Metro Inc
TSX:MRU
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
65.53
87.68
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Metro Inc
You don't have any saved screeners yet
Good morning, ladies and gentlemen and welcome to the Metro Inc. 2022 Second Quarter Results Conference Call. [Operator Instructions] Note that the call is being recorded on Thursday, April 21, 2022.
And I would like to turn the conference over to Sharon Kadoche, Manager, Investor Relations and Treasury. Please go ahead.
Thank you, Sidney. Good morning, everyone, and thank you for joining us today. Our comments will focus on the financial results of our second quarter, which ended on March 12. With me today is Mr. Eric La Fleche, President and CEO; and Francois Thibault, Executive VP and CFO. During the call, we will present our second 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.
In general, any statement which does not constitute a historical fact may be deemed as a forward-looking statement. Expressions such as expect, intend, are confident that, will and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy and our annual budget, as well as our 2021-2022 action plan. 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.
A description of these risks which could have an impact on these statements could be found under the Risk Management section of our 2021 Annual Report. As with the preceding risk, the COVID-19 pandemic constitutes a risk that could have an impact on the business, operations, projects, synergies and performance of the company. We believe these statements to be reasonable and pertinent at this time and represent our expectations. The company does not intend to update any forward-looking information except as required by applicable law.
I will now turn the call over to Francois.
Thank you, Sharon, and Good morning, everyone. For the quarter, our total sales were CAD4.274 billion, an increase of 1.9% over last year. Food same-store sales increased by 0.8% for the quarter, while Pharma same-store sales were up 9.4%. Our gross margin stood at 20.1% of sales versus 20.2% for the same quarter last year. Operating expenses were down CAD5.5 million year-over-year and represented 10.4% of sales versus 10.7% of sales last year.
The lower level of operating expenses is mainly due to a reduction in pandemic-related expenses, which stood at CAD29 million in the second quarter of last year. Our EBITDA for the quarter totaled CAD414 million or up 4.5% when compared to last year's EBITDA. As a percentage of sales, EBITDA was 9.7% versus 9.4% last year. The adjusted net earnings were CAD204.7 million compared to CAD194.7 million last year. That's an increase of 5.1%, and our adjusted net earnings per share were CAD0.84. That's up 7.7% versus last year adjusted EPS of CAD0.78.
For the first half of our fiscal year, capital expenditures amounted to CAD286 million, an increase of a little more than CAD76 million versus last year and the higher level of capital expenditures are mainly the result of our ongoing investments in the modernization of our supply chain in both provinces and in our retail store network, including in-store technology. At the end of the second quarter, we had 380 stores equipped with self-checkouts and 218 stores with electronic shelf labels.
We plan on adding another 54 stores equipped with self-checkout technology and 26 stores equipped with electronic shelf labels by our fiscal year end. We also started rolling out self-checkouts in select pharmacies and we now have 27 pharmacies equipped with that technology. Halfway through to our current fiscal year, we have opened 4 new food stores. We relocated another metro store and carried out major renovation in 6 stores, representing a net increase of 150,000 square feet or 0.5% of our food retail network.
Turning to our current normal course issuer bid program, we have repurchased between November 25, 2021 and April 1 of this year, 2.35 million shares for a total consideration of CAD156.3 million and that represents an average share price of CAD66.51. As a result of the 7 day labor conflict with our full-time distribution center employees in Toronto, our third quarter results will be impacted by the direct cost of the strike and the impact of a new 4-and-a-half year collective agreement, which are estimated at about CAD10 million pre-tax.
That's it for me. I'll now turn it over to Eric.
Thank you, Francois, and Good morning, everyone. We are pleased with our results in the second quarter as we grew sales by 1.9%, EBITDA by 4.5% and earnings per share by 7.7%. That's on top of a strong quarter last year and despite a challenging operating environment marked by the Omicron variant and the labor shortages throughout the supply chain. Food same-store sales were up 0.8% in the quarter and the 2-year stack for the first 8 weeks of the quarter, that is the pre-COVID comparable period was at plus 11.5%.
With most government measures lifted and customers gradually returning to pre-pandemic behavior, we continue to see an increase in traffic and a decline in the average basket in our food stores. Our discount banners are growing faster than our conventional banners and online sales are stabilizing. The supply chain continues to be challenging, mostly because of product shortages from our vendors. For the quarter, our internal food basket inflation accelerated to about 5%, up from 3.5% in the prior quarter as the industry continues to experience higher than normal inflationary pressures and cost of goods sold, transportation and labor.
The main categories driving inflation at retail are meat and grocery. Promotional penetration is back to pre-pandemic levels as consumers are more value-oriented. Our teams remain focused on delivering value to consumers by providing quality products at competitive prices in all of our banners. Turning to pharmacy, comparable sales were up 9.4%, with a 7.7% increase in prescription drugs helped by COVID-related activities, such as the distribution of rapid tests. Commercial sales were up a strong 13.3%, supported by growth in the over-the-counter medications, particularly cough and cold products, as well as lower sales last year due to the 6 week ban on the sale of non-essential products.
Our online grocery sales were up 6% versus the same quarter last year and up 250% versus 2 years ago. We are seeing demand stabilize as a portion of consumers return to pre-pandemic behavior and opt to shop in-store more often. We are pleased with our dedicated facility in Montreal with key metrics progressing in the right direction. On the Click and Collect side, we continue to deliver against our plan with some 210 Metro stores now offering Click and Collect across the provinces of Quebec and Ontario. This allows us to reach close to 90% of the population of Quebec and 75% in Ontario.
Jean Coutu also offers the Click and Collect service now in more than 290 pharmacies. We're confident in our prudent investment approach, our flexible e-comm model and in the team we built over the last 7 years to continue meeting consumer demand as it evolves. Turning to our supply chain investments, this quarter we reached a key milestone with the start-up of our fully automated frozen DC and Toronto. All stores are now serviced from this new facility, which is ahead of our schedule. Produce in the -- sorry, productivity in the new Produce facility, which we opened last year continues to improve.
As you know, the full-time employees in our Toronto distribution centers were on strike for one week at the beginning of the month. We reached a satisfactory agreement which will allow us to remain competitive although the first year salary increases are higher than usual, mainly because of the current high inflation environment. Looking ahead, we expect food sales in the short-term to remain relatively stable versus last year. In Pharmacy, we expect positive sales trends, although moderating versus the first half of the year given last year's deconfinement, which started taking effect in Q3 and positively impacted both prescription and front-end sales.
In closing, I'm proud to mention that the Jean Coutu banner ranked number one in the recent Leger Reputation survey. This marks the second time in the last 3 years that consumers designate Jean Coutu as the most admired company in Quebec, which is a reflection of the strength of the brand, the trust of consumers, and the quality of the services provided by the pharmacist owners. As well the Metro banner in Quebec ranked number one for grocery in the Leger Customer Experience Index for the fifth year in a row.
So with that, thank you and we'll now take your questions.
[Operator Instructions] And your first question will be from Irene Nattel at RBC.
Eric, I was wondering if you could just give us a little bit more color around what you're seeing with consumer behavior, private label, promotional penetration, those sorts of things?
So the same story as we said at the end of January. Clearly, the inflationary picture is accelerating. So that's having an impact on consumers. Our discount banners are growing nicely, faster than our conventional banners. So there's a search for value. There's a shift to discount happening for sure. Customers trading down, there's high inflation in certain categories. I can think of certain meat cuts or beef in particular. So that's having an impact on consumer behavior. They're trading down for cheaper cuts. On the grocery side, private label is doing really well because its great value and a lower price point in general.
Promotional penetration, as I said in my opening statement is back to pre-pandemic levels. Whenever there's spikes in inflation like this, promotional penetration increases. We've seen that before and we see strong, strong, I would say sales, whenever we feature a key item that has experienced inflation -- let's talk about beef. Whenever with ground beef is on ad these the volumes are very, very high because people will focus on those items. So there is a search for value happening accelerating. That said, I think we're very well-positioned with the Super C Food Basics, our Metro stores, with their merchandising program, with good value all the time. So it's dicey. It's a tougher environment. But I think we're performing well in that environment.
And Eric, how would you qualify or describe the competitive environment right now, given that everybody is facing the same challenges that you are, both in terms of rising costs, but also the availability issue?
I think the competitive environment is the same it was a few months ago. It's always very competitive. But everybody has issues with supply chain. Everybody's experiencing cost increases. And that's industry wide. And that's why you're seeing inflation at retail. Those cost increases with the rest of the increases that we are all experiencing are reflected themselves as retailers. And that's why you're seeing this accelerated inflation. But I would describe the competitive environment as rational, highly competitive, but stable.
Next question will be from Michael Van Aelst at TD Securities.
So the general expectation heading into this year was that inflation would be pretty high in the first half and then moderated some in the second half. But with all that's going on, how does that change Metro's view in terms of what the inflation might look like for the balance of this year?
Hard to say, Michael but we're seeing or hearing from our suppliers that we have experienced cost increases over the last several months, and we're hearing noises that there will be more coming. So we don't have that definite, but it looks like inflation will be here for a little while longer. How long? I don't know. The shorter the better. But it's hard to see much further than that with all the global impacts of the war, fuel, energy prices. There's so much, so many variants to the inflation in every picture that it's really hard to say, interest rates are going up, how long for and how fast. And we'll see what impact it has on the inflation over the next several months. So we will have to adjust accordingly.
Right. And the increases are still to come, are they in particular categories?
Well, grocery, CPG we hear -- there's going to be continued pressure there because everybody's facing additional cost pressures. So we expect that to continue. So again, we will sit down with our suppliers. We will see exactly what's justified and how fast and what can be done. It's a difficult environment, but we -- at the end of the day, everybody wants to protect their volumes, protect their sales. So we have to manage the inflationary pressures. Right now for sure, the acceleration of inflation is not something we like at all, too fast, too high is not good. So we have to manage the cost increases as best we can to protect value for the customers and protect volumes at retail.
Right. And that's -- and you alluded to that in your outlook statement where you highlighted the risk of prolonged inflation and labor shortages on margins and -- like, how long can this go on before you start to see increased pressure on the gross margins, you think?
We have some pressure, a bit of pressure on our gross margin in food right now. So, again, I think we have experienced merchandisers and we are striving to continue to provide value and adjust on what's available, what can deliver good values at good prices without the -- with as little inflation as possible. So the margin rate may be under some pressure a bit. Hopefully, we'll protect the margin dollars.
And then just last question; on -- the drug same-store sales are really strong and you've benefited a lot from some of the increased services in the last year or so, at least in particular with the drug kits this quarter. Longer term, though, what kind of pharmacy services do you think could replace some of these higher level of volumes and test kits and vaccines in that that we've been seeing over the last year?
Well, there are medical procedures that are now allowed for pharmacists to perform. And so those can qualify service and added revenue on the prescription front for our pharmacies. Renewal of prescriptions, vaccines I think are here to stay. And we think that the pharmacy channel will be very important for the distribution of vaccines going forward even more than before. So, I think pharmacy services are in a good position to continue to grow. And I'm going to give -- I can't give you guidance on exactly how and how much, but we see that for sure as a growth opportunity going forward.
Next question will be from Kenric Tyghe at ATB Capital Markets.
Eric, with respect to the labor shortages, can you speak to how those exited the quarter and perhaps more importantly as you're moving into the summer how you are managing those labor shortages? Have the pressures eased? Are things sort of standing still or have you perhaps seen improvement in certain markets with respect to your labor requirements, both in-store and in your distribution network?
So yes, we continue to experience labor shortages. The absenteeism caused by COVID is under control. We saw a spike in cases in January or in the last few weeks actually, we saw again more and more infections so some absenteeism. But the return to work is much more rapid than it was. So the COVID issue, I think is manageable in terms of impact on our labor in stores and DCs. But there is a structural shortage of labor that we are managing with and trying to improve. So recruiting programs, retention programs, salary increases, all of the above to improve the labor picture. But it is a reality of the industry that it's -- there are some shortages. So manageable, we have good teams and we think we have good HR programs to do as best we can. But I'd be lying to you to say that…
[Technical Difficulty]
I think I caught the majority of that answer, Eric and I appreciate the granularity there. If I could just stay on the topic of the labor discussion and perhaps one for Francois. Francois, did I hear you correctly. You called out a CAD 10 million pretax impact on the new agreement effective the third quarter. And can you just remind us if there are any other collectable material agreements over the next -- through the balance of either this year, or next? I'm a little out of sync on that.
The CAD 10 million amount that we flagged for Q3, the bulk of that amount is direct cost of the strike, so transportation, security, etcetera, and waste of perishables. And the biggest portion of those direct costs are waste of perishable items that we faced. There's a smaller portion that is related to a retroactive adjustment for wages and benefits, as per the new labor agreement. But as I said, the majority of that CAD 10 million is direct costs due to the strike.
As far as material agreements going forward, we have agreements that are negotiated every year. The stores, warehouses, the Montreal Meat and Frozen DC contract is up this year and will be renegotiated over the course of the summer. So a normal course of business.
And just a quick final one for me. Front-store you called out was driven by OTC and obviously the easier comp on the non-essential in the year prior. Have you subsequent to the quarter end seen any further changes in consumer behavior and in the categories that are perhaps driving growth as we head into summer and as sort of the pandemic headwind and restrictions are either further behind us than they were?
No, no real noticeable changes. I think our front-end program in our pharmacies is strong. Our seasonal programs are strong. There are some supply issues there on seasonal coming from China. But we think we're in good shape generally. So, cough and cold, good. As we head into the summer, it's less of a contributor, that's seasonal. Allergies will come in, solar and all those cosmetic products as people -- as the economy is opened up and people get out, I think we should be pretty much back to normal over there.
Next question will be from Vishal Shreedhar at National Bank.
Just on your e-commerce initiatives. Online food sales were up 6% if I got that number right. How should we think about it through the balance of the year as the economies keep on reopening but at the same time you're adding more capacity and getting more efficient there? Any factors for us to consider?
Yes. So the 6% is total e-comm, so all models. So that's our dark store, our hub stores, our partners, Click and Collect, everything is in there. So there's quite a bit of added capacity to get that number so on a comparable basis, some stores are actually down, which is in line with the market in general. As we head into the summer season, there's always a softening in e-comm sales as we go into the summer. So we're expecting that. And as I said in my opening statement, people revert to old habits and behavior. So, yes, there's going to be a portion of the market on e-comm for sure. But we expect demand to stabilize, let's call it that.
Right. And between the various offers that you have, Click and Collect delivery, you have your Cornershop offer. Do you see consumers gravitating more towards one or another, or is it relatively stable since you last updated?
Well, Click and Collect as we add capacity it is growing but from a zero base. So it's still a minority. Our model over the years was developed with hub stores and delivery. So that's still the lion's share. The partnership is progressing well also. So for competitive reasons we will try to keep it at that. But there's a trend in general and e-comm for speed of delivery and immediacy, short windows, 2 hours, 30 minutes, next day. So I think our offer is well-suited to that. It's flexible, it's agile and with our own models plus the Cornershop partnership, we think we can meet that customer demand for more immediate short-term deliveries.
Okay. And you talked about services being a bigger part. I'm just switching gears here to PJC services being potentially a bigger part of PJC's offer in the future. One of your peers completed an acquisition to expand their medical offer with Lifemark. I'm wondering if Metro is also considering pursuing acquisitions to expand the pharmacy.
Yes. Like we said, we're always open to expansion ideas in food and pharmacy in Canada. So, technology or tools that help our food and pharma offer professional services or front end in pharmacy is something that we could look at. But it has to be in line with our model and with the regulatory environment in Quebec, which is different. So yes, we look at different opportunities. If it's a good fit strategically and that it adds value to our patients and customers, clearly we're interested, so I'll leave it at that.
Next question will be from Peter Sklar at the Bank of Montreal.
So earlier in the call you described all the trade down effects you're seeing which seem to be accelerating with this tough inflation we're seeing. Is that going to present itself in terms of your financial metrics, in terms of same-store sales, margins, profitability? Are the numbers going to fall out differently than and we should be alerted to that?
Not -- I don't think so. Like I said we have a mix of banners, a mix of geography, strong in the cities, strong throughout the provinces of Quebec…
[Technical Difficulty]
Bad karma today on the telecommunications. So just following up on that, so when you have a sale that goes from a Metro to a Food Basics do you care about that in terms of returns and profitability, are you indifferent?
It's a good question. Net-net we are -- we have comparable profitability, bottom line on EBITDA and contribution line. So it's pretty similar, but it depends, it can vary by geography or by store, but overall big picture that's what we like about our mix to have discount and conventional. The transfer of sales from one to the other can impact gross margins and same store sales. But at the bottom line we think it protects us well.
You have less SG&A and so it all catches up at the contribution net.
Switching topics. So back on this inflation, but not just the food inflation, but just a question on overall food inflation, because it's just not food, it's energy, rent. Interest rates are going up, everything. Have you seen any evidence that consumers are actually spending like their monthly or weekly spend is less on grocery than it has been just because they're just being overwhelmed by the -- this inflationary headwind that they have to budget?
No. Our baskets are still very healthy. They're down year-over-year because of -- there's more traffic, a bit of a softer basket versus a year ago but the basket size versus pre-COVID is still very healthy. So, we think food dollars, at home for consumption at home are still in good shape.
And then excuse me, just lastly a question on the Toronto DC strike. Francois is that going to be an adjustment or it's going to be in the earnings and you're just calling it out so we know?
Yes. I'm just calling it out. That's part of business. But it doesn't happen very often so I want to flag it. But we're not going to adjust earnings officially.
And like, as you know, like during that one week strike, there were some big holes on the shelves in the stores in Ontario. I don't know if you have a way of measuring this or maybe just anecdotally, like how did the consumer behave when they came into a Metro store? They saw a big hole in the shelf. Did they leave and go to competitors and if that was the case, have they come back to their normal shopping habits and come back to Metro? Do you think there was any of that shifting around during the one week strike?
The strike is not good. Being short of product is not good. So clearly we lost some sales during a big week, which was the Easter week. So it had an impact and we weren't -- stores were open and we did get customers in and they still bought from us, but they couldn't maybe get it all. So they -- we lost some tonnage for sure during that week. The good news is that one week -- it was only one week. We're back stores are filling up this week as much as possible. And last and it's -- we're not exactly where we want to be. We're not exact 100% back to normal, but we will be shortly. And given the general stock issues and supply chain issues that we've experienced for months, I think a lot of customers are understandable and are not penalizing us too much. So I think we'll be okay. But clearly we weren't servicing customers the way we'd like to -- that we can draw on for sure.
Okay. And was the impact significant enough that like we should curtail our same-store sales assumptions for the third quarter or it's just not that meaningful?
Hopefully it won't be -- is that meaningful? It's a 4 period quarter, Q3, for us. We'll do everything to get it back with good merchandising and good store conditions. I think our teams did a great job under a lot of pressure and I think our customers appreciated that. We got a lot of good comments from customers even during the strike. So we have a good loyal customer base and I think we can manage over the next few months.
Next question will be from Mark Petrie at CIBC.
Eric you highlighted that promo penetration is back to pre-pandemic levels. I just want to clarify that this is up from last quarter. And then my question is how much of a constraint are the uncertainties and challenges in the supply chain just with regards to how you're promoting and the sort of the programs you'd like to have in place and in this environment in particular?
So to the first part of your question, yes, promo rates are up slightly versus the previous quarter. And like I said, we expected that with the inflationary picture that you're talking about. The constraints on supply chain, so it's up to us to work with our vendors to manage our promotions, manage how we go to market so that we have availability as much as we can to not disappoint customers. So it's a lot of coordination and collaboration with vendors to have effective programs to deliver on that. So it's a day-to-day work to do that. So there are constraints, there are issues. So they need to be managed. And we've been at it for several months, years now, over 2 years of this. But it's not going away, unfortunately. It's going to be with us for a while it seems.
Yes, and I guess that was sort of my follow up is it's just sort of your sense on how that has trended sort of over the last quarter or 2 and then your expectations over the next quarter or 2? It didn't sound like you expect that to change though.
Yes. So again, we -- I think I've made some improvements, but the service levels to our stores from our warehouses are not where they were pre-pandemic and it's mostly caused by vendor shortages. So we do have some issues sometimes that are within our own shop, but it's mostly because we're not getting the product or we're not getting enough product. So I think that's an industry-wide issue. So we have to work with our vendors and manage it as best we can. Like you just said, we expect that to continue over the next little while.
Absolutely. Understood. Okay. And then, I guess, maybe just related to that a little bit. With regard to the labor situation, how does the tightness in the market affect you sort of tangibly? Is it mostly in your costs or is it more in the store conditions or service levels from the distribution network?
Well, if you have vacant positions in stores you're affecting your -- the way you go to your customers. So the in-stock level, the service level, the wait time so we're putting in technology with self-checkouts to help up -- speed up the lines that are going out. So it just puts pressure on the general condition of a store when you're missing labor. And if you're missing labor in a warehouse, well, you're not shipping as much product as you'd like, picking or shipping.
So it's all that needs to be managed and it has an impact on salary rates to attract people, when you need people, it's the offer and demand so that puts a little bit of pressure especially on start rates to get labor because everybody's looking for labor not just us throughout the market. So it puts added pressure and it contributes to the inflationary picture. I don't want to say it's unmanageable and it's -- I don't want to sound too alarmist, it's just an issue that we have to manage every day.
And then just the last follow-up on that, is this having much of an impact or similar impact in the pharmacy business, is it the food or its most acute in the food business and pharmacy is affected but not as materially? Is that fair?
Well on the pharmacy side, the shortages are more lab technicians. That was an issue pre-pandemic. It's still an issue today. So that has an impact sometimes on speed for filling prescriptions. So the front of the store is I would say less -- there's less pressure there than there is on the food side. There's just fewer employees in the pharmacy in the front end. We feel it's more in the lab, in our pharmacies, but again managing through it, nothing new and we're just managing it.
Next question will be from Patricia Baker at Scotiabank.
Just want to dig a little deeper, Eric and Francois, into the vendor product shortages. Can you talk about how extensive those have been and how -- what roughly proportion of the stores impacted? And then as you moved through Q2 and into Q3, has there been any abatement -- has there been any improvement or just continues to be at the same level and continue to be a big issue?
Well, it varies. It varies from week-to-week or month-to-month. So you see improvements and then we fall back. Some vendors continue to have issues and are not shipping us on time sometimes for products that we've ordered. But it's, I would say, generally improving, but we're not where we need to be and where we'd like to be.
[Operator Instructions] And your next question will be from Chris Li at Desjardins.
Just a few quick questions, Eric. If inflation and labor challenges are more prolonged, than you expect are there some initiatives that you guys can accelerate to try to cut costs and try to mitigate the impact on margins?
Well, that's -- we manage as best we can like we say to -- our merchandising, have the right products, the right price, and provide great value in all of our banners. So that's job one. On the cost side, technology is a big driver. So we've rolled out over the last 2 years, starting last week, self-check outs, electronic shelf labels. We accelerated that roll out knowing we were facing labor issues that are not going away so, we had to do that.
Longer term, automation of our warehouses, technology in the warehouses will alleviate pressure on labor. So, those are all cost saving, labor saving initiatives that will help us through the long term. And so, everywhere in the business we try to manage our costs. We've done that for -- as long as I can remember we continue to do that. Despite inflationary pressures we manage as best we can to manage our costs. So, not much more I can say.
And then another question I have is your food same-store sales was up around 1% and your inflation was around 5%. So, the street math would imply your tonnage was down roughly about 4% compared to last year. Is the decline mostly just cycling through the strong COVID demand from last year?
Yes. The economy is more open. Restaurants are more open. There are more alternatives out there. So, that has an impact on our tonnage. So, yes, that's the short answer.
Okay. And my last question, just you also mentioned that gross margin for food was down a little bit compared to last year. I know you won't disclose the percentage, but just anecdotally like, directionally, did the decline accelerate in Q2 versus what it was in Q1?
No. It did not accelerate. It's a pretty much the same picture that we painted in Q1.
And at this time, we have no further questions. Please proceed.
Thank you all for your interest in Metro. And we will speak again soon to discuss our third quarter results on August 10. Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time we do ask that you please disconnect your lines.