Good afternoon, ladies and gentlemen. Welcome to the Metro Inc. 2023 first quarter results conference call. At this time, all participant 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 Tuesday, January 24, 2023. I now would like to turn the call over to Sharon Kadoche. Please go ahead.
Thank you. 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 17th. With me today is Mr. Eric La Flèche, President and Chief Executive Officer, François Thibault, Executive VP and Chief Financial Officer. During the call, we will present our first quarter results and comment on its highlights. We will 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 2022, 2023 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 could have an impact on these statements could be found under the risk management section of our 2022 annual report. As with the preceding risks, 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. Good afternoon, everyone. Total sales for the quarter were CAD 4.7 billion, an increase of 8.2% over last year, with food same-store sales up 7.5% in the quarter and pharma same-store sales up 7.7%. Our gross margins stood at 19.6% of sales versus 19.9% in Q1 last year. The decrease mainly the result of higher cost of goods sold in food, a portion of which we absorbed. Operating expenses stood at CAD 458.2 million or 9.8% of sales versus 10.2% of sales in the same quarter last year. The decrease in SG&A ratio is mainly due to good cost control and good leverage on a high level of sales. EBITDA for the quarter totaled CAD 462 million.
That's up 8.9% year-over-year. As a percentage of sales, EBITDA was 9.9% versus 9.8% last year. Total depreciation and amortization expense for the first quarter was CAD 120.1 million versus CAD 112.5 million for the same quarter last year. The increase reflects the additional investment in supply chain and logistics as well as in-store technology. Adjusted net earnings were CAD 237.6 million compared to CAD 14.2 million last year, a 10.9% increase. Our adjusted net earnings per share amounted to CAD 1.00. That's up 13.6% versus last year's adjusted EPS of CAD 0.88. After one quarter, capital expenditures amounted to CAD 129.3 million versus CAD 141.5 million last year.
As mentioned on our previous call, we are planning a record level of CapEx this year of about CAD 800 million, resulting mainly from our ongoing investment in the modernization of our supply chain in both provinces. On the retail side, we opened two new Super C this quarter, one in Saint Jérôme and another in Beauharnois. We also carried out major renovations in three Metro stores, representing a net increase of 100,000.4 sq ft or 0.5% of our food retail network. On November 18th, we renewed our normal course issuer bid program, enabling us to repurchase 7 million shares between November 25, 2022 and November 24 of this year.
As at January 13th, we had repurchased 696,000 shares for a consideration of CAD 52.2 million, representing an average share price of CAD 74.94. In closing, the board of directors yesterday declared a quarterly dividend of CAD 0.3025 a share or CAD 1.21 on an annual basis, and that's an increase of 10% versus last year. This is the 29th consecutive year of dividend growth and represents a payout of about 31% of last year's adjusted net earnings in line with our policy. That's it for me. I'll turn it over to Eric..
Thank you, François, and good afternoon, everyone. We delivered solid results in the first quarter in a very competitive and challenging operating environment, growing market share driven mainly by our discount banners. As inflationary pressures persist, our teams did a good job to provide the best value possible to customers in our stores, pharmacies, and online. For the quarter, total sales grew by 8.2%, adjusted EBITDA by 8.9% and adjusted EPS by 13.6%. Food same-store sales were up 7.5% compared to a decrease of 1.4% in the same quarter last year.
Our internal food basket inflation was 10%, same as in the last quarter. Compared to last year, traffic was up while the average basket remained flat. Not surprisingly, customers are searching for value and promotional penetration continues to increase, and private label sales growth is outpacing national brands. Discounts continue to outperform conventional, and we are well-positioned to capitalize on this trend with our Super C stores in Quebec and Food Basics in Ontario. We are accelerating the growth of our discount footprint with the opening of two new Super C this quarter and two more planned for fiscal 2023, in addition to two Food Basics. Pharmacy comparable sales were up 7.7% and 16% over two years, with a 6.5% increase in prescription drugs, helped again by COVID-related activities such as the distribution of tests.
Front store sales were up 10.2%, driven by strong growth in the over-the-counter medications due to cough and cold symptoms, as well as strong sales of cosmetics and health and beauty products. Our online food sales were up 40% for the quarter as we continue to grow by expanding our service coverage and adding more capacity to meet evolving customer needs. This is being accomplished by adding new markets, the rollout of Click and Collect to our Super C stores, and expanding our presence on third-party marketplaces such as Cornershop and Instacart, offering two hour delivery. We are pleased that the Metro online service was ranked number one in grocery in the most recent Léger WOW Digital Index. As we begin our second quarter, market challenges and inflationary pressures persist. Our focus remains on delivering value to our customers while executing on our strategic priorities..
We can't predict future inflation, as many vendor requests for price increases continue to come in and the root causes outside of our control are still present. We will be cycling high inflation figures recorded last year in the second half of this fiscal year, and we would normally expect inflation to moderate later this year. We don't make predictions. Metro is proud of its commitment to reduce food insecurity in our communities. Last week, we announced that the company donated CAD 50 million worth of food in fiscal 2022 to food banks in Quebec and Ontario, equivalent to 9 million meals, in addition to giving CAD 5.5 million to different charities, and also raising CAD 6.8 million in our networks, thanks to the generosity of our customers.
Moreover, in November and December, we held our first Healthy Together campaign and raised an additional CAD 2.2 million from generous customers. Metro donated CAD 550,000 to our longtime food bank partners. To conclude, we continue to execute on our business plans to deliver a strong value proposition to our customers, invest in our retail network and infrastructure, and support our communities. As the company proudly celebrates its 75th anniversary, we look forward to continued growth and success for all stakeholders. Thank you. We'll now be happy to take your questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, 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 from the question queue, please press star followed by two. If using a speakerphone, we ask that you lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Kenric Tyghe at ATB Capital Markets. Please go ahead.
Thank you. Good afternoon. Eric, why don't you provide some insight into the relative performance of discount in Quebec versus Ontario? If that's getting a little too specific, perhaps you could provide some insight into sort of the consumer behavior in each of those two markets and how you've seen that evolve in the face of the macro pressures.
As I said, in my opening remarks, discount continues to outpace conventional. It's been the case for several quarters. It continued into Q1. Both Quebec and Ontario, our discount banners are growing very nicely. Similar growth, I would say. I won't give you more color than that, but we're pleased with our performance, overall performance, and we're pleased with our relative performance versus competitors either in discount or in conventional. Yes, conventional is trailing behind discount, but holding its own versus peers. Discount is doing well in both markets. Consumer behavior is more of the same in this high inflationary period.
Our features and specials are selling more and more every month. People are looking for value and stretching their dollars, no big surprise. Our teams are working really, really hard to give to provide the best value possible in this tough period for customers, tough period for everybody. We're receiving, we received in the fall a lot of cost increases, we continue to receive some. The search for value continues by customers, and we're well positioned to do our best to do that.
Thank you, Eric. That's great. If I could just switch to pharmacy for one more quick question. Flu season had a very big start. It also appears to perhaps tapered quicker than some had expected. Could you provide an insight as just how material flu season was in quarter, and how you were thinking about the impact-
you know, of this performance on sort of OTC given the tough comps going forward. Thank you.
Well, yeah, thank you for the question. The flu season, you could call it a tridemic pandemic. It's the flu, it's respiratory viruses, it's continued COVID causing a lot of cough and cold, flu-like symptoms, which is generating traffic to our stores and generating OTC sales at a higher than normal pace. It was strong in Q1, same as in the previous couple of quarters, and it's continuing so far into Q2. How long that will last, I can't predict, but it was material in Q1, no question about that. Yep, I hope that answers it.
It does. Thank you, Eric. Congrats on the quarter. I'll get back in queue.
Thank you.
Next question will be from Irene Nattel at RBC. Please go ahead.
Thanks. Good afternoon, everyone. Just looking at the income statement with the pressure on both gross margins and on SG&A, or SG&A down, like one offsetting the other. Can you talk about to what degree that's the result of the mix shift towards discount, and what you're seeing just on the cost side in general and how we should be thinking about cost pressures as we move through F-2023?
The gross margin decline, again, like we said in the last few quarters, on the food side we've seen a decline of our gross margin. It was offset by pharmacy and cosmetics and the like in the previous quarters. In this quarter, the food decline was a little more and we overall was not completely offset by the pharmacy performance, which was quite strong. The gross margin is caused by a higher cost of goods sold that we are not passing completely to consumers at retail for competitive reasons and for market reasons, very competitive out there. There are price points that we can't get to or we can't pass on on the regular shelf price and also on promotions.
That's causing an impact on gross margin. The higher feature penetration in all of banners, discount and conventional, is also impacting the gross margin. Produce, this past quarter was a challenge. You've all read about the weather conditions in certain areas where we get supply in California and others. Very challenging, very volatile markets, high prices that we can't pass on. Gross margin in produce suffered in all of our banners, discount and conventional. Last, you say the mix to discount. Yes, as discount sales grow faster, it's a lower gross margin business and it also has an impact. It's not just one thing, it's a combination of factors.
The good news is, I think our sales performance is strong. Our market share performance is very healthy. I think our value proposition resonates with customers. Our expense control was good in the face of high inflation on the cost side, too. There was a bit of leverage there where sales or expenses grew at a slower rate than sales grew. The SG&A rate went down, which offset the decline in gross margin. Pleased with that. It's a challenging operating environment, and it takes a lot of attention and experience to maneuver, that's for sure.
Absolutely. If we're thinking about the magnitude, Eric, of cost increases for this year, you know, minimum wage, et cetera, should we be thinking sort of low mid-single digits on the cost side? That's the first part. Second part is, what's the magnitude of the vendor price increase requests that you're getting at this point?
I'll start with the vendors and Pasquale can take the cost side. We explained and it was covered in the media that we have an effective blackout from November 15 to about February 1, where we don't accept cost increases. That doesn't mean that the cost increases are not there and then coming. Over the next weeks and months, there will be more cost increases. We're getting a significant number of cost increase demand, so we have good conversations with our vendors to manage it, to mitigate, and to control the rate of increases because we wanna protect its customers and protect the pricing at retail. There are increases coming.
The root causes of worldwide food inflation are still there and we're gonna have to accept some of these increases. Hopefully we will manage to mitigate as best we can. There's more of that ahead while we will remain always competitive in a very competitive marketplace. On the cost side, Pasquale can.
Yeah.
Take the shot.
Irene, I think your, you know, your low single digit up to mid is not an unreasonable assumption. You know, this quarter, year-over-year, our OpEx grew by 4.2%. When your top line is 8.2%, obviously that will be met by good leverage on a high level of sale. You know, across the board, increases in labor, maintenance, energy supplies, publicity for. They were all increases, but they were smaller increases than top line. That's what we mean by good cost containment, but that's gonna be our job going forward, is to make sure that we have visibility and that we manage those costs.
we'll have to show the same discipline that we've shown in previous years because that's.
That's a inflationary environment that does not just affect the gross margin, it affects the OpEx as well.
That's great. Thank you. Also thank you for calling out all of the, all of the donations, of food donations into the community. We all know how important that is right now. Thank you.
Thank you.
Next question will be from Peter Sklar at BMO Capital Markets. Please go ahead.
Hi, François. Just following up on that comment about growth rate and OpEx costs. The 4% growth was pretty good. Is there anything coming up in 2023? You know, could there be a large labor contract or, you know, an unusually high number of labor contracts that are coming up that could inflate that number? Is it kind of? Are those labor contracts kind of, you know, is it kind of smooth curve as they mature?
Well, there's a lot of components that, to that OpEx. There's not one big number that can make or break, you know, the year. I think it's, there's always labor agreements coming due for negotiations. There's several contracts with transport suppliers, et cetera, that you have to, you know, renew. It's gonna be, it's gonna be, it's gonna be, as I said, several components that we have to keep a very close eye on and make sure that we contain the increases in line with the top line growth. It's. That's nothing unusual this year versus other years. You know, labor pressures remain. Quebec announced a 7% increase in the minimum wage.
That gives you an indication on the labor side, there's pressure.
There's pressure, for sure.
That we expect that to continue. To your question, is there one single event that's gonna make a huge difference between 2022, 2023? As François said, there's not one single thing, but there are pressures in the system on the expense side. Labor is our biggest expense, so we manage as best we can. There are rate increases. We have technology, we manage productivity, we manage that as best we can, but there's clearly pressure in the system.
A different question. Eric, from your comments, it sounded like like discount is strong and you felt you picked up market share and discount. It sounded like you picked up market share in both Ontario and Quebec, and I'm just wondering what you attribute that to. Did you have any particular promotions that worked well, or was there anything you could attribute to, or is it just daily blocking and tackling and merchandising?
No, it's daily blocking, merchandising, good merchandising. Having the right product, the right week at the right price in a challenging environment with all the inflation that everybody talks about. Good execution at store level. You know, it's a total package, and I'm pleased with the performance. Like I said, our discount banners are growing and have been a little better than the competitive set in discount, so we're pleased with that. Our price indices versus the market are very competitive. We monitor that very closely. We have a strong private label program that's resonating well by these days, for sure. Private label sales are growing significantly faster than the general sales.
Discount, as you know, sells more private label as a percentage of their sales. That's all in there to contribute to the good performance. Stores are in good shape. The renovation program, every year we renovate stores, expand others. The physical plant, if you call it, is in good shape and Super C and Food Basics, I think that helps too over time. A bunch of factors, but good execution.
Okay. Just lastly, a question on your online business. You touched a little bit about your comments, Eric. You had very high growth rate in online sales at a time when consumers are generally returning to store. What's the larger factor that caused that huge discount? Is it because you introduced your Click and Collect into discount?
The largest contributor was partnerships, expansion of the partnerships, third-party marketplaces. We've added markets and banners to Instacart and to Cornershop in the case of Ontario. Those are the largest contributors to our online growth. Our hub stores are pretty consistent. Click and Collect is growing, but not at a crazy pace. I think our multi-service model where we have our own platforms, Click and Collect, home delivery, either same day or next day and the short window immediate delivery with third-party partners is serving us well and enabling us to capture our fair share of online sales.
These partnerships, do they positively or negatively impact margin?
Well, this it's. Let's just say an online sale is a lower margin sale than an in-store sale. Let's be clear on that. But for those customers that are expect online service, we are there to serve them and to provide the offer, is it short term or next day, or Click and Collect. It's a piece of the market. It's not a very big piece of the market, but we want our fair share, so that's why we have the offer we have.
Okay, thank you.
As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. Your next question will be from Mark Petrie at CIBC. Please go ahead.
Yeah, good afternoon. Just to follow up on a couple of things. First, on the gross margin, is it fair to say that the gross margin performance in the pharmacy business was consistent in Q4 or sorry, in Q1 versus Q4?
Yes.
Okay. I also wanted to ask about sort of how supply chains are affecting your business today. I mean, one of the dynamics over the last couple of years is, you know, we've heard of low service levels from manufacturers and, you know, them re-reducing their SKUs to sort of ease some of those challenges on their side. How has that evolved and what's the sort of state of that today for you?
The supply chain is better than it was. It's improving, I would say, every quarter, positively, but it's not back to pre-pandemic levels. There are vendor service issues to our warehouses. We are still on allocation with certain vendors in certain categories. An evolving situation, the assortment reductions or production reductions by certain vendors, as far as I know, it's not that much better. They're still concentrating on their best selling items to ensure supply. That remains. You can still see holes on some of our shelves. Most of them are vendor-related. Some of it is self-inflicted for sure, sometimes. Net-net, the supply chain service levels from our vendors has improved, but we're not quite where we wanna be.
Does that affect, sort of, you know, the promotional tactics that those customers or those suppliers may be adopting? How do you sort of look at that dynamic with regards to sort of product availability affecting promotional tactics?
Clearly, it does. Our merchandising teams, sometimes they want to advertise a certain product at a certain price, they can't do it because they're not going to get supply. When I say we're on allocation, sometimes it means that we can't advertise XYZ product, the week we want to. It's, again, collaboration and discussions with our vendors to be able to serve our customers. It is a factor that's affecting merchandising for sure.
Okay, thanks. That's helpful. I guess just one last one. Regarding the competitive environment, you know, appreciating that it's always very tough and extremely competitive, I'm curious if this sort of prolonged shift to discount has led to any sort of disruption or changes in behavior in the competitive market.
Well, it's extremely competitive. All banners, be they conventional or discount, want their fair share and are promotionally aggressive. The regular prices, there's a difference. The base shelf price, there's a difference. Promotional activity, like I said, is strong in both formats by all competitors. Does it create reactions? Yes, when discount's growing more, some conventional competitors can become more aggressive, which affects the whole market. It's a reality that's always been a factor. That's why we say we're well-positioned with both of our banners. I think we're very competitive in pricing with our competitors. The price checks we consistently do prove it. Our price indices are where they need to be.
When I look at our sales performance and our market share performance, I think, it's proving that it resonates with our customers.
Yeah, indeed. Okay. Appreciate all the comments. All the best.
Thank you.
Next question will be from Michael Van Aelst at TD Securities. Please go ahead.
Good afternoon. Wanted to ask first on your unit volumes. Last quarter, you indicated that you were still seeing unit volume growth even though inflation was higher than your same-store sales. I'm curious if that was still the case this quarter and how you're explaining that gap, like where are the biggest, what are the biggest factors explaining that gap?
Well, we our data and information, our tonnage is about flat this quarter, year-over-year. You know, you wrote about that, Michael, you know, family size, private label. The gap between the total dollar sales and the inflation that we report, it does not equal tonnage. It's a little more complicated than that. We look at units that go through the cash. We look at cases shipped from our warehouses in all of our markets. In this quarter, our tonnage was about flat. That's what I can give you.
Okay. Thank you. On the gross margin, one thing I didn't hear you talk about was shrink, and I don't think you've mentioned it in a while. I'm wondering if shrink is becoming more of an issue with prices the way it is. You hear about theft increasing in social media and that. I'm wondering if that's something you can actually see?
I called out produce as a contributor to gross margin decline in all of our formats in food. The high cost and the volatility in pricing for vegetables in particular, fruits also, led to some, you know, we try to manage the prices, the sticker shock as much as we can, but we certainly can't recoup all the increases we're getting. That's causing some decline. There's also a sticker shock that can lead to shrink in store. In our produce departments, for sure, shrink was a little higher, but I wouldn't call it out as the biggest main source of all the decline. It was a contributing factor.
Even more than that, the whole base pricing and promotional pricing in produce in the environment over the last quarter was a bigger factor than shrink. That's the way to put it.
Okay. you're not be adding RFID to the tomatoes?
No.
No. Okay. finally, can you talk about the benefits you're expecting to see from your modernized supply chain and, you know, what's the timing roughly that we can expect to start seeing that?
Okay. Projects are up and running. Phase I of fresh veg, fruits and vegetables in Toronto and the freezer, which is fully automated in Toronto. We are seeing productivity gains, cases per hour. We're doing more volume with less people in those warehouses, especially in the automated frozen warehouse. Very happy with our performance there. We're ahead of plan on productivity, so that bodes well. The gain in efficiency is more volume with less hours, so better productivity, better assortment, better freshness for consumers and more efficiency at our end. We're bringing in-house some of direct-to-store volume that's done by third parties. Again, that enables some savings for us.
We're treating the merchandise. We have expenses for it, but as part of the whole thing, it's more efficient and less deliveries to our stores, which, you know, generates some savings at store level too. You know, it's a big project, a lot of change management, but we have a very good team managing it. It's a lot of work, but we're pleased with our progress and we're looking forward to opening Terrebonne, which is fresh meat, fish, dairy in Quebec. 600,000 sq ft plus, fully automated also. That starts up in September. It's gonna be gradual, and we're not gonna be record productivity day one, but we're confident that we can get the same kind of results in Terrebonne that we're getting in Toronto.
We're pleased with it. Thank you.
Okay. All right. Just final question is, you know, in Q4, you had an 8% increase in your OpEx, but excluding the gain that you had, it was more like a 10.7% increase. Now this quarter, your year-over-year increase is 4%, yet your, you know, your top line's growing around the same pace. Can you explain the difference in that growth rate? I do believe you said something about catching up a little bit in cost last quarter, but didn't seem like they were one-time in nature. Maybe you could explain the difference in those two growth rates and how much in Q4-
Yeah, no, you're right. The Q4, we called it out. It was, we had some cost increases that were higher than sales growth. Energy was one, transportation was another. Transportation is still expensive this quarter, by the way. Yeah, it was, we had a, you know, year-over-year, there were higher increases in some key components that drove that deleverage, if you will. I did say that, you know, in some of these contracts, there was a bit of a catch up with respect to inflation that was not reflected last year or in the beginning of fiscal 2022.
Again, this quarter was much better, and we intend to continue to do that discipline to make sure that we can contain those costs as sale growth decreases eventually when we comp higher inflation at the latter part of the year. You're right. We had a couple of contracts, a couple of components that were higher than normal last quarter.
This Q1 growth rate and rate as a % of sales is more reflective of what we should expect going forward, except for once we get to Q4 and you're lapping that high number, you should see a little bit of relief, I guess, by Q2.
Listen, it's really hard to predict. Our job is to make sure we have visibility on the contracts that come due. When it, you know, we go for tender, we negotiate, we try to contain those cost increases as much as possible given the top line. I think that's what we've demonstrated in previous years and we'll continue to do this year.
Great. Thanks very much.
Thank you. Once again, ladies and gentlemen, if you have a question, please press star followed by one. Next question will be from Chris Li at Desjardins. Please go ahead.
Hi, good afternoon. Eric, just maybe a follow-up to your answer to Mike's last question about the benefits from the DC modernization. I'm just curious, did we see most of those benefits being reflected in this quarter's results, or are majority of them still to come?
As the DCs gain more experience, they get better and better. We expect every quarter or certainly every year that the DCs that we opened, one in 2021, one in 2022, will continue to improve. I think there's more ahead of us, and the project in Quebec, you know, gradually will ramp up and we're confident will deliver efficiencies as it matures. We go back to Toronto with phase II of Fresh, which will be more automated. We're looking for efficiency gains over there too. I wouldn't say it's all we've all captured it. I think we will continue to improve gradually and re-reach our objectives. These are long-term projects. There's a lot of work.
Not easy to start a new D.C. with new technology, new warehouse systems, new everything, new ways of doing things. The team has done a good job. Always hard at first, but it will serve us well, I'm confident of that.
Okay. That's helpful. Thanks for that. I think you mentioned at the AGM this morning that, like, last year, you received something like 27,000 price increases with an average ask of more than 10%. I know you're continuing to get price increases this year. Just curious, what is the average ask in terms of price increase this year? Is it more in line with the historical average?
I don't have a precise number for you. The discussions are ongoing. We're trying to manage these cost increases as best we can to make them progressive and over time. We have conversations with our vendors as we speak, and some prices increase. Some price increases have been accepted and will start to materialize at retail in the coming weeks. I'd rather not say an average percentage, but it's, you know, there's still, like I said, the root causes of worldwide food inflation are still present for the most part. Some of our vendors are living through that and their costs are going up and they're looking for increases. You know, mid to high single digits, some double digit.
It really depends by category, by commodity. I don't wanna make a general statement here. Inflationary pressures are persisting.
Okay. Is it fair to assume, just maybe a quick one on gross margin, that, you know, most of the gross margin pressure that you saw in Q1, is it fair to assume that they'll continue in the foreseeable future? I know you don't give guidance, but directionally speaking, is the 30 basis point decline in Q1, is that a reasonable run rate for Q2, or do you expect that to improve or accelerate in the foreseeable future?
Chris, it's hard to, you know, to predict a precise number. We have to be competitive. We wanna protect our market. We've said all along, we've been saying these inflationary pressures put pressure on margin, there's no question about it. Every quarter in fiscal 2022, our growth margin in food was slightly down year-over-year, made up by pharmacy. Nothing new this quarter. It was just a little more, a little more pronounced perhaps than previous quarters. If inflation pressures persist, it does put pressure on margin, but I think the team is doing a good job, both in terms of growing the dollars of margin as opposed to necessarily the percentage and making sure that we contain costs.
overall, when you look at the EBITDA performance, I think, we're very pleased with that.
Okay. That's helpful. Maybe last one for me, just on prescription drugs. You know, as the industry approaches the end of the five-year agreement between the government and the generic drug manufacturers in March, are you hearing any update from the government? What are your expectations? Will you Get a new agreement by then? Just, you know, just any update on that front. Thank you.
As far as we know, discussions are ongoing and there's no decision made. Negotiations between the manufacturers and the government, be they the Association of Provinces or the federal, for the ethical drugs. Discussions are ongoing. The price reductions that have been mentioned are not... We're not there yet. We're trying to make everybody understand that the distribution model of drugs is based on the price. In these inflationary times where costs are going up for everybody, manufacturers, distributors, it's very hard with the distribution economics to say that a price reduction can happen just like that. It would have an impact on inventories. It would have an impact on service levels.
You know, discussions are ongoing, negotiations are ongoing, and hopefully we'll come to a solution where, you know, if price reductions are negotiated that, it will be offset somehow for distribution 'cause it would have to be.
Okay, great. Thanks. It's very helpful, and all the best.
Thank you.
Thank you. At this time, we have no other questions registered. Please proceed with closing remarks.
Thank you, Metro. We will speak again soon to discuss our second quarter results on April nineteenth. 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.