Good afternoon, ladies and gentlemen, and welcome to the Metro Inc. 2022 first quarter 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 Tuesday, January 25, 2022. I would like to turn the conference over to Sharon Kadoche, Manager, Investor Relations and Treasury. Please go ahead.
Thank you, Sylvie. Good afternoon, everyone, and thank you for joining us today. Our comments will focus on the financial results of our first quarter, which ended on December 18. With me today is Mr. Eric La Flèche, President and Chief Executive Officer, and François Thibault, Executive Vice President and Chief Financial Officer. During the call, we will present our first 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 François.
Thank you, Sharon, and good afternoon, everyone. For the quarter, total sales were CAD 4.317 billion, an increase of 0.9% over last year, and 7.1% when compared to the first quarter of 2020. Food same-store sales declined by 1.4% for the quarter, but grew by 8.5% on a two-year basis. Pharma same-store sales were up 7.7%. Our gross margins stood at 19.9% of sales versus 19.7% for the same quarter last year, led by strong performance in pharma. Operating expenses were down CAD 7.4 million year over year and represented 10.1% of sales versus 10.4% last year.
The lower level of operating expenses is mainly due to a reduction in pandemic-related expenses, which stood at CAD 28 million last year. Operating expenses are up 4% when compared to fiscal 2020. EBITDA for the quarter totaled CAD 424.1 million, up CAD 24.9 million or 6.2% when compared to last year's EBITDA. As a percentage of sales, EBITDA was 9.8% versus 9.3% last year. Adjusted net earnings were CAD 214.2 million, compared to CAD 197.7 million last year, an increase of 8.3%, and our adjusted net earnings per share were CAD 0.88, up 11.4% versus last year's adjusted EPS of CAD 0.79. The impact of the labor conflict at Jean Coutu impacted last year's EPS by CAD 0.05.
12 weeks into fiscal 2022, capital expenditures amounted to CAD 141.5 million. That's up CAD 51.6 million versus last year, and this higher level of capital expenditures is a 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, as well as the increase in our online capacity. The amount also includes the purchase of a prime real estate property in Ottawa, where we operate a Metro store. At the end of the first quarter, we had 360 stores equipped with self-checkouts and 190 stores with electronic shelf labels. So far in fiscal 2022, we opened three new Food Basics.
We also relocated another Metro store and carried out major renovations in three stores, representing a net increase of 76,000 sq ft or 0.4% of our food retail network. On November 19, we renewed our normal course issuer bid program, sorry, enabling us to repurchase 7 million shares between November 25, 2021 and November 24 this year, and as at January 14, the company had repurchased 650,000 shares for a consideration of CAD 41.2 million, representing an average share price of CAD 63.38. In closing, the board of directors yesterday declared a quarterly dividend of CAD 0.275 per share, an increase of 10% versus last year. This is the 28th consecutive year of dividend growth and represents a payout of about 31% of last year's adjusted net earnings.
That's it for me. I'll now turn it over to Eric.
Thank you, François, and good afternoon, everyone. We are pleased with our strong first quarter results, driven by continued sales growth on top of record sales last year and good expense control. On a two-year basis, we delivered sales growth of 7.1%, adjusted EBIT of 15.3%, and adjusted EPS growth of 23.9%, all of which exceed our long-term annual financial targets. Food same-store sales were down 1.4% in the quarter, but up 8.5% when compared to fiscal 2020. Transactions were up in Q1 but are still below 2020.
Average basket size was down versus last year, but remains significantly higher than two years ago. For the quarter, our internal food inflation was 3.5%, up from 2% in the prior quarter, driven by the meat and grocery categories. Promotional penetration has increased as consumers manage their budgets in this inflationary environment, and I assure you that our merchandisers are working hard to continue to provide great value to customers in all of our banners. Since the end of the quarter, the spread of the Omicron variant has impacted our operations and those of our suppliers, putting pressure on our supply chain. Our team has worked in collaboration with suppliers to mitigate the impacts, and as more people return to work at our suppliers and in our operations, overall supply chain pressure has started to ease.
Turning to pharmacy, comparable sales were up 7.7% with continued solid growth in prescription sales and front of store sales up a strong 8.9%, driven by over-the-counter medications resulting from the stronger cold and flu season, good seasonal merchandise sales, as well as lower sales last year due to the labor conflict. Our online grocery sales were flat versus the same quarter last year, but up 167% over two years ago. We continue to deliver against our plan with 185 Metro stores now offering click and collect across the provinces of Quebec and Ontario, 14 hub stores offering delivery service, and one dedicated facility in the high-density Montreal market.
We have recently launched a two hour express delivery service on metro.ca in the Greater Montreal and Toronto areas, and we'll roll out the service to more stores in Quebec and Ontario over the coming months. We also started offering the click and collect service in addition to our existing delivery service and pharmacy in mid-November, and now more than 270 pharmacies offer the service across Quebec, Ontario, and New Brunswick. We believe our flexible e-com model positions us well to meet consumer demand as it evolves. Our supply chain projects are progressing well. Productivity in our new produce facility continues to improve, and I'm pleased to announce that we have reached another milestone with the completion of our new fully automated frozen food distribution center in Toronto earlier this month.
The transition to the new facility is underway and will gradually ramp up over the next few months. In Quebec, construction of the new fresh and frozen automated facility in Terrebonne is on track and scheduled for a 2023 opening. Looking ahead, while we can't predict exactly how the pandemic will evolve, we expect in the short term our food sales to remain relatively flat versus last year, but to compare favorably to pre-pandemic levels. In our pharmacy division, we expect strong comparable sales in the second quarter as we are cycling six weeks of government restrictions on the sale of non-essential goods in Q2 last year.
In closing, I invite you to take a look at our 2022-2026 Corporate Responsibility Plan unveiled today, which builds on the progress we achieved over the last decade and sets ambitious goals for the company in terms of sustainable development. That's it for me. We'll take your questions. Thank you.
Thank you. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone 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're 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 Kenric Tyghe at ATB Capital Markets. Please go ahead.
Thank you, and good afternoon. Eric Laflèche, I wanted you to provide some insight on how consumer response to inflationary pressures in this cycle has perhaps differed to in past cycles, just given the backdrop we're dealing with and some of the complexity we're dealing with. Have you seen, you know, less product substitution in these sort of the early stages of inflation ramp? You've spoken to promotional penetration, but any additional insight you can provide would be really useful. Thank you.
Thank you. Yeah, like I said in the opening remarks, inflation is higher than normal. It has increased quickly. Consumers are adjusting their behavior for sure. They are buying more on promotion. They're buying more private label. There's a bit of a trading down. There's a shift, I would say, back to pre-pandemic levels in the discount penetration versus conventional penetration in the general market. We've seen that shift, and the consumers are adjusting to the inflationary realities. As I pointed out earlier at the AGM, you know, we're working really hard to contain those inflationary pressures by offering the best value we can.
The merchandisers, I think, are doing a great job to minimize the impact on our consumers in all of our banners. You know, watching it closely, clearly an important issue.
Thank you, and just one quick follow-up for me. François, you called out the impact on gross margins as sort of the recovery in pharma. Can you provide any more color on the drivers there in terms of the gross margin lift that the pharmacy business provided in quarter?
Well, as you remember, we were comping a labor conflict last year in pharmacy, so obviously that affected sales. Combined with a great seasonal OTC program this year, this explains the improvement in gross margin in pharmacy. Just to pick up on that, last year during the conflict in Q1, we secured deliveries of RX over commercial merchandise from the warehouse. That was the priority, medications, obviously. The sale of front-end or commercial merchandise out of our warehouse last year was impacted by those, by the contingency plan. This year we cycled that, so that clearly benefited gross margin from our pharma division.
Great. Thanks so much. I'll get back in queue.
Thank you. Next question will be from Peter Sklar at BMO Capital Markets. Please go ahead.
Good afternoon. Eric and François, can you talk a little more in depth about the labor situation? You indicated that supply chain is getting a little better. I'm just wondering if you expect it like to like if things are gonna get tighter again, given you know the vaccination requirements that Canada recently introduced for truckers. As well, can you talk about the labor situation in your stores? Just anecdotally, I've been in some stores, and it seems there's some big holes in the shelves and you know seems to be fewer cashiers. Are you having trouble getting labor in your stores? You know, how is that impacting your ability to stock the shelves? Do you think you're gonna have to curtail store hours, and how is all that going to play out? Thanks.
Okay, there's a lot to cover there. Clearly, the pandemic has had, since the beginning, an impact on the supply chain, mostly labor shortages, across the chain, from our suppliers to logistics providers to ourselves. I would say that there are labor pressures, they have been there pre-pandemic. They amplified somewhat in the pandemic, and they clearly amplified when the Omicron variant started to spread in late December. I would say the last four or five weeks were really tough, with the big spike in the virus. We felt it in our operations. Our suppliers felt it. We have been challenged for sure, and you have seen some holes. There's no panic in the stores.
I think consumers understand what's happening after two years of pandemic. There's no real hoarding. Clearly there are more holes than we would like to offer to our customers. Working hard on that. The good news is the five-day isolation rule for people in close contact or with the virus is helping to bring people back to work. More recently, we've seen more people come back in our shop and at our suppliers. We're trying to get to a better position, which has started to happen. I think the worst is behind us, but with this virus, you never know. You know, we keep a close eye on it.
Getting merchandise, stocking our shelves clearly a big priority and working in that direction. As far as labor in our stores, the pandemic affected and increased absenteeism for sure. We have labor challenges as an industry, and we're addressing them. We're recruiting as best we can. We're installing technology in our stores with self-checkouts to mitigate the impact of not finding cashiers for certain shifts. Overall, I think we're managing it pretty well. It's not perfect. Clearly, it's been tough, like I said, the last few weeks, but we think it's gonna get better.
On the vaccination of truckers, it's having or will have mostly an inflationary impact on the cost of merchandise coming in from the U.S., produce especially. We saw an uptick in the transportation costs right away, but we're getting the merchandise. So our transportation providers are able to service us for the most part. There's always exceptions, but for the most part, we're getting the merchandise. But there's an inflationary issue that comes with that requirement, so. It's a challenge, but I think we're working really hard. I think our teams are doing under the circumstances a pretty good job to provide our customers the best experience that we can. We look forward to improving our in-stock position.
Sorry for the long answer.
That's a thorough answer. Thank you.
Thank you. Your next question will be from Irene Nattel at RBC. Please go ahead.
Thanks, and good morning. Sorry, good afternoon, gentlemen. I don't think we've quite beat this horse from every angle yet. I was wondering about sort of merchandising and promotional strategies, and I'm thinking here, Eric, about the flyer and the challenges in putting together the flyer when you don't know what you're gonna get necessarily and you don't know how much you're gonna get. Can you just talk a little bit about sort of the key skill sets that your guys have that really make a difference in this kind of environment or, you know, whether we should just expect to see kind of thinner flyers.
Our flyers are not thinner than they were, and we're working hard to provide as many promotions as we did before. I said penetration is increasing of the flyer in recent weeks. With more inflation, we're seeing an increased penetration. No, we have no intention of cutting promotions. We're working with our suppliers to see what product can be featured and when. There's a lot of work behind the scenes. Again, there are some hits and misses in there, and sometimes we don't get the product we're supposed to get, or we get it late so that we're not in stock as much as we'd like to be in our stores. Again, it's unusual, extraordinary circumstances.
The peak in Omicron clearly had an impact. I think the worst is behind us. I think our merchandisers have enough experience to work with the suppliers to provide a good commercial offer with great value to our customers.
That's great. Thank you, Eric. That's really helpful. I was really interested in your commentary around the return of traffic to discount. You know, if you think back to previous inflationary cycles like this, do you think we're kind of at imbalance now or as close to imbalance as in terms of what we should be expecting discount versus conventional?
Yeah. The shift back to discount, you know, I think it was expected and it was normal, and I think a little higher inflation has perhaps accelerated it a little bit. But as we all know, during the first phase or the most part of the pandemic, conventional supermarkets, community supermarkets benefited with the one-stop-shop and did well. We all expected that to revert back to discount at some point, and I think we're there.
Yep. Thanks so much.
Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.
Yeah, thanks. Good afternoon. With the trade-down that you're seeing, Eric, I'm just wondering if there are certain categories that do better or worse, or if it's just sort of trading around within categories. I guess maybe I'm thinking specifically about prepared foods and HMR. It's obviously more expensive than, you know, consumers preparing themselves, but cheaper option than restaurants. Just curious what you're seeing in that part of the store.
Yeah. Well, there's ups and downs everywhere. I would say prepared foods in general are up versus last year, so I don't consider that necessarily a trading down or trading up. It's just reverting back to more normal levels. In the fresh meat category, because of certain really high cost increases, our promotional strategy, our merchandising strategy was adjusted with different cuts of meat, lower priced cuts of meat sometimes. Some trading down just with our promotional mix is happening. Things like that happen. Private label in grocery, frozen and dairy, you know, does well in times like this. That's all contributing to what's happening at the till and in line with the inflation that we're seeing.
Okay, great. I'm just wondering how, you know, the sort of challenges of accelerated inflation are different in your pharmacy business, front store, if at all, than in the food business. I know there's obviously a structural difference just with regards to the business model, but commentary about inflation in pharmacy versus grocery, please.
We're not seeing as high inflation in health and beauty products that we sell mostly in our pharmacies. There is inflation, but at more normal levels in the 2% range or so. I would call the inflation levels or trends in pharma pretty normal.
Okay, thanks. Just one follow-up, François, sorry. I know you don't normally comment on the segmented results specifically, and apologies if I missed this in the comments you were talking about the benefit from the growth in pharmacy on gross margins. Could you just comment about the gross margin performance in the food business specifically? Was it stable or up or down? Could you give us any indication?
It was, well, it was slightly down. I want to leave it at that, but it was slightly down.
So very-
In this inflationary pressure that we're facing, we did not pass all that.
Understood. Thanks very much, guys, and all the best.
Yep. Thank you.
Thank you. Next question will be from Michael Van Aelst at TD Securities. Please go ahead.
Thank you. Wanted to ask about e-commerce. You know, when we look at the trend a year ago, we saw the volume ramping up as we got into the winter months. You know, so the growth rate was much higher in the winter months last year. You just said that it was flat essentially in the first quarter. Are you seeing it ramping up again in the second quarter, or, 'cause if not, I'd assume that would mean it would be trending lower year over year.
Yes, we're seeing an uptick in e-com demand and e-com sales, basically since Christmas or after Christmas. I think a lot has to do with the government measures announced and the closures of restaurants and the stay-at-home restrictions. I won't call it a full lockdown, but it feels like it. With this rapid spread of Omicron, I think a lot of people stayed home and went back online or went online. Yeah, we've seen the uptick for sure in online. That sort of coincided with the rollout of our click and collect offer in food at Metro Quebec and Metro Ontario. We worked hard over the last, you know, the summer and fall to roll it out.
You know, volume has clearly picked up since Christmas in click and collect, so that was timely. Same thing in pharmacy. We rolled it out, the click and collect, and that's also ramping up.
Okay. Would you say that it's ramping up to show growth year over year, or is it still kinda flat?
Well, the quarter's not finished, and I don't wanna give you a guidance, but it feels like it should go up.
Okay. You talked about the COVID costs as well. I'd assume they were relatively stable in Q1, but in Q2, you announced another gift card. Is it the same amount, that CAD 8 million or so that we saw the last time it was provided to employees?
Yes, it is.
Yeah.
Yeah. We announced it last week. You know, we did it 3 times last year. We felt last week it was the right time or right thing to do this year after the last few weeks that I just described in enough detail. It's been very challenging for our people, and they've done a great job, so we felt it was the right thing to do. CAD 8 million, yes.
Okay. Apart from that, has the surge in Omicron required you to spend more in other types of COVID costs, or is that stable right now?
Stable.
Perfect. All right, thank you very much.
Thank you, Michael.
Thank you. Next question will be from Vishal Shreedhar at National Bank. Please go ahead.
Hi, thanks for taking my questions. Just related to the in-stock positions that you have in your different banner types, conventional and discount, are they impacting one banner more than another?
No, you know, we service our stores from the same warehouses in Quebec and in Ontario. The general in-stock position is similar between all of our food banners.
Okay. Would the same comment apply for labor shortages, given the smaller labor number at discount stores? Are you finding you're more understaffed there?
Well, it's all a question of proportions. As a percentage of employees, the staff missing is pretty similar. There's, like you say, less services in a discount store, so you can absorb absenteeism a little better in a discount format. It's also a challenge there. You know, as I said earlier, as people return back to work following the peak of Omicron, we will be in a position to fill our shelves better and offer a better experience to our customers.
Okay. With respect to your conventional banners, have labor shortages placed pressure on some of your service counters? If so, did that impact margins in the quarter?
I wouldn't say it impacted our margin, but, you know, at a granular level in store XYZ, they may have cut hours in the deli or prepared foods. You know, in general terms, there could be so some reduction of hours in certain departments which could have impacted margin in that store. Overall, for the company and the numbers we're reporting to you, I wouldn't call that one out.
Okay. With respect to the variety of investments that Metro is making, either through its supply chain investments or its store investments like the shelf tags or the self-checkouts, is the inflation and the labor pressure that Metro's seeing curtailing the rate at which Metro can make investments and delaying projects?
No. Our capital program is staying constant. You know, you're familiar with our supply chain projects. Our CapEx for retail renovations in new stores is pretty similar year to year, and the technology budgets are part of that for stores. No, the inflationary situation is not impacting our CapEx. Although, you know, some of these construction costs are, you know, very high these days, and we're looking at every project before we invest on a renovation, especially the sizable renovations, we make sure the numbers work out because construction costs are a much bigger factor.
Okay. Lastly, maybe you can just provide some extra color on the Toronto Fresh DC and the level of performance it's at and the automated frozen DC.
The automated frozen DC just started. We turned the operation on this past week. We're piloting some stores out of that DC last week. Just started, we're gonna do more and more stores every week. We see a process of four to five months. The shorter, the better, but we'll do what we have to do to do it properly to transition from the old freezer to the new freezer. That takes some time. I think we're in a good position since it's the second one we're doing. I'm confident that the transition will go well. It's a lot of work, especially in the midst of a pandemic, so not easy work, but it's gonna get done.
The produce, I said in my remarks, productivity is improving, so you know, we're adjusting systems and processes and schedules and everything. We're working with our unionized employees and with WITRON, our technology partner, to optimize. Again, big project, a lot of change management, but going in the right direction, and I'm pleased with the improvement certainly over the last few months. We have room to grow. We're never happy. We want it to be better, and I'm confident that it will continue to improve.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you do wish to ask a question, please press star followed by one on your touchtone phone. Your next question will be from Patricia Baker at Scotiabank. Please go ahead.
Thank you very much. Most of my major questions have been asked, but I do have a few minor ones. Firstly, with respect to the supply chain disruptions and where you've seen the holes, are they primarily in the grocery category or are they also in the fresh category? You know, is there a focus on where those holes are, where you're seeing the shortages?
Yeah. Grocery is an issue because there's more variety basically in center store, and that's the biggest issue. We're getting product.
Mm-hmm.
People can fill out their order, but clearly there are SKUs missing, there's variety missing, there could be sizes missing. As our suppliers are adjusting their production, given their constraints, we don't offer necessarily the full variety in our center store. That's grocery, dairy, frozen, those categories. You tend to see a little more holes as you would see in our fresh departments.
Okay, thank you. I have two questions that are specific to Quebec now. In your outlook, when you discussed your outlook for pharmacy sales, you did mention that you expect that the distribution of the rapid tests could be a nice tailwind for pharmacy in the near term. On the outset in Quebec, it was pretty chaotic, that distribution, not necessarily from you guys, but from the government getting them to where they were gonna be distributed. Has that kinda calmed down and become more orderly?
It's getting better as we get more quantities and more supply. The government, for those who are not in Quebec, put the free distribution of rapid tests in the hands of the community pharmacies. Every community pharmacy was basically getting 108 kits a day.
Oh.
That's not many kits for many pharmacies, especially at Jean Coutu, which have large volumes. That caused a lot of frustration early on, people lining up and trying to get online. It was hectic. It was chaotic, like you said. It's getting better as supply has increased. We would like to have more, and I think the government will be in a position to supply more. It's better every week, but it wasn't easy.
Another thing exclusive to Quebec, Eric, is the fact for the last three Sundays, the grocery stores have not been allowed to open. It was only three Sundays, but I'm still curious what you might have seen there in terms of consumer behavior. Did you see people reverting more to online because of that on those days? Did you see a bigger uptick in the Saturday, or was there just not any discernible difference?
No, it was another element that made our life more complicated for sure. The three Sundays are now behind us. We were open this past Sunday.
Mm-hmm.
The three previous Sundays, we were closed in food, not in pharmacy, but in food. Yes, most of the volume transfers to the Saturday or the Monday. It puts pressure on other days. In an environment where we had supply chain issues that we've talked about at length today, it made it more complicated. It was a challenge. It's behind us and move on.
Yeah. Let's hope it stays behind you. Then just lastly, a slight clarification. You talked about discount reverting back. We're getting more shoppers in the discount box. When you say revert back, what you're referring to there is that we're back more or less to the normal levels that we saw pre-pandemic as opposed to heightened or elevated levels?
Yeah. That's what I'm referring to. Again, at Metro, we have a good portfolio of banners with discount and significant discount presence in both Quebec and Ontario. We have Adonis also. Metro provides great value. I think we're well positioned to serve all customers. The discount reverting back is a market, I think, phenomenon, and we're well positioned to capture it.
Okay. Thank you very much.
Thank you.
Next question will be from Chris Li at Desjardins. Please go ahead.
Oh, hi. Good afternoon. Eric, I know there are many moving parts and you don't have a crystal ball, but just wondering, can you share with us some of the major puts and takes that you see impacting gross margin for the year? Do you believe, you know, stable margin is a reasonable expectation, or do you see some downside risk because of the inability to fully pass on all the cost increases at the retail level? Thank you.
Yeah, well, that's a hard one, and you're right, I don't have a crystal ball. I do know that we're getting cost increases. We're getting more increases this time of year than we usually do. It's usual in our industry in food to get cost increases late January, early February. In the next days and weeks, there's a significant amount of products that will have cost increases. How much of that will be reflected at retail? We will be very competitive. We monitor prices everywhere, and we intend to remain competitive.
I think there's there could be some risk short term to gross margin rate as those cost increases come in and if we can pass them on at retail. It typically takes a bit of time so that we've been there before, and we managed through it before. It's something it's a watch-out for sure on the gross margin. Other than those cost increases, which is a key element, I think we're confident in our strategy, our merchandisers on the fresh side, I think are gonna do a good job. I think we can deliver a margin. The diversification with pharmacy, I think is another helpful element. We saw it in this quarter.
Overall, I think we're confident that we can deliver good gross margin numbers. It's competitive.
Okay. That's helpful. Maybe specifically, how big of a contributor has the increase in private label sales to the gross margin in the quarter or in the last couple of quarters? Has it been a notable contributor or not really?
Well, it's a key contributor overall always. You know, with the uptick, you know, private label penetration is doing well. You know, we're seeing the same in our gross margin. I wouldn't call it out as a big difference in the gross margin that we're reporting, but clearly it's a contributor. The supply chain issues that we talked about affect private label, too. Some suppliers are in difficult positions there, too, and we're not getting all the merchandisers we need sometimes in private label. It plays out everywhere, even in private label.
Okay, thank you for that. Maybe just one for François. I apologize if you disclosed this already, but what was the COVID expenses that were incurred during the quarter?
Yeah, Chris, as we said on the last call, we're no longer reporting on COVID expenses. One, they, you know, they're coming down versus the peak, obviously. Two, it's the line between a COVID and non-COVID expense is blurring quite a bit. It's just part of our normal operating expenses now. We're no longer specifically tracking that number and reporting as such 'cause it's not as clear-cut as it was before. That's what we indicated on the last call.
Okay. That's fair. I guess suffice to say, given that you guys did call out, I think, over CAD 100 million of expenses last year, based on your early comment that it's been sort of stabilizing, we should expect that to be a fairly good tailwind in terms of a reduction in expenses, you know, throughout the year.
You know, some departments that were open post-pandemic or when restrictions were easing have more labor and services. It was not a dollar-for-dollar. The parity of the peak COVID expense of last year. We don't expect that to be repeated.
Okay, great. Thank you and all the best.
Thank you, Chris.
Thank you. Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. Your next question will be from Mark Petrie at CIBC. Please go ahead.
Yeah, hi. Just a quick follow-up, Eric. You already spoke about the relative demand and traffic you're seeing in e-commerce, with the Omicron wave. I'm just curious, though, with the pickup in inflation, does that affect how people shop online at all, either in terms of basket size, or are you seeing the same sort of increase in promo penetration in the online business as well?
It's similar. Yeah, I would not call out notable differences of buying behavior online versus in store with the Omicron variant. Sizable basket, you know, margins are. If it's a good basket, it's a good customer, and we wanna service them however they wanna shop. But I wouldn't call out a big difference there.
Okay. The same variances as sort of before inflation kind of accelerated, you know, remain in place?
Right.
Okay, great. Thank you.
Thank you. 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 second quarter results on April 20. Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.