MRU fell 7% on Wednesday, but remains up 9% this year and up 18% over 52 weeks. Sales and earnings in the recent quarter were up moderately but did miss expectations slightly. The company is seeing tariff pressure and higher costs. Exacerbated price sensitivity and promotional pressure may continue to be headwinds for Metro's food operations for at least this calendar year. Food comparable sales grew only 1.9% in fiscal 3Q vs. 2.4% last year. For 4Q, the company could report much the same cadence against similar comparisons. Strong growth in GLP-1s is driving positive results for pharmacy, with prescription-drug comparable sales gaining 6.2% for 3Q. Starting in 2026, there could be disruptions to profitability, with the patent for Ozempic lapsing in Canada and the potential for generics entering the market. Gross margin for 3Q was relatively flat as product mix and cost inflation (especially in meat) managed to offset productivity gains in distribution centers and lower shrink. MRU we think is doing a decent job managing a tough environment. Its current malaise is more tariff/economic related than company-specific. We would be fine holding this after the dip.
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