Growth steady at grocer Metro

Quebec-based grocery chain Metro Inc. has decided to quit fretting about being a juicy corporate takeover target and focus on improving its business, executives told the company's annual meeting yesterday.

The Toronto Star
January 31, 2002

Growth steady at grocer Metro
Profits keep rising for Quebec-based food store chain
Allan Swift

MONTREAL — Quebec-based grocery chain Metro Inc. has decided to quit fretting about being a juicy corporate takeover target and focus on improving its business, executives told the company's annual meeting yesterday.

Chief executive Pierre Lessard said the firm's steady growth in the last 11 years proves it can expand and increase shareholder value on its own, so that's where its future lies.

Following the grocery shakeup in Canada about three years ago, when industry leader Loblaws took over Quebec's leader Provigo, Metro was touted as the odd man out. It looked like a sure takeover target.

Metro managers even tried to position the company for a takeover bid but it hasn't happened. Lessard, after the meeting, said the company is still open to a takeover or merger, "but we're not in a selling mode."

Lessard said that sales were up 35 per cent between 1997 and 2001. Share values in 2001 doubled, increasing their total worth by $1 billion, he said.

"We've shown we can grow without having to sell out. We've created a lot of value."

The chief executive also said Metro is open for acquisition prospects, particularly in Ontario where it owns 39 Loeb stores in the Ottawa area.

The company also expects to grow through continued store renovations and store openings.

Metro plans to open 16 stores this year, including 10 Metro supermarkets, one Super C large surface store and one Loeb supermarket.

Another 38 stores will be renovated or enlarged.

Metro currently has 253 Metro supermarkets, 43 Super Cs, 39 Loebs, 155 smaller Marché Richelieu and 266 Gem stores and 84 Brunet drugstores.

The fiscal year is off to a good start, as Metro reported a profit of $30.4 million in the three months ended Dec. 22, up from $24.7 million profit a year earlier.

Per share profits rose to 59 cents from 49 cents, while sales increased by 8 per cent to $1.23 billion.

It marked the 45th consecutive quarter in which Metro has increased its operating income.

Analyst Keith Howlett, who describes Metro as one of his favourite stocks, has now reduced his buy rating to accumulate, because he does not think the stock can maintain its high rate of growth.

The Desjardins Securities analyst says corporate Metro still has room to grow, but two or three years from now it will have to make a move.

"They've been grinding this axe for about a dozen years pretty successfully, almost all in Quebec," Howlett said.

"But everyone thinks that five years from now they've got to be somewhere else other than Quebec and Eastern Ontario."

Metro shares rose $1.20 to close at $41 on the Toronto Stock Exchange yesterday.

Most of Metro's supermarkets belong to local merchants, some of whom have been fighting the company's move to prepare itself for a takeover.


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