Good morning, ladies and gentlemen, and welcome to Metro Inc. 2021 Q4 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on Wednesday, November 17, 2021. I would like to turn the conference over to Sharon Kadoche, Manager, Investor Relations and Treasury. Please go ahead.
Thank you, 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 25. With me today is Mr. Eric La Flèche, President and Chief Executive Officer, and François Thibault, Executive VP and Chief Financial Officer. 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. In general, any statement which does not constitute a historical fact may be deemed as a forward-looking statement. Expressions such as expect, intent, or 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 2020, 2021 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 2020 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 François.
Thank you, Sharon, and good morning, everyone. For the quarter, total sales were up CAD 4.092 billion versus CAD 4.144 billion last year. That's a decrease of 1.2%, but up 6% when compared to the Q4 of 2019. Food same-store sales declined by 2.9% for the quarter, but grew by 6.8% on a two-year basis. Pharma same-store sales were up 4.1% on top of 5.5% in the previous year. Our gross margin stood at 20.4% of sales versus 20.2% for the same quarter last year, reflecting an overall good merchandising performance in both food and pharma.
Operating expenses were down slightly year-over-year and represented 10.5% of sales versus 10.4% last year, and our COVID-19 related expenses amounted to CAD 9 million for the quarter. That decrease of CAD 18 million in COVID-19 costs versus the same quarter last year was offset by an increase in other operating expenses, mainly related to activities and services that have been reinstated after initially being paused at the start of the pandemic, such as hot foods, for example. Advertising is also up versus last year. Going forward, though, we will no longer report specific COVID-19 related costs, not only because these costs are much lower than before, but also, to be frank, the line between a COVID-19 expense and a regular expense has now become quite blurred.
EBITDA for the quarter totaled CAD 403.6 million, flat versus last year, but at a margin on sales of 9.9% versus 9.7% last year. Our depreciation expense was down 6.5% versus last year, but I remind you that we had CAD 10.7 million of accelerated amortization last year related to the opening of our new Fresh DC in Ontario. Adjusted net earnings were CAD 200.6 million compared to CAD 193.1 million last year, an increase of 3.9%, and our adjusted net earnings per share were CAD 0.81, up 5.2% versus last year's adjusted EPS of CAD 0.77.
On a two-year basis, EPS grew 19.1%, representing an annual compounded growth rate of 9.1%, well in line with our annual growth target of 8%-10%. In fiscal 2021, capital expenditures amounted to a little under CAD 600 million, up CAD 88.6 million versus last year. This record level of CapEx is a result of our ongoing investments in the monetization of our supply chain in both provinces and in our retail store network, including in-store technology, as well as the increase in our online capacity. At the end of the Q4 , we had 340 stores equipped with self-checkouts and 170 stores with electronic shelf labels. For fiscal 2022, we plan on adding another 80 stores with self-checkouts and another 70 stores with electronic shelf labels.
Also, during the fiscal year, we opened our online dark store in Montreal, one Metro Plus, and one Adonis in province Quebec and one Food Basics in Ontario. We also relocated another Food Basics and carried out major renovations in nine stores, representing a net increase of 260,000 square feet or 1.3% of our food retail network. On September 30, we announced the amendments to our normal course issuer bid program, sorry, allowing us to repurchase an additional 1.5 million shares over and above the initial 7 million shares authorized. We completed our program on November ninth, having repurchased a total of 8.5 million shares for consideration of CAD 498 million, representing an average share price of CAD 58.55. That's it for me. I'll now turn it over to Eric.
Thank you, François, and good morning, everyone. We ended the fiscal year on a strong note with adjusted earnings per share growth of 5.2% in the fourth quarter, despite lower sales as we cycled exceptional sales last year. On a two-year basis, we delivered sales growth of 6% and adjusted EPS growth of 19.1%. In our fourth quarter, food same-store sales were down 2.9%, but up 6.8% when compared to FY 2019. As expected, with government restrictions easing over the summer, a portion of food consumption transferred back to restaurants. Similar to Q3, transactions were up in Q4 year-over-year but are still below 2019. Average basket size was down versus last year, but remains significantly higher than two years ago. Promotional penetration increased and is now back to pre-pandemic levels.
For the quarter, our internal food basket inflation was 2%, up from the 1% in the prior quarter, with the main drivers being meat and dairy products. Turning to pharmacy, comparable sales were up 4.1% and 9.8% versus 2019, with prescription drugs up a strong 6.7% in the quarter as we continue to see an uptick in physicians' visits. Front of store sales were down 1.1% this quarter and up 4.9% versus 2019. OTC beauty and cosmetic sales were up versus prior quarters. However, we were cycling significant sales of COVID-19 products such as masks, gels, and sanitizers last year. Online grocery sales were flat versus last year in the fourth quarter as demand is leveling off from peak COVID-19 levels, but up 160% versus 2019.
The online market is still growing, but at a slower pace. We are on track to increase our capacity with the ramp-up of the Montreal dark store. Click and collect now available in 180 Metro stores versus 170 originally planned, and new hub stores in Ottawa and Chicoutimi this summer and soon Windsor. Super C is now on the Cornershop platform for rapid home delivery. Our strategy is providing operational flexibility and we believe well adapted to our local markets and demand growth. When fully deployed in 2023, our online service will be available to 85% of the population of Quebec and Ontario. On the pharmacy side, our e-commerce offering is evolving as well.
This month, actually this week, we will be launching our click and collect service at more than 250 Jean Coutu locations across Quebec, Ontario and New Brunswick. Customers will now be able to order online more than 20,000 products, including over-the-counter medicine, and pick it up the same day at their local Jean Coutu pharmacy. This new service is in addition to the long-standing delivery service for prescriptions and the more recent Cornershop platform for quick delivery of HABA products. Our supply chain projects are progressing well. Operations in the new produce DC in Toronto are not yet at the expected productivity level, but continue to improve every week. We are pleased with the service level to our stores and the quality of our products.
The new automated frozen DC is in the final commissioning stage, and we expect to start shipping to stores in January. The transition from the existing frozen DC will take place over a four-month period. In Quebec, construction of the new automated fresh and frozen facility in Terrebonne is well underway and is scheduled for a 2023 opening. Looking ahead, while we can't predict exactly how the pandemic will evolve, we expect our food sales to decline versus last year until the second anniversary of the pandemic in March, but to continue to compare favorably on a two-year basis. In our pharmacy division, we expect strong comparable sales in the first half of the year as we are cycling an eight-week labor conflict at Varennes in Q1 last year and six weeks of government restrictions on the sale of non-essential goods in Q2 last year.
Our industry is experiencing cost inflation pressures, mostly cost of goods sold, labor, transportation. However, we're working hard to contain those cost increases and provide the best value possible to our customers. As always, our teams are focused on daily execution while delivering on our strategic priorities. That's it. We'll now take your questions. Thank you.
Thank you. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw your question, simply press star followed by two. If you are using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Patricia Baker at Scotiabank. Please go ahead.
Thank you very much and good morning, everyone. Eric and François, I just would like to talk about, you know, the current backdrop, and you talked about seeing labor cost inflation, cost of goods inflation. What are you seeing from the CPG companies? What are they looking for? Because they're sort of incurring higher costs. Then somewhat related to that, have you seen any disruption to availability of any product, you know, in the context of the current backdrop?
Yes, for sure. Some of our vendors are experiencing inflationary pressures of their own clearly, and we have received some cost increases late summer and through these last few weeks. There are cost increases coming because of you know, commodity issues weather issues labor and whatnot at the vendor end. Yes, there are cost increases, and that's what's causing inflation. We're confident in our ability to pass on costs and over time, but we are working hard to contain those costs and make sure that we are market competitive and that we can you know, provide great prices to our customers. That's a reality right now, those inflationary pressures, we're managing as best we can.
Availability, yes, there are SKUs that continue to be hard to get supply and to get the quantities that we would like. There are some, there are not that many, but there are some key items where we are on allocations, the whole industry is. That continues to be an issue. It's better than it was, but it continues to be a factor.
Thank you very much for that color, Eric. Can I just follow up with one follow-up question that is, did you see any sort of difference in the pace of growth at conventional versus discount in this quarter relative to what you had seen in the first three quarters of the year?
I would say that in Q4 versus prior quarters, it was not that different.
Okay.
As inflation accelerated late in Q4, in September mostly, you know, and into this quarter right now, clearly there's an inflationary pressure, and that's causing customers to look for value. When I said that, restaurants were opening up this summer, we certainly felt that. Our sense is that consumers are consuming more at homes than they were two years ago, that's for sure. They're consuming more at home right now than they were over the summer. We're confident that we're well positioned in both our discount stores, our conventional fresh stores to serve customers who are facing a lot of these inflationary pressures.
managing as best as we can, like I said, to provide great value, great prices so that we can meet the customer-consumer demand for food at home.
Okay. Thank you very much, Eric.
Thank you. Your next question will be from Mark Petrie at CIBC. Please go ahead.
Yeah, good morning. I just wanted to follow up specifically on the inflation topic. Could you just discuss sort of anything you're seeing with regards to consumer behavior to the acceleration in inflation, sort of at the end of Q4 and then into Q1? Also, have you observed any changes in the competitive landscape?
Pretty much the same answer to the previous question. Inflationary pressures are making consumers look for value and eat at home a little more. You know, search for value so that you would think would favor discount. We're confident that we have a great discount offer. We also provide great prices in our fresh stores, but we have you know, great businesses with Super C and Food Basics in Ontario and Quebec. We're really well-positioned to meet consumer demand for those customers who are looking for value in both of our formats. Not much more I can say.
Are you observing any adjustments in the competitive landscape? I know that you said promotional activity has returned to pre-pandemic levels, but any further comment?
It's very competitive. Everybody's looking for their piece of the pie, so it's very aggressive. Promotions are aggressive. It's hard to promote certain items with some of the inflation cost pressures we see, especially in meat. It makes it more difficult, but I think our merchandisers are experienced and can stickhandle through this. We've done it before, and I think we're well positioned to face the competition. But it's very competitive and we expect that to remain.
Actually, sorry, just one more on that topic. Any difference in behavior promotionally, discount versus conventional or relatively balanced?
Well, both formats have their own merchandising strategies and same for our competitors, so I don't think there's a huge change. I'm just saying it's very competitive and balanced.
Yeah, understood. Okay. Just with regards to e-commerce, I mean, I understand growth has flattened out as you're lapping a significant surge last year. What are you observing now in terms of basket size and sort of composition? Is the slowdown just a matter of people mixing online and in-store a bit more, or are you seeing something different in the consumer behavior?
Well, as I said in my opening remarks, demand has leveled off. It's still growing, but it's at a much slower pace. E-com sales are clearly above two years ago, but they're not at where they were during the peak pandemic when all the windows midweek, early in the day, whatever, everything was full. This is not the case now. Demand has leveled off. People are going to restaurants or going back to old habits and visiting more stores, shopping around. E-com has leveled off a bit. That said, we like our model, we like our flexibility. We have different models to serve the customer for delivery, for click and collect, we have partners for instant delivery.
We have dark stores for high-density markets, hub stores for mid-density markets. I think we're investing at a measured pace, and we're meeting consumer demand. It's not easy. E-com's a tough business, but we're getting better, and I'm confident that we can perform well.
Understood. Sorry, François, I think I'm not sure if I missed it in your comments, but can you provide any commentary with regards to CapEx for next year or this year?
As I said, CAD 600 million this year was a record level, but it's gonna be higher next year, you know, in light of those ongoing investments, supply chain mostly. Look, you can expect something north of CAD 700 for next year.
Okay. Thank you very much. All the best.
Thanks.
Thank you. Next question will be from Vishal Shreedhar at National Bank. Please go ahead.
Hi. Thanks for taking my questions. I was hoping that you could update us on the Ontario frozen DC. Is that still on track for January 2022, and are there any learnings from your prior DC implementations that you can apply to that to maybe have a quicker ramp-up time or more efficiencies?
Yes, we're on track for January to start shipping to our stores, as I mentioned earlier. The building is up, the temperature is being brought down. Inventory is gonna start to come in there soon. We are very much on track for a January start. For sure, there are lots of lessons learned with the fresh phase one that we did this year. The new DC for frozen foods is fully automated. You would think that that would make it more complicated and perhaps riskier. We think it probably is gonna be a little easier because the produce we were mixing manual pick with a portion of automation, not an easy task.
You know, we expect that we're gonna be ready and that we're gonna be able to ramp it up efficiently. You know, it hasn't started, so I can't tell you exactly and make promises that we can't keep, but we're doing everything we can to have the smoothest transition that we can have. We wanna de-risk the business. We wanna make sure our stores are serviced well. We're gonna plan the transition. It is planned over four months. Hopefully, it could take a little less and go a little faster, but we're gonna do things right, and that's the way you know, the team has planned it.
I think it should be simpler, but you know, a change is a change, and there's always risk with that, but I think we're managing that risk well, and it will be ready.
Okay. From time to time, Metro has been active in M&A. I know you have larger CapEx investments coming up, but over the next few years, wondering how Metro thinks about the M&A backdrop currently, and would Metro entertain buying assets outside of its direct circle of operations of pharmacy and grocery?
No, not for now. Our focus is on food and pharmacy in Canada. Yes, there are fewer targets than there were, but you know, we take a long-term view, and you know, that's our business, that's our core business, and that's what we're focused on. Are there adjacent adjacencies that could strengthen our food or pharma platform that we could look at? Never say never, but we like food and pharmacy, and that's what we're focused on.
Vishal, I'd just like to add a bit on your comment about higher CapEx. It still leaves us with a very strong financial position, strong balance sheet that we'd seize any opportunity in M&A that makes sense. The higher CapEx doesn't change our financial position. Doesn't change the fact that we still be in positive free cash flow territory. We still, you know, we'd still be able to act pretty quickly should there be an opportunity that comes up.
Yeah, absolutely. Thanks for adding. Just a quick one here. I was wondering about pharmacy and beauty and pharmacy. How far is that business away from pre-pandemic levels? Do you make more margin selling beauty products into PJC from your DC as well?
How far? I don't have an exact number versus pre-pandemic. I think we're a bit shy of it. But we're certainly getting more traction, like I said, in beauty and cosmetics as the economy opens up and people are returning to the office. But it's not quite at the level of two years ago. On the margin side, beauty and cosmetics is a higher margin category, both at retail and wholesale. So for both our franchisees and for us as distributor, it's yes, for sure, a higher margin category.
Thank you.
Thanks, Vishal.
Thank you. Next question will be from Peter Sklar at BMO Capital Markets. Please go ahead.
Good morning. These, you know, kind of declining baskets and negative tonnage trends that the industry is experiencing as, you know, restrictions ease and people go back to normal activity in restaurants, how are you seeing that? Like, is it across all categories? How is it trending and is it? I'm just wondering what your outlook is as residual restrictions are eased. Do you expect these basket and tonnage trends to get worse? Maybe you have some insights because you're seeing how it's trending as you get into the first fiscal quarter here.
The overall number, the top line is down. Yeah. It's a mix of higher traffic, but lower basket versus last year. The composition of the basket is it's across the basket. There's no department or category in the basket that is more down than others. I think it's just a general decline versus very high levels. I think the key point for me is that on a two-year stack basis we are up in our sales, in our tonnage and our market share. Pleased with that. Like I said, I think there was a rush to restaurants this summer and people, you know, and you can't blame them after a long COVID-19 period wanting to get out.
We felt that in the grocery channel over the summer. As the summer ended, and inflation picked up, I think a combination of both people are reverting back to more food at home consumption, and I think that bodes well for us. We're seeing our two-year stack so far in the quarter improve. We think that's positive, and we think that food sales will remain more elevated post-COVID than pre-COVID.
Okay, thank you.
I look at it in our favor.
Okay. On a different topic, can you talk a little bit about how the Montreal dark store is performing? Any trends or learnings from that, and is your expectation that you also eventually do a dark store in Toronto?
Okay. The Montreal dark store opened this summer. We closed the delivery operations in three Montreal Island stores and concentrated them in the new dark store. You know, we're using pretty much the same technology that we had in store, so with some adjustments. It's a learning curve. There are some changes. It's not exactly the same as in a store. It's more efficient. We've honestly have had you know, some issues staffing. Labor in Quebec is an issue. This summer, it was hard to get labor everywhere in our stores, in our DCs, and in the dark store. The ramping up is working with that. You know, we're pleased with our progress.
At the same time, you know, demand leveled off, like we said. I think it was good timing to start the new DC, the new dark store in Montreal. Toronto is, you know, the largest market in Canada. Our plan is eventually to have a dark store in Toronto for sure, and we'll keep you posted.
Okay, that's all I have. Thank you.
Thank you. Your next question will be from Michael Van Aelst at TD Securities. Please go ahead.
Hi. Thank you. I just wanted to start on gross margin because it was up quite nice, up 20 basis points. Considering the inefficiencies that usually come with the drop in tonnage and the initial cost of goods sold inflation ramping up, I was surprised that it was up by 20 basis points. Can you know, walk us through, I guess, what allowed you to see that margin inflate upside and whether that's—I know you don't like to give guidance on margins, but you did comment about cost of goods sold being passed through over time rather than, you know, maybe immediately. I'm not sure if that implies some pressure coming.
Well, I think it's a combination of factors. Essentially, I think our merchandising programs were well done and effective in providing the margin. I think our tools to manage shrink in our stores keep getting better, and that's always a factor. Inflation, you know, in certain categories can help too. One other factor I would say is pharmacy. The mix of our sales pharmacy changed a bit over the quarter. After we switched operations, the Metro Pharmacy DC combined with the Jean Coutu. If you remember early last summer, there was a portion of the McMahon business, which was wholesaling to hospitals, which we let go.
That was a low-margin business. That's a contributing factor, not the main factor, but it's a contributing factor. It's a bunch of things. Our private label sales continue to do better. HMR sales in our stores are up. There's ups and downs, and there's inflation, then there's tonnage. I get all that, but we're pleased with our result at 20 basis points.
Michael?
Please unmute, Michael.
Oh, sorry. Just two other quick questions. One, what should we expect for transition costs for the DC in 2022? Then, what does a normal CapEx look like once you're beyond all of these new DCs?
Well, normal CapEx will be, you know, somewhat similar to what we had before starting the fresh part one, which will be a sort of a mid CAD 500 million level, you know, CAD 550 million. That was the normal sort of CapEx run rate. As I said earlier, you know, next year you should expect CapEx to be higher. I would call it now at north of CAD 700 million. So that's a runway CapEx I think you could be using going forward, CAD 550 million.
We're not gonna give guidance on the transition cost. We have to manage that as best we can. There will be some costs. When you transition and you operate from two DCs for three to four months, there's gonna be some costs. Maybe we can give you more color.
Well, like we did this year when we, you know, had one quarter where there was a transition cost for the fresh part one. We highlighted it. You know, in our business plan and in our model, we assume some transition costs, we assume some overhead duplication. Hopefully we'll, you know, be on track. If it's something that affects a particular quarter, we can give more color as it happens.
Perfect. Thank you.
Any further questions, Michael?
No, thank you.
Thank you. Next question will be from Irene Nattel at RBC Capital Markets. Please go ahead.
Thanks, and good morning, everyone. I apologize ahead of time for beating the inflation horse, but that it does seem to be sort of the biggest issue of concern. You know, in the past, when we've seen inflation, you've seen some trade down and let's say, you know, cuts of meats or fresh to frozen. You know, in your experience, at what level of inflation does that occur? That's the first element. The second is because we've seen so much higher inflation in food away from home, you know, are you expecting any, maybe this time it's a little bit different, or you think that won't make a difference?
Exactly like you said, people trading down or on cuts of meat, that will happen when their cut or favorite cut of meat is up significantly or is not promoted because the costs are gone too high. There have been some weeks recently where it's been challenging for our people to advertise some of the cuts we would have liked to advertise because the prices would be too high for everyone. It's related to the category and to the SKU or to the cut that will generate that trading down activity.
After if inflation is the story in the news for months and weeks and months, and everybody's talking about inflation, that creates a mindset for sure, and then the general population can start trading down on a more, you know, broad level. Private label, fresh to frozen, cuts of meat, everything you mentioned is behavior that can happen. We're not seeing that much yet, but that, you know, if inflation is the story for a long period of time, that could happen. Like you said, inflation away from home seems to be even higher. Again, that's, I think, reflected in our performance so far in this quarter, where, you know, as I said, our two-year stack has gone back up a bit.
It's good for us.
For sure. Thank you. If I just might switch gears a little bit over to PJC. At this point in time, do you feel as though you've gotten all of the synergies from the distribution, you know, sort of the merging of the distribution from looking at, you know, sort of the supplies. Just sort from A to Z. Do you feel like you're now at a steady run rate or we can still expect kind of a step up, if you will, relative to where, you know, the one plus one historically?
Well, we guided to a CAD 10 million DC CapEx for FY 2022, following the combination of the operations in Varennes earlier this summer, and we're sticking with that.
Over and above the 75 that we had,
For procurement.
Realized, yeah.
For procurement and expenses.
Yeah
SG&A. We achieved our CAD 75 million synergy number earlier than planned. The last portion related to distribution was delayed because of COVID-19. We're now operating out of there. Our operations are steady-state, and we are confident that we will achieve the CAD 10 million over the course of FY 2022.
That's right.
Like I said earlier, I'm confident that Jean Coutu, our pharmacy, was a tough year, FY 2021. We had a labor conflict, we had COVID-19, and we had the restrictions. FY 2021 was a tough year in pharmacy, and we're looking for FY 2022 to deliver stronger results in addition to those synergies.
That's great. Thank you.
Thanks, Irene.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions, please press star followed by 1 on your touchtone phone. The next question will be from Chris Li at Desjardins. Please go ahead.
Hi, good morning. Hi, Eric. I know you don't have a crystal ball, but just, you know, wondering if you assume you continue to manage cost inflation the way you have so far, is it reasonable to assume that gross margin rates for next year to remain stable? Just curious to see what are some of the major puts and takes for gross margin for next year. Thank you.
Well, again, you know, we hope to, you know, keep our margin rates healthy, and we will do the best we can. There's clearly inflation out there, and we wanna stay very competitive and provide value to our customers. Can that put pressure on the gross margin rate? It could. I'm not gonna guarantee the rate. I think we have experienced merchandisers. We have a good mix with conventional discount pharmacy, so we're looking for, you know, we are planning to deliver our numbers. Gross margin is part of that. You know, we have to manage the rate and with our expenses and with our tonnage, and it's all a mix together as you know, to deliver the bottom line.
For sure, gross margin is a KPI, and it's something we look at very closely. There can be movement in the rate in times like these, so we'll see how we do.
Okay, that's helpful. Maybe a quick question on e-commerce. Just curious, you know, other than the dark store in Montreal, can you share with us what other initiatives are being deployed to further improve online profitability over the longer term?
Well, it's execution, and it's processes, and it's just getting, you know, more efficient every day, every week, every month. Clearly volume helps to achieve better profitability. You know, we have a good team. We're putting a lot of effort into our systems and to be efficient. I think we are investing at the right level. We're adding capacity at a measured pace, and you know, we're looking to generate contribution. It's, as I said, no surprise there. It's dilutive versus brick-and-mortar, but it's part of our mix. Our customers. Some of our customers want e-com, and we are there for them, and we will deliver or let them pick up at our stores.
Again, execution is the name of the game with good people and good systems, and hopefully our profitability keeps getting better.
Great. Maybe just a couple of quick ones on operating expenses. The first one, just clarification. Was any of the CAD 10 million of the warehouse integration from Jonquière realized in the quarter, or are they still to come?
It's for FY 2022.
Okay. François, just another quick one. You know, for the quarter, if I exclude the COVID-related expenses, you know, it looks like your operating expenses for the fiscal 2021 for the entire year were up about 3.5%. Again, you know, do you expect a similar growth rate for next year? Again, sort of what are some of the major puts and takes?
Well, again, what we're seeing now is the reverse of what we saw in the pandemic. When we had high COVID-19 expenses last year, our increase in SG&A was not, you know, year-over-year was not that much higher. It's the same thing now. We have lower COVID-19 expenses, although, as I said, the line is getting a bit blurry, you know, as part of the way we operate. We have lower COVID-19 expenses, but we have more operating expenses and services that were reintroduced, hot foods, HMR, some maintenance, some advertising, as I said, is up as well. We always manage, you know, our cost in line with our sales volume.
You know, we intend to continue to do all we can to improve and create operating leverage. We try to keep the increase in operating expenses, you know, lower than the increase in sales. That's our aim, without affecting, obviously, service and remaining competitive. I think, you know, just on the gross margin discussion we had earlier, we're gonna be doing the same thing on cost containment, going forward. We can expect, you know, the same sort of operating leverage that we keep delivering.
Great. All the best for the holiday season.
Thank you. You too, Chris.
Thank you.
Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.
Yeah. I just wanted to follow up with regards to the launch of the Click and Collect program at PJC. Are there any expenses or material expenses to you through the launch of that? Does that affect and then the sort of store-level costs? I assume those all are borne by the franchisee, but just any comment with regards to the economic impact of that would be helpful.
It's not material at our level, and neither for the franchisees. They bear the cost of retail operations and the staff to provide the service. It's part of their operation, and we don't expect a material impact on them or us.
Thank you.
Thank you. At this time, there are no further questions. I would like to turn the call back to Sharon Kadoche.
Thank you all for your interest in Metro, and we will speak again soon to discuss our Q1 results on January 20. Thank you.
Thank you. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your line.