Metro TSE: MRU reported fiscal 2026 second-quarter results showing higher sales and earnings, with management highlighting continued momentum in the pharmacy business and benefits from distribution center productivity and private label performance. Executives also addressed an ongoing strike affecting produce distribution in Québec operations, noting the financial impact will be clearer once the dispute is resolved.
Second-quarter sales rise 4.1% to C$5.1 billion
Executive Vice President and CFO Nicolas Amyot said second-quarter sales totaled C$5.1 billion, up 4.1% from the prior year, supported by new store openings, same-store sales growth, and what he described as “the transfer of one significant pre-Christmas shopping day to the second quarter this year.”
Food same-store sales grew 1.8% for the quarter, or 1.5% when adjusting for the calendar shift, Amyot said. In pharmacy, same-store sales increased 5.1%, driven by a 6.1% gain in prescription sales and 2.8% growth in front store sales.
President and CEO Eric La Flèche said the company was “very pleased with our discount store expansion plan that is fueling our food sales growth and with the continued strong momentum in our pharmacy business.” He added that Metro’s discount banners delivered same-store sales growth above the Metro banner, aided by openings and conversions.
Margins and expenses supported by productivity gains and cost discipline
Amyot reported gross margin of C$1.03 billion, or 20.1% of sales, compared with 20.0% in the same quarter last year. He attributed part of the increase to productivity gains in distribution centers and noted that operations at the Toronto distribution center have returned to normal.
Operating expenses were C$538.9 million, up 3.4% year over year. As a percentage of sales, operating expenses improved to 10.5% from 10.6%, which Amyot said reflected “continued cost discipline.”
Metro recorded net gains of C$20.4 million from asset disposals during the quarter, including C$20.1 million from the disposal of out-of-service warehouses. EBITDA rose 10.3% to C$508.6 million, representing 9.9% of sales. Excluding the warehouse disposal gain, adjusted EBITDA was C$488.5 million, up 6.0% and equal to 9.6% of sales, an increase of 16 basis points from the prior year’s second quarter.
Asked about gross margin performance, La Flèche said Metro does not break out food versus pharmacy margins, but cited private label, lower shrink, and improved forecasting as contributors. “I think the teams did a good job to protect and slightly grow gross margin,” he said.
Earnings increase; debt ratio about 2.2x after bond issuance
Adjusted net earnings were C$236.5 million, up 4.4% from C$226.6 million in the year-ago quarter, while adjusted fully diluted earnings per share rose to C$1.11 from C$1.02, an 8.8% increase, Amyot said.
Depreciation and amortization expense rose C$8.2 million to C$144.3 million, which Amyot linked to increased retail network investments (including right-of-use assets) and ongoing technology spending.
Net financial costs increased to C$37.3 million from C$33.4 million, primarily due to higher interest expense on net debt, according to Amyot. He said Metro issued a five-year, C$350 million note on Feb. 25 with a 3.469% interest rate, using proceeds to repay revolving credit facility borrowings and for general corporate purposes. Including the financing, Metro’s debt-to-EBITDA ratio stands at “about 2.2x,” he said.
The company’s effective tax rate was 24.6%, similar to last year’s 24.5%, continuing to benefit from the Terrebonne distribution center tax holiday, Amyot added.
Store expansion, renovations, buybacks and online growth
Capital expenditures were C$85.3 million, consistent with last year, Amyot said. After 24 weeks on the food retail side, Metro opened or converted six stores and completed four major renovations, resulting in a net increase of 141,000 square feet, or 0.6% of food retail network square footage.
La Flèche said that halfway through fiscal 2026, food retail square footage growth was 0.6%, and over the last 12 months it was up 1.9%, with most new openings in discount formats and primarily in Ontario. On the pharmacy side, he said Metro completed 15 of 35 renovation projects planned for fiscal 2026 after two quarters, including seven pharmacies under a new concept.
Under its normal course issuer bid, Metro repurchased 2.9 million shares as of April 2 for C$279.8 million at an average price of C$96.47, Amyot said.
Online sales grew 19.8% in the quarter, La Flèche said, driven by third-party marketplaces, click-and-collect ramp-up, and discount-banner delivery. COO Marc Giroux said e-commerce has lower contribution than brick-and-mortar sales, but Metro has been working to narrow the gap through efficiency initiatives. He said management expects e-commerce growth to normalize as the market matures, while the company continues to focus on efficiency “not only in e-com but in our overall business.”
Strike in Québec operations expected to affect fiscal Q3, not Q2
La Flèche opened his remarks with an update on a strike that began March 30 in Québec operations and has impacted produce distribution to stores in the province. He said the company returned to the bargaining table April 8 and is “determined to reach an agreement” that balances employee and customer needs while preserving long-term competitiveness.
“The strike has impacted our sales, especially given that it happened the week before Easter,” La Flèche said, adding that the company will be able to specify the financial impact once the dispute is settled. He said the contingency plan is now in place and stores are “generally well-stocked,” though “not in perfect condition.”
Amyot clarified during Q&A that because the strike started March 30, it will have “no impact in Q2” and will instead impact fiscal Q3.
Inflation, consumer behavior, fuel and “Buy Canadian” trends
La Flèche said Metro’s internal food basket inflation was in line with reported food CPI of 4.3%, with inflationary pressure in meat and “higher than usual CPG vendor cost increases.” He said customer behavior has been consistent in recent quarters, with shoppers seeking value across all banners. “Private label is up, penetration remains elevated,” he said.
Responding to questions on fuel costs, Giroux said Metro has received only a few supplier price increase requests tied to fuel so far and is negotiating terms while trying to delay impacts to food pricing. On Metro’s own distribution, he said fuel costs are having a direct impact and estimated that at current elevated prices, it could represent a “C$5 million-ish per quarter impact” if conditions hold.
On “Buy Canadian” trends, Giroux said interest continues but has softened compared with the initial surge. He added Metro has not seen a significant year-over-year increase in Canadian product sales recently and described performance as “pretty stable.”
Pharmacy growth led by prescriptions, specialty medications and GLP-1s
Jean-Michel Coutu, president of the pharmacy division, said GLP-1 medications remain a “considerable” contributor to prescription growth but were a slightly less strong contributor than organic growth and specialty medications. He said GLP-1 demand is continuing to grow strongly as new generations come to market, and that Metro is holding its typical share and in some cases “outperforming” for certain molecules.
La Flèche also noted that over-the-counter performance was softer, partly due to a compressed cough-and-cold season that “peaked earlier and was shorter in duration.”
Metro said its third-quarter results are scheduled for Aug. 12.
About Metro TSE: MRU
Metro is one of the largest grocery retailers in Canada. With its 2018 acquisition of Jean Coutu, it also boasts a meaningful drugstore footprint. Noteworthy grocery banners include Metro, Metro Plus, Super C, and Food Basics, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. It utilizes an array of business models, but it most frequently acts as either a retailer, operating individual stores, or a franchiser, licensing its trademarks and supplying merchandise to franchisees.
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