Metro: Stock of the Week

Why Canada’s smallest grocery stock is not to be underestimated.

Andrew Willis 13 February, 2023 | 4:28AM
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Andrew Willis: If you’ve visited or lived in Ontario or Québec, you’re likely familiar with the brands Food Basics, Jean Coutu, and of course, Metro (MRU). And you likely have different associations with each of the brands – from a focus on affordability to convenience or selection, and that’s because Metro’s been mastering marketing segmentation.

Providing the right products and services to the right consumers, at the right price points, is one of Metro’s fortes – and we think the company’s done a good job highlighting the value propositions of each of its stores. Senior equity analyst Dan Wasiolek says that despite being the smallest of the “Big Three” Canadian pure-play grocers, he thinks the company has punched above its weight through strategy and execution. For example, it was a big move to buy the largest pharmacy chain in Québec, but the Jean Coutu deal achieved a targeted 75 million dollars in annual cost savings through warehouse consolidation and procurement initiatives. It also likely helps support a grocery delivery network that now spans over 90% of the populations of Québec and Ontario.

With the ability to reach a variety of markets through a broad portfolio of store banners and value offerings, and improvements to distribution and cross-selling of private labels, we believe Metro’s ready to navigate what’s ahead for Canadian grocers. This includes near-term inflationary and supply chain headwinds.

Metro executives were probably relieved to see the end of No Frill’s price freeze at competitor Loblaws given the susceptibility of the sector to price wars. At least with the help of its larger proportion of fresh products, Metro can maintain its superior inventory turnover.

For Morningstar, I’m Andrew Willis.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Metro Inc70.86 CAD0.35Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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