Q4 2025 Metro Inc Earnings Call
Speaker #1: Good Good morning, ladies and gentlemen, and welcome to the METRO INC. 2025 fourth quarter results conference call. At this time, all participant lines are in a listen-only mode.
Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require assistance, please press star zero for the operator.
Speaker #1: Also, note that the call is being recorded on Wednesday, November 19th, 2025. I would now like to turn the conference over to Sharon Kadoche, Director Investor Relations and Corporate Finance.
Speaker #1: Please go ahead.
Speaker #2: Merci Sylvie. Good morning, everyone, and thank you for joining us today. Our comments will focus on the financial results of our fourth quarter, which ended on September 27th.
Speaker #2: With me today is Mr. Eric Fleche, President and CEO; Nicolas Amyot, Executive VP and CFO; Marc Giroud, Chief Operating Officer; and Jean-Michel Coutu, President of the Pharmacy Division.
Speaker #2: During the call, we will present our fourth quarter results and comment on its highlights. We will 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.
Speaker #2: 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", or "confident that", "will", and other similar words or expressions are generally indicative of forward-looking statements.
Speaker #2: The forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy, our annual budget, and our 2025 action plan.
Speaker #2: 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.
Speaker #2: 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 under the risk management section in our 2024 annual report.
Speaker #2: 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.
Speaker #2: I will now turn the call over to
Speaker #2: Nicolas.
Speaker #3: Okay. Thank you, Sharon,
Speaker #3: and good morning, everyone. I will now go over our Q4 results, starting with the comments on our Toronto freezer situation. As you are all aware, operations at our frozen distribution centre in Toronto have stopped on Friday, September 12th, as a result of a mechanical issue with the refrigeration system.
Speaker #3: Since then, our teams have been working hard on securing supply for our Ontario food retail network. Our contingency plan is ongoing and working well, and Eric will be sharing more colour on the state of the DC in a minute.
Speaker #3: On my end, I will be focusing on the financial impact of this situation in Q4, as well as the expected spillover in our first quarter of F26.
Speaker #3: The after-tax financial impact of this situation on our fourth million, or 30.6 million before taxes. quarter was 22.5 Which includes 24.5 million for inventory losses as well as 6.1 million for other direct costs related to temporary equipment rental to keep the temperature down in our freezer, as well as incremental transportation and third-party logistics costs for the execution of our contingency plan.
Speaker #3: Looking forward to Q1 of F26, we estimate that the direct costs associated with the rental of temporary chilling equipment and with the execution of our contingency plan will impact our net earnings by approximately 15 to 20 million dollars.
Speaker #3: The impact on sales and margin is expected to be modest. Given the contingency plan in place, we expect being essentially back to normal by the end of December.
Speaker #3: Now turning to our Q4 results. Total sales reached 5.1 billion, an increase of 3.4% versus the fourth quarter last year, driven by higher sales in our discount and pharmacy retail networks.
Speaker #3: Food same-store sales grew by 1.6% in the quarter, while pharmacy same-store sales grew by 4.8%, supported by a 5.5% growth in prescription sales and a 2.9% growth in front-end sales.
Speaker #3: Our gross margin reached $1.022 billion, or 20% of sales, compared to 19.7% in the same quarter last year. The year-over-year increase is partly attributable to shrink improvement in food retail activities, as well as productivity gains at our food distribution centers.
Speaker #3: Note that the direct costs related to the freezer were recorded under operating expenses. Turning to operating expenses, they were $535 million in the quarter, up 4% year-over-year.
Speaker #3: As a percentage of sales, operating expenses were 10.5% versus 10.4% in the fourth quarter last year, as they were unfavourably impacted by 6.1 million of direct costs related to the temporary shutdown of our freezer.
Speaker #3: Excluding these costs, operating expenses grew by 2.8% year-over-year and represented 10.4% of sales, the same percentage as Q4 last year. EBITDA for the quarter, amounted to 485 million, that's up 5.5% year-over-year and stands at 9.5% of sales.
Speaker #3: Adjusting for the 6.1 million direct costs, incurred for the Toronto DC, adjusted EBITDA stood at 491 million, up 6.8% year-over-year, reaching 9.6% of sales, an increase of 30 basis points over Q4 2024.
Speaker #3: Total depreciation and amortization expense for the quarter was $140 million, up $4.1 million. Net financial costs for the fourth quarter were $30.4 million, compared to $32.6 million last year, due to higher interest on net debt.
Speaker #3: Our effective tax rate of 24.1% is lower than the effective tax rate of 24.5% in the fourth quarter last year, largely driven by the turbine tax holiday.
Speaker #3: Adjusted net earnings were 246 million, compared to 227 million last year, an increase of 8.6%, while adjusted fully diluted net earnings per share amounted to $1.13 versus $1.02 last year.
Speaker #3: This is up 10.8% year-over-year. These results are adjusted for the 22.5 million after-tax impact of the freezer situation. Our capital expenditures in fiscal 25 totaled 511 million, down 69 million versus last year.
Speaker #3: The lower year-over-year CapEx level is mainly the result of the completion of our automated distribution centres in the summer of '24. Looking forward, we expect CapEx in F26 to reach approximately 550 million, as we continue to invest in our retail network.
Speaker #3: On the food retail side, in fiscal 2025, we opened 14 stores, including 5 conversions, and carried out major expansions and renovations at 77 stores for a net increase of 294,000 square feet, or 1.4% of our food retail network square footage.
Speaker #3: Under our normal issuer bid program as of November 7th, we have repurchased 8.7 million shares, for a total consideration of 848 million, representing an average share price of $97.51.
Speaker #3: Closing in on fiscal 25, we are very pleased with our financial performance and the fact that we delivered against our financial framework. I will now turn it over to Eric for more colour on our DC situation as well as on our overall performance.
Speaker #3: Thank
Speaker #3: you. Thank you, Nicolas and
Speaker #2: Good morning, everyone. We delivered another solid quarter to finish a very good year, meeting or exceeding our financial framework metrics. In fiscal 2025, we grew sales by 3.7%, adjusted EBITDA by 5.5%, and adjusted earnings per share by 10.9%.
Speaker #2: Before turning to the quarterly results, let me share some color on the state of our frozen DC in Toronto. I'm pleased to report that operations resumed on November 10, and we started shipping to our stores yesterday.
Speaker #2: We expect to essentially be back to normal by the end of December. The mechanical issue responsible for the shutdown affected several components of the refrigeration system, and the repairs were complex.
Speaker #2: The setback was not related to the automation system. Our automated freezer DC in Quebec assumed a substantial portion of the Ontario volume, together with three Ontario-based third-party logistics providers.
Speaker #2: And also increased direct-to-store deliveries from several suppliers. I want to thank all our teams and partners who have worked non-stop on our contingency plan to minimise the impact on our customers.
Speaker #2: We have insurance coverage in our currently working with our insurers to confirm the amounts that we will be entitled to recover. Turning to the fourth quarter, we recorded sales growth of 3.4%, food same-store sales were up 1.6%, and 3.8% over two years.
Speaker #2: Discount continues to drive same-store sales faster than metro, with the gap between them remaining consistent with the prior quarter. Food same-store sales were negatively impacted by about 30 basis points due to the shutdown of the freezer over the last couple of weeks of the quarter, and also by the lift we had during the LCBO strike that occurred in the fourth quarter last year.
Speaker #2: Total food sales growth of 3.2% reflects the performance of our new stores and conversions, which we are very pleased with. Our internal food basket inflation was below the reported food CPI of 3.4%.
Speaker #2: We continue to see inflationary pressures on certain commodity prices, namely in the meat category. We are presently in our price freeze period; however, we continue to receive price increase requests from our vendor partners at levels higher than the typical 2% to 3%.
Speaker #2: We continue to negotiate hard to minimise the impact on consumers going forward. During the quarter, our metro stores saw an increase in average basket, partly offset by a slight decrease in transactions.
Speaker #2: On the discount side, both basket and foot traffic were up as customers continued to search for value. Promotional penetration remains at elevated levels and consistent with prior quarters.
Speaker #2: Private label sales continue to outperform national brands by a healthy margin. The competitive environment remains intense but rational, and our market share was flat for the quarter.
Speaker #2: Online sales grew by 19.8% in the quarter, driven by the
Speaker #1: Party Third . marketplaces . Last month we celebrated the first anniversary of the loyalty program in Ontario . Although still early in the program , we continue to see encouraging metrics with a growing member base improved penetration and rates .
Speaker #1: Turning to pharmacy , the business sustained its momentum with another quarter of strong sales growth and positive front end performance . Prescription sales were up 5.5% , driven driven by continued organic growth .
Speaker #1: Specialty medications . GLP one and clinical services . In fiscal 25 , we recorded 5.4 million clinical services in our network of pharmacies .
Speaker #1: A number that is well aligned with our leading market position in the province of Quebec . Commercial sales were up 2.9% . The strong performance was driven mainly by growth in beauty and cosmetics , and partly offset by a slow start to the cough and cold season .
Speaker #1: Nicola As mentioned , we are on track with our plan to accelerate the development of our growing discount banners as we successfully nine new opened stores and converted five stores in we fiscal 25 , continue to see more opportunities in the coming years , and our plan calls for a dozen new discount stores in fiscal 26 , including a few conversions .
Speaker #1: Looking forward halfway through our first quarter , we are seeing similar trends to Q4 in food . Same store sales on the pharmacy side .
Speaker #1: Prescription sales continue to be strong , but sales of OTC products are softer due to the slow start of the cough and cold season to conclude , in addition to the ramp up of the freezer .
Speaker #1: Our focus remains on realizing efficiency gains throughout our supply chain and store network. While we continue to execute on our plan to accelerate the development of our growing discount banners.
Speaker #1: We remain steadfast in our efforts to deliver the best value possible to our customers through our effective merchandising programs. Strong private labels, the program, and consistent at-store execution level.
Speaker #1: Thank you . And we'll be happy to take your questions .
Speaker #2: Thank you . Ladies and gentlemen , if you do have any questions , press please star followed one on your by touchtone phone .
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Speaker #2: If you have any questions , first we will hear from Chris Lee at Desjardins . Please go ahead .
Speaker #3: Oh good morning everyone . Thanks first for quantifying the impact on the same store sales with the the Eric , shutdown . I just want to wondering , are you still seeing some impact in Q1 when you set the trends or in Q1 ?
Speaker #3: And similar to Q4, or is that 30 basis points pretty much now behind you in Q1?
Speaker #1: The answer is we continue to see an impact from the freezer situation . It is impacting our same store sales a bit . So that's continuing .
Speaker #1: I said the 30 basis events . points was two The the freezer for two and a half weeks and the Lcbo last year .
Speaker #1: So the freezer situation is having an impact . We're losing a bit of sales and margins . It doesn't show too much to the consumer , but we don't have a full assortment and certain categories in frozen bakery is an example .
Speaker #1: So when I say similar trends in Q1 to Q4 , we're in the same very much the same ballpark . And we continue to to be affected by the freezer situation .
Speaker #1: It is a bit of a drag included in that number .
Speaker #3: Okay . And once it's presumably fully back online by end of this calendar year , I mean , that shouldn't really be a headwind anymore .
Speaker #1: That's correct .
Speaker #3: Okay . Okay . That's helpful . And then just maybe a quick one on gross margin , you know , continue to benefit nicely from the productivity gains at the food disease .
Speaker #3: Is it fair to assume we'll continue to see the benefits manifested in in fiscal 26 .
Speaker #4: So hi Chris . Good morning . I would say However , yes . I guess as you know , we are in a very competitive industry .
Speaker #4: So we're always , you know , looking at preserving , gaining market share . So not to say that some of these benefits would not be quote unquote reinvested in promotional activities , but the I would say that , yes , the benefits that we've been able to capture are there to stay .
Speaker #4: So okay .
Speaker #3: That's helpful . And maybe last question on the pharmacy business , another you had very strong year , both in terms of prescription and commercial sales growth .
Speaker #3: I guess my question is , do you expect kind of similar drivers for this year that have supported the strong growth in the previous fiscal year ?
Speaker #3: And then what are some of the things that you guys are watching closely ?
Speaker #1: Yeah , we expect the same , same fundamental trends . You know , the the RX growth has been very strong . The last couple of years .
Speaker #1: seeing still good We're growth . The expanded scope of practice going forward is going to be a tailwind on RX . Eventually when when Bill 67 kicks in on the front end you know it's a competitive market .
Speaker #1: We're well positioned . We have a great network , good merchandising , good programs , and we're confident ability to in our continue to to see decent growth in our in our front end sales .
Speaker #1: You know , the fundamental drivers are still there . Aging population , health , health trends , clinical services , expanded scope of practice .
Speaker #1: These are all , you know , good good good good tailwinds , structural tailwinds for for pharmacy for us in Quebec .
Speaker #3: Okay, thanks, Eric. And all the best.
Speaker #1: Thank you .
Speaker #2: Next question will be from Mark Cardin at Please UBS . ahead .
Speaker #5: Good morning . Thanks so much for taking the question . So just to start , I just wanted to to see your latest thinking on the health to consumer has purchasing behavior changed much quarter from last ?
Speaker #5: And then just related , are you still seeing much of a Buy Canadian push .
Speaker #1: So behavior is consumer very similar to what we've been reporting for several quarters . As I outlined in my opening remarks . So not much to not not much to add .
Speaker #1: There . Buy Canada . It has softened up . There's still there's still more growth in Buy Canadian product sales than than non-Canadian product sales .
Speaker #1: But that growth has somewhat narrowed versus what we saw in spring and summer . So it's it's declining a bit . And since counter-terrorists were lifted in on September 1st , some of these products , US products prices have gone down .
Speaker #1: So, that's maybe contributed to the narrowing of that gap.
Speaker #5: Okay , great . And then just on prescription drugs , you guys continue to do well . There . Slight acceleration from the last few quarters though .
Speaker #5: Just curious what the primary drivers you're seeing in the growth in prescription drugs are from a category standpoint . You know , what you're seeing from the one angle .
Speaker #5: And GLP then any update on your outlook for healthcare services ?
Speaker #1: Well , let's have a crack at that .
Speaker #6: Yeah . So I think Eric highlighted the drivers very well . So GLP one is continue to to be a tailwind . There's been some some changes in that category as new products have come into into market in Canada .
Speaker #6: And that's also continuing to boost growth in in that category overall . In terms of professional services . We're continuously growth on professional services , although since there's new no new services , we're starting to see that it's moderating a little bit .
Speaker #6: But with PL 67, we do expect that to pick up. We don't have any news on the PL 67 front right now.
Speaker #6: We're probably looking at a January timeline . Depending on the negotiations between the government and the UCP . But other than that , it's the same underlying drivers that are going to continue to to , to to maintain that momentum in 2026 .
Speaker #6: For us .
Speaker #5: Great . Thanks so much and good luck , guys .
Speaker #1: Thank you .
Speaker #2: Next question will be from Irene Natal at RBC Capital Markets. Please go ahead.
Speaker #7: Thanks and good morning everyone . I think we're all kind of hyper focused on any marginal changes in the environment , the competitive intensity , consumer behavior .
Speaker #7: based But on your comments . Eric , like , are there really any or is it fairly stable to , let's say , earlier in the year ?
Speaker #1: I it's I think think it's fairly stable . It's very consistent environment , I would say . And consumer behavior , the accelerating square footage growth is , is , is not new from for this quarter .
Speaker #1: it's But it's it's been it's been something that you know we've we've opened stores . Others opened stores . have So there's industry square footage growth out there .
Speaker #1: That's having having an effect . It's it's making the market certainly more competitive . So the you know the level of same store sales were reporting I think reflects some of that new competition , new square footage in the market .
Speaker #1: that's the So only comment I would add .
Speaker #7: That's really helpful . Thank you . And then just coming back to a comment that you made about requests for a price increases , being in excess of the historical 2 to 3% , I think you called out meat , but what about other categories and what would be your expectation for where things actually settle out versus the requests ?
Speaker #1: you know So , , price requests of over two 3% is not unusual . They we we we see that before mid-single digits high single digits , sometimes more .
Speaker #1: It depends on the category . The ingredients where the particular situations . So this is I would say normal . Normal situation . There's a the quantity remains elevated of price increase request .
Speaker #1: But we deal with it as best we can . We negotiate in good faith with our vendors . We push back when we when we can , and when when it's justified .
Speaker #1: We it will be a market increase and we we will have to take it . As I said in the opening remarks , we're in the freeze right now .
Speaker #1: So there was some price increases before November 15th and the next wave will not come before February . So , you know , consumers , we're trying to protect consumers as much as we can and give value as much as we can .
Speaker #1: And what the outcome of those negotiations are , we expect to be normal . And we expect it to be manageable . And we expect to stay in a range of inflation in the 2 to 3% .
Speaker #1: But , you know , the jury's out and I don't have the famous crystal ball . We'll see where it lands .
Speaker #7: That's great . Thank you . And just one final one for me please know , . You you mentioned the accelerating square footage growth .
Speaker #7: Your yours and the others , notably in discount . What kind of returns are you seeing as you open these real estate projects ?
Speaker #7: Are they any different from, and are historically?
Speaker #1: In general , we're pleased with our returns . We we analyze investments very carefully . We have our internal We're meeting thresholds . our investment thresholds .
Speaker #1: So , you know , market by market , investment by investment . We're careful to make the decisions that will contribute to long term shareholder growth .
Speaker #1: And capture market share that we think is out there to capture for us in a responsible and disciplined way . So short answer is we're meeting our financial we're targets .
Speaker #7: Thank you .
Speaker #2: Next question will be from Michael van Elst at TD Cowen . Please go ahead .
Speaker #8: Hi . Thank you . I just wanted to go back on your answer to one of the earlier questions about the industry square footage growth , and , I mean , I think it's makes sense that it's moderating the levels of same store sales growth .
Speaker #8: But you also said that it's making the industry more competitive now . I guess I'm wondering , is it just making it more competitive in terms of lowering that same store sales growth , or is it also impacting your gross margins because your gross margin up 23 basis points was was actually quite solid and , you know , so I'm kind of curious as to whether you're seeing pressure on the gross margins .
Speaker #1: Comment was more was more the same . There's a new store opening across the street . It makes it more competitive for your network .
Speaker #1: So I said square footage makes it more competitive because it adds competition in certain markets, and it impacts same-store sales for that market.
Speaker #1: So for me , it's one and the same . The gross margin . We're pleased with our results this quarter . So you know we're we're we're able to manage manage through this competitive environment .
Speaker #1: And pleased with our performance . I think we have experienced merchandisers and we're we're doing what we can to meet to meet our targets .
Speaker #1: But we're in a competitive environment and always have been .
Speaker #8: Okay . So okay . And then Nicholas mentioned that the the the DC efficiencies that you're getting are helping to drive that gross margin higher .
Speaker #8: I was the mean , that case obviously in this quarter in in the face of some of this competitive pressures . So what might change .
Speaker #8: What do you think might change over the next over fiscal 26 . That might require you to reinvest some of that margin . Margin improvement back into promo activity .
Speaker #8: Like you suggested might might be possible , necessary .
Speaker #1: I don't want to speculate . We we are competitive . We always will be competitive in the market to protect our share , protect our sales and deliver decent margins to to our to our shareholders for the business .
Speaker #1: What might change ? You know , it's hard it's hard to to give you a straight answer or clear answer to that . We're in a competitive market and we're confident in our position and our ability to compete .
Speaker #1: We're well positioned with our network of stores, both Metro and discount, in both provinces, with a very good market share. I think we're well positioned to continue to do well.
Speaker #8: Okay , so maybe just I'll ask bit it a little clearer . Is there anything that you're seeing now that's causing you to reinvest some of that gross margin gain that you that you got in Q4 , or is that just is that just a possibility in future quarters ?
Speaker #1: Well , it's always a possibility . But , you know , we don't give guidance like that . And I think we should .
Speaker #1: That's all I'm going to say.
Speaker #8: Okay . Just to be clear on the on the impact , when DC you talked about the direct impact of 6 million , all of that was in OpEx , I believe you said .
Speaker #8: when you So say you got you had , you know , I don't know , you said 30 basis point impact from two factors .
Speaker #8: So let's call it 20 basis points from the freezer . Was that impact was that adjusted for in the EPs or was that not or was that left to flow through ?
Speaker #4: No . So so what I said , as you mentioned , is that all the direct costs associated with the freezer were recorded under OpEx know , .
Speaker #4: You when the free freezer situation happened , we completely stopped operating the freezer , shipping products out of the freezer . So the the gross margin benefit that we've seen , you know , was realized , if you will , prior to that situation and his quote unquote , not adjusted for it just does not include any impact for the The all freezer .
Speaker #4: The direct cost, incremental costs in are OPEX.
Speaker #1: But just to pick up , to pick up on that , we did not adjust for the lost sales and the margins on those lost sales .
Speaker #1: We adjusted for the loss of inventory in the warehouse and the direct costs.
Speaker #4: That was that clearer . Mike . Mike .
Speaker #8: Yeah , that's that's clear . Thank you very much .
Speaker #4: Okay .
Speaker #2: Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.
Speaker #9: Yeah . Thanks . Good morning . Thanks for all the comments on the competitive consumer and the environment . That's that's very helpful .
Speaker #9: Hoping you elaborate on the can steps you took with regards to the frozen DC . Just to get it back on track to full operations , you know , was it repair replace and how have you sort of addressed the risks of of recurrence .
Speaker #1: Thank you . Thank you for that question . So I'm not an engineer and I don't want to things that say are way my out of my league .
Speaker #1: But it was a complex repair and set up involved . So it compressors that were repaired , heat exchanger that was that is being replaced .
Speaker #1: So we are we are changing some components of the heat exchanger system to a different system . will be And we adding some redundancy so that we will avoid the situation .
Speaker #1: We will do eventually or in the not too distant future . We we don't same face the risk in our other frozen , automated , frozen facility in Quebec .
Speaker #1: That one is a fresh and frozen building on a different refrigeration system . We we we made sure that we we have enough capacity and redundancy .
Speaker #1: Redundancy there . We will add even more . But we are we are in a good position there . And I think the the risk is , well managed .
Speaker #1: I think the good news in this , in this catastroph is what our Quebec DC was able to pick up from Ontario . So very pleased that we were able to increase capacity in turbine in short order , quite substantially .
Speaker #1: So that proves that we have , you know , good networks , good facilities , with good systems that that can operate . Again , the breakdown in Toronto was really mechanical refrigeration related , not it or automation related at all .
Speaker #1: I hope this answers your question .
Speaker #9: Yes it does . Thank you . And I'm not an engineer either . So that's more than enough for me . But I guess maybe just to follow up the the cost for whatever you did have to do with turbine , that's included in in the 15 to 20 million for Q1 or that's just included in your overall CapEx budget or where do those costs fall ?
Speaker #1: So the 1520 that we that we flagged out for Q1 , a lot of that is transportation costs and that , you know , that includes turbine .
Speaker #1: So we're shipping from turbine to Ontario stores all over the province . So that has a that has a substantial cost . Transportation that's that's in that costs .
Speaker #1: And number .
Speaker #9: Yeah . Okay . Sorry . I just I just meant the the cost of the equipment . But I think it was probably relatively small .
Speaker #9: And then my only other follow up question just on , on the , on the sensor sales growth and or I guess specifically to inflation , it seemed like the gap to CPI was wider .
Speaker #9: This quarter than it has been in the last , you know , number of quarters . Would that be a fair interpretation ? And if so , when you look at your internal data , what would what would account for that ?
Speaker #1: I wouldn't say the gap to CPI increased . We're we're in the same in the same ballpark . CPI for our markets was 3.4 .
Speaker #1: We're we're in the three range . So it was about a similar gap in the previous quarter . If I recall . We don't see we don't see a huge gap .
Speaker #1: But there's a gap .
Speaker #9: Yeah okay . Thanks for the clarification . And all the best .
Speaker #2: Next, I'd like to introduce Rachael Shridhar from National Bank. Please go ahead.
Speaker #10: Hi . Thanks for taking my questions . I just wanted to circle back to the GLP one that will go generic and and have an on on impact Metro's drugstore business .
Speaker #10: Is it fair to suggest that there'll be an impact on same store sales growth ? Yeah , and gross margin dollars ? Or do you anticipate some of that being completely or more than offset by volume ?
Speaker #6: Yep . So I could take this one . So it's it's a good question . It's right now the challenge is we don't have a crystal ball .
Speaker #6: So we can't really tell you when Ozempics could be genericized . There's been some delays . We know that the first submission did receive a notice of non-compliance .
Speaker #6: So clearly this could be further into pushed 2026 for us . Some people are saying spring . And then the question becomes will they have enough supply to to meet the demand ?
Speaker #6: also is That going to change the dynamics . The dynamic in the impact of GLP one for us . But but when you right now , the it's is for submission Ozempic , which is primarily for diabetes .
Speaker #6: Are they going to be prescribing it also for weight loss ? Chances are yes . But they're there are other alternatives . As I mentioned earlier on the market now right that have also continued to bring a little bit more dynamics to the to that category .
Speaker #6: But yes , it will . A generic if the demand doesn't pick up because of the lower cost , will deflate , will create some deflation in our same store sales .
Speaker #6: now , when Right we look at latent demand , we do expect some because pickup of the accessibility of the new price point .
Speaker #6: And then, in terms of margin in our model, it can create some margin decrease as we make margin as a percentage from wholesale.
Speaker #6: So that's I mean that's the dynamic right now in the market . But there's still a lot of unknowns for 2026 .
Speaker #10: Okay . Thank you for that . That was helpful . With respect with respect to the the Jean Coutu network is that sufficiently outfitted to capture the growing demand for professional services ?
Speaker #10: And how can I think about the size of that business for for Metro ?
Speaker #6: Yeah . So , so right now it's it's more of a same store sale business . And we take we get royalties on those , on those fees .
Speaker #6: But when we look at our network , we are very well positioned . We've invested for a long time in making sure that our stores have sufficient consulting rooms .
Speaker #6: On average , two per store . And now we're looking at stores with three and four as we're renovating and continuing to to expand our stores .
Speaker #6: So we are in a very position to strong continue to offer these professional services across our network . It's something we've always invested in and we see it right now .
Speaker #6: We're capturing our fair share of professional services . This is continuing to grow .
Speaker #10: Thank you .
Speaker #2: question will be Next from John Zamparo at Scotiabank . Please go ahead .
Speaker #11: very much . Thank you Good morning . I wanted to follow up on the gross margin gain topic . The year over year gain this quarter was significantly more than what Metro had posted over the last three quarters .
Speaker #11: I know you called out improvements in shrink productivity gains from the D.C., but is there any color you can add on why this made a more meaningful improvement this quarter versus the past three?
Speaker #1: Not really. Maybe Marc can add color, but not really.
Speaker #12: Maybe a comment on the on the two questions regarding margin . Gross is a margin very dynamic and fluid . Concept or results .
Speaker #12: Where our focus is winning on customer value and driving tonnage and maintaining share and delivering . As Eric said , the and bottom line shareholder value .
Speaker #12: So the rate itself for us is a is a guiding post , but not an objective on itself . So depending on the quarter , depending on the dynamic , of the depending tonnage available , our team will merchandising invest and deploy strategy to win in the marketplace .
Speaker #12: As you as you've seen in the past , our gross margin have been quite stable for multiple quarters , some to Nicola's point earlier .
Speaker #12: Some of the productivity gains and shrink gains sometimes are reinvested to drive tonnage, and sometimes they're flowing to the bottom line. I don't know if that helps and provides additional color.
Speaker #12: Yes .
Speaker #13: you Thank
Speaker #13: .
Speaker #11: thank you
Speaker #11: . And just to follow Yes , up on that , the fact that shrink is listed as the first factor , should we interpret that as that was the larger of the two drivers between that and productivity ?
Speaker #4: Not necessarily . John , I would say , you know , it's a it's a combination of of shrink DC productivity DC , including within the DC as well as all of our logistics around transportation .
Speaker #4: So I would say that they are , you know , similar contributors .
Speaker #11: Got it . Okay . And then in the outlook , you talked about 12 new or converted stores in Apologies F 26 . if I , if I missed it , but can you say what you expect for for net square footage growth for this year ?
Speaker #1: A little for for fiscal 26 . We're seeing a above 1% , you know , one 1 to 1.4% . You where we land .
Speaker #1: .
Speaker #11: Okay I'll pass it on . Thank you .
Speaker #2: Once ladies and again , gentlemen , if you do have any questions , please press star , followed by one on your touch tone phone .
Speaker #2: Next is a follow up from Michael van Elst . Please go ahead .
Speaker #8: Hi there . Just a quick one on the insurance claim . I know you said you're still negotiating it , but is your expectation that it's going to cover most of the most or all of the the direct and indirect and inventory hit or or just one of them ?
Speaker #8: Then, do you have any idea of the timing?
Speaker #1: Michael I would have liked to report that exactly that we're going to get it all back . It's you know , it's these are complex policies with several insurers .
Speaker #1: So what I , what I read is what I'm told I should say , we're making our claims . We're , we're going to get as much as we can .
Speaker #1: We think we're well covered with good with good coverage and hopefully we'll keep you posted . hope to And we get we get hope to get most , if not all of it back , but we'll see .
Speaker #1: We'll see where it ends up .
Speaker #13: Yeah .
Speaker #8: Can you comment at all on the timing?
Speaker #1: Hard to to say we're going to get some some advances . It looks like they're going to they recognize liability . So we're going to get some money pretty early for the rest I don't know how long it will take .
Speaker #1: So we'll keep you posted .
Speaker #13: Thank you .
Speaker #2: Next question is a follow up from Chris Lee . Please go .
Speaker #3: Oh sorry . I'm sorry . If you talked about this already , but it's a question on your the quarter . expenses for If we exclude the 6 million of non-recurring costs , fairly it was normal .
Speaker #3: it was I think up just under 3% . I know you don't give any sort of guidance for this year , but I just wondering , like , is there anything over the horizon that would cause you perhaps to deviate from that 3% growth for this If you year ?
Speaker #3: Exclude the one-time costs that are still coming in in Q1. Thanks.
Speaker #4: Yeah . So as you've mentioned , I think adjusted for the direct cost of the freezer , the year over year growth of SGA was Nothing 2.8% .
Speaker #4: specific to highlights . You know , multiple categories contributed quote unquote normally to the increase . Nothing . Nothing that we see on the horizon that should that should have a material , you know , impact .
Speaker #4: We have always ongoing union labor negotiations that that could , you know , come and have an impact . But as you've mentioned , don't we don't give we specific guidance .
Speaker #4: And I would say nothing , nothing specific to to to highlight , okay .
Speaker #3: That's that's helpful . And then on the share buyback you bought back , I think 800 million of shares in fiscal 25 , do you expect a similar amount in fiscal 26 .
Speaker #3: And then maybe related to that , you do have a still a very strong balance sheet . I think your leverage is only 2.2 times , which is below your target .
Speaker #3: Do you anticipate there's more room maybe to use that to accelerate buybacks ? If you think it's appropriate ?
Speaker #4: Yeah , I think at this point , as I've mentioned , we've as of November 7th , we have repurchased 8.7 million shares .
Speaker #4: The total approved program was 10 million shares . We're obviously not going to get to that by November 26th . I would say that next year at this point , I would expect a similar program and , you know , similar kind of operating conditions , meaning we're not necessarily going to totally , totally fill it up .
Speaker #4: And I think leverage wise , we've been saying that we are in a good position , balance sheet wise . We might we might increase leverage in the future depending on conditions .
Speaker #4: And I would say for the moment, the message is the same.
Speaker #3: Okay. That's helpful. Thank you very much.
Speaker #2: Thank you. At this time, we have no other questions registered. Please proceed.
Speaker #1: Thank you .
Speaker #14: All for your interest in Metro. Please mark your calendars for our first quarter results on January 27th. Thank you.
Speaker #2: Thank you , ladies and gentlemen . This does indeed conclude your conference call for today . Once again , thank you for attending .
Speaker #2: At this time , we ask that you please disconnect your lines . Have yourselves a good .