costs will flow through into fiscal Q1 of next year. And then, secondly, I want to just check in with you to see if you can share any comments with respect to the costs related to the launch of the new loyalty program in the fall in Ontario.
Francois: For modeling purposes, as we look out for fiscal 'twenty five.
Francois: Wanted to just touch on quickly on two things I guess first I wanted to confirm that.
Francois: Some of these decent duplicated costs.
Francois: Will flow through into fiscal Q1 of next year and then secondly, I wanted to just check in with you to see if you can share.
Francois: Comments with respect to the cost related to the launch often Lord Lupton, new loyalty program.
Francois Thibault: Well, some of the duplication costs will flow through Q1, but we're expecting them to be lower. You know, we are launching Phase 2 of our new automated DC in Ontario, so that will also have an impact going forward in Fiscal 25, but it will improve so that we are able to say that we will be back to our normal growth profit increases for Fiscal 25. So, no change on that. For the cost to launch Moi in Ontario, like I said, we'll give you more details as we get closer. Yes, we will have some marketing expenses to launch a program, but we intend to manage that as part of our marketing budgets to a large extent, and we'll keep you posted as we get closer.
Francois: And in the fall in Ontario.
Francois: Well some of the some of the duplication costs Wolf.
Francois: Flow through Q1, but they will do we're expecting that to be lower.
Francois: We are we are launching phase phase II of our fresher automated DC in Ontario, So that will that will also have an impact going forward in fiscal 'twenty, five but improving so that we're able to to say that we will be back to our normal gross profit.
Francois: Increases for fiscal 'twenty five so no change on that.
Francois: You are saying.
Francois: The cost to launch more in Ontario, but like I said, we'll give you more details as we as we get closer yes, we will have some marketing expenses to launch a program, which we are we intend to manage that as part of our of our marketing budgets to a large extent and we'll keep you posted as we get close exactly.
Christopher Li: Okay. Thanks, guys, and all the best.
Okay, Thanks, guys and all the best.
Operator: Thank you. And at this time, we have no other questions registered. Please proceed.
Speaker Change: Thank you and at this time, we have no other questions registered please proceed.
Unknown Executive: Thank you all for your interest in Metro, and please mark your calendars for our third quarter results on August 14th. Thank you.
Speaker Change: Thank you all for your interest in Metro and please Mark your calendars for our third quarter results in August. Thank you.
Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your lines.
Speaker Change: Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines.
Speaker Change: Hum.
Speaker Change: Yes.
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Speaker Change: Okay.
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Speaker Change: Uh huh.
Speaker Change: Yeah.