Metro Inc

TSX:MRU

Q4-2025 Earnings Call

[Operator]

Good morning, ladies and gentlemen, and welcome to the Metro Inc. 2025 Fourth Quarter Results Conference Call. [Operator Instructions]

Also note that the call is being recorded on Wednesday, November 19, 2025. I would now like to turn the conference over to Sharon Kadoche, Director, Investor Relations and Corporate Finance. Please go ahead.

[Sharon Kadoche, executive]

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 27.

With me today is Mr. Eric La Fleche, President and CEO; Nicolas Amyot, Executive VP and CFO; Marc Giroux, Chief Operating Officer; and Jean-Michel Coutu, President of the Pharmacy Division.

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 a forward-looking statement. Words or expressions such as expect, intend, are confident that, will and other similar words or 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, our annual budget and our 2025 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.

Risk factors that could cause actual results or events to differ materially from our expectations as expressed in or implied by our forward-looking statements are described under the Risk Management section in our 2024 annual report. We believe these forward-looking statements to be reasonable and pertinent at this time and represent our expectations. The company does not intend to update any forward-looking statements, except as required by applicable law.

I will now turn the call over to Nicolas.

[Nicolas Amyot, executive]

Okay. Thank you, Sharon, and good morning, everyone. I will now go over our Q4 results, starting with a comment on our Toronto freezer situation. As you are all aware, operations at our frozen distribution center in Toronto have stopped on Friday, September 12, as a result of a mechanical issue with the refrigeration system. Since then, our teams have been working hard on securing supply for our Ontario food retail network. Our contingency plan is ongoing and working well, and Eric will be sharing more color on the state of the DC in a minute.

On my end, I will be focusing on the financial impact of this situation in Q4, as well as the expected spillover in our first quarter of F '26. The after-tax financial impact of this situation on our fourth quarter was $22.5 million or $30.6 million before taxes, which includes $24.5 million for inventory losses as well as $6.1 million for other direct costs related to temporary equipment rental to keep the temperature down in our freezer as well as incremental transportation and third-party logistics costs for the execution of our contingency plan.

Looking forward to Q1 of F '26, we estimate that the direct costs associated with the rental of temporary chilling equipment and with the execution of our contingency plan will impact our net earnings by approximately $15 million to $20 million. The impact on sales and margin is expected to be modest, given the contingency plan in place, and we expect being essentially back to normal by the end of December.

Now turning to our Q4 results. Total sales reached $5.1 billion, an increase of 3.4% versus the fourth quarter last year, driven by higher sales in our discount and pharmacy retail networks. Food same-store sales grew by 1.6% in the quarter, while pharmacy same-store sales grew by 4.8%, supported by 5.5% growth in prescription sales and a 2.9% growth in front-end sales.

Our gross margin reached $1.022 billion, 20% of sales versus 19.7% in the same quarter last year. The year-over-year increase is partly attributable to shrink improvement in food retail activities as well as productivity gains at our food distribution centers. Note that the direct costs related to the freezer were recorded under operating expenses.

Turning to operating expenses. They were $535 million in the quarter, up 4% year-over-year. As a percentage of sales, operating expenses were 10.5% versus 10.4% in the fourth quarter last year as they were unfavorably impacted by $6.1 million of direct costs related to the temporary shutdown of our freezer. Excluding these costs, operating expenses grew by 2.8% year-over-year and represented 10.4% of sales, the same percentage as Q4 last year.

EBITDA for the quarter amounted to $485 million, that's up 5.5% year-over-year and stands at 9.5% of sales. Adjusting for the $6.1 million direct costs incurred for the Toronto DC, adjusted EBITDA stood at $491 million, up 6.8% year-over-year, reaching 9.6% of sales, an increase of 30 basis points over Q4 2024.

Total depreciation and amortization expense for the quarter was $140 million, up $4.1 million. Net financial costs for the fourth quarter were $34.4 million compared to $32.6 million last year due to higher interest on net debt. Our effective tax rate of 24.1% is lower than the effective tax rate of 24.5% in the fourth quarter last year, largely driven by the Terrebonne tax holiday.

Adjusted net earnings were $246 million compared to $227 million last year, an increase of 8.6%, while adjusted fully diluted net earnings per share amounted to $1.13 versus $1.02 last year, this is up 10.8% year-over-year. These results are adjusted for the $22.5 million after-tax impact of the freezer situation.

Our capital expenditures in fiscal '25 totaled $511 million, down $69 million versus last year. The lower year-over-year CapEx level is mainly the result of the completion of our automated distribution centers in the summer of '24. Looking forward, we expect CapEx in F '26 to reach approximately $550 million as we continue to invest in our retail network.

On the food retail side, in fiscal '25, we opened 14 stores, including 5 conversions and carried out major expansions and renovations at 17 stores for a net increase of 294,000 square feet or 1.4% of our food retail network square footage.

Under our normal issuer bid program as of November 7, we have repurchased 8.7 million shares for a total consideration of $848 million, representing an average share price of $97.51.

Closing in on fiscal '25, we are very pleased with our financial performance and the fact that we delivered against our financial framework.

I will now turn it over to Eric for more color on our DC situation as well as on our overall performance. Thank you.

[Eric La Flèche, executive]

Thank you, Nicolas, and good morning, everyone. We delivered another solid quarter to finish a very good year, meeting or exceeding our financial framework metrics. In fiscal '25, we grew sales by 3.7%, adjusted EBITDA by 5.5% and adjusted earnings per share by 10.9%.

Before turning to the quarterly results, let me share some color on the state of our frozen DC in Toronto. I'm pleased to report that operations resumed on November 10, and that we started shipping to our stores yesterday. We expect to essentially be back to normal by the end of December. The mechanical issue responsible for the shutdown affected several components of the refrigeration system and the repairs were complex. The setback was not related to the automation system.

Our automated freezer DC in Quebec assumed a substantial portion of the Ontario volume together with 3 Ontario-based third-party logistics providers and also increased direct-to-store deliveries from several suppliers.

I want to thank all our teams and partners who have worked nonstop on our contingency plan to minimize the impact on our customers. We have insurance coverage and are currently working with our insurers to confirm the amounts that we will be entitled to recover.

Turning to the fourth quarter. We recorded sales growth of 3.4%. Food same-store sales were up 1.6% and 3.8% over 2 years. Discount continues to drive same-store sales faster than Metro with the gap between them remaining consistent with the prior quarter.

Food same-store sales were negatively impacted by about 30 basis points due to the shutdown of the freezer over the last couple of weeks of the quarter and also by the lift we had during the LCBO strike that occurred in the fourth quarter last year.

Total food sales growth of 3.2% reflects the performance of our new stores and conversions, which we are very pleased with. Our internal food basket inflation was below the reported food CPI of 3.4%. We continue to see inflationary pressures on certain commodity prices, namely in the meat category. We are presently in our price freeze period. However, we continue to receive price increase requests from our vendor partners at levels higher than a typical 2% to 3%. We continue to negotiate hard to minimize the impact on consumers going forward.

During the quarter, our Metro stores saw an increase in average basket, partly offset by a slight decrease in transactions. On the discount side, both basket and foot traffic were up as customers continue to search for value. Promotional penetration remains at elevated levels and consistent with prior quarters. Private label sales continue to outperform national brands by a healthy margin. The competitive environment remains intense but rational, and our market share was flat for the quarter.

Online sales grew by 19.8% in the quarter, driven by the ramp-up of click-and-collect and the launch of home delivery at both Super C and Food Basics as well as third-party marketplaces.

Last month, we celebrated the first anniversary of the Moi loyalty program in Ontario. Although still early in the program, we continue to see encouraging metrics with a growing member base and improved penetration rates.

Turning to pharmacy. The business sustained its momentum with another quarter of strong Rx sales growth and positive front-end performance. Prescription sales were up 5.5% driven by continued organic growth, specialty medications, GLP-1s and clinical services. In fiscal '25, we recorded 5.4 million clinical services in our network of pharmacies, a number that is well aligned with our leading market position in the province of Quebec. Commercial sales were up 2.9%. The strong performance was driven mainly by growth in beauty and cosmetics and partly offset by a slow start to the cough and cold season.

As Nicolas mentioned, we are on track with our plan to accelerate the development of our growing discount banners as we successfully opened 9 new stores and converted 5 stores in fiscal '25. We continue to see more opportunities in the coming years, and our plan calls for a dozen new discount stores in fiscal '26 including a few conversions.

Looking forward, halfway through our first quarter, we are seeing similar trends to Q4 in food same-store sales. On the pharmacy side, prescription sales continue to be strong, but sales of OTC products are softer due to the slow start of the cough and cold season.

To conclude, in addition to the ramp-up of the freezer, our focus remains on realizing efficiency gains throughout our supply chain and store network while we continue to execute on our plan to accelerate the development of our growing discount banners. We remain steadfast in our efforts to deliver the best value possible to our customers through our effective merchandising programs, strong private labels, the Moi program and consistent execution at store level.

Thank you, and we will be happy to take your questions.

[Operator]

[Operator Instructions] First, we will hear from Chris Li at Desjardins.

[Christopher Li, analyst]

Thanks first for quantifying the impact on the same-store sales with the DC shutdown. Eric, I was wondering, are you still seeing some impact in Q1 when you said the trends are in Q1 and similar to Q4, or is that 30 basis points pretty much now behind you in Q1?

[Eric La Flèche, executive]

The answer is we continue to see an impact from the freezer situation. It is impacting our same-store sales a bit. So that's continuing. I said the 30 basis points was 2 events, the freezer for 2.5 weeks and the LCBO last year. So the freezer situation is having an impact. We're losing a bit of sales and margins. It doesn't show too much to the consumer, but we don't have a full assortment in certain categories, and frozen bakery is an example.

So when I say similar trends in Q1 to Q4, we're in the same -- very much in the same ballpark. And we continue to be affected by the freezer situation. It is a bit of a drag included in that number.

[Christopher Li, analyst]

Okay. And presumably, once it's fully back online by end of this calendar year, I mean, that shouldn't really be a headwind anymore?

[Eric La Flèche, executive]

That's correct.

[Christopher Li, analyst]

Okay, okay. That's helpful. And then just maybe a quick one on gross margin. It continued to benefit nicely from the productivity gains at the food DCs. Is it fair to assume we'll continue to see the benefits manifested in fiscal '26?

[Nicolas Amyot, executive]

Chris, so I would say, yes. However, I guess, as you know, we are in a very competitive industry. So we're always looking at preserving, gaining market share. So not to say that some of these benefits would not be "reinvested" in promotional activities. But the -- I would say that, yes, the benefits that we've been able to capture are there to stay.

[Christopher Li, analyst]

Okay. That's helpful. And maybe last question on the pharmacy business. We had another very strong year both in terms of prescription and commercial sales growth. I guess my question is, do you expect kind of similar drivers for this year that have supported the strong growth in the previous fiscal year? And then what are some of the things that you guys are watching closely?

[Eric La Flèche, executive]

Yes. We expect the same fundamental trends. The Rx growth has been very strong the last couple of years. We're seeing still good growth. The expanded scope of practice going forward is going to be a tailwind on Rx eventually when Bill 67 kicks in.

On the front-end, it's a competitive market. We're well positioned. We have a great network, good merchandising, good programs, and we're confident in our ability to continue to see decent growth in our front-end sales. The fundamental drivers are still there. Aging population, health trends, clinical services, expanded scope of practice, these are all good tailwinds, structural tailwinds for pharmacy for us in Quebec.

[Operator]

Next question will be from Mark Carden at UBS.

[Mark Carden, analyst]

So just to start, just wanted to see your latest thinking on the health of the consumer. Has purchasing behavior changed much from last quarter? And then just related, are you still seeing much of a Buy Canadian push?

[Eric La Flèche, executive]

So consumer behavior is very similar to what we've been reporting for several quarters, as I outlined in my opening remarks, so not much to add there. Buy Canada, it has softened up. There's still more growth in Buy Canadian product sales than non-Canadian product sales, but that growth has somewhat narrowed versus what we saw in spring and summer. So it's declining a bit. And since counter tariffs were lifted in -- on September 1, some of these products, U.S. products prices have gone down, so that's maybe contributed to the narrowing of that gap.

[Mark Carden, analyst]

Okay. Great. And then just on prescription drugs, you guys continue to do well there, slight deceleration from the last few quarters, though. Just curious what the primary drivers you're seeing in the growth of prescription drugs are from a category standpoint. What you're seeing from the GLP-1 angle? And then any update on your outlook for health care services?

[Eric La Flèche, executive]

I'll let Jean-Michel have a crack at that.

[Jean-Michel Coutu, executive]

Yes. So I think Eric highlighted the drivers very well. So GLP-1s continue to be a tailwind. There's been some changes in that category as new products have come into market in Canada, and that's also continuing to boost growth in that category overall.

In terms of professional services, we're continuing to see growth on professional services. Although since there's no new services, we're starting to see that it's moderating a little bit, but with Bill 67, we do expect that to pick up. We don't have any news on the Bill 67 front. Right now, we're probably looking at a January time line depending on the negotiations between the government and AQPP. But on that is the same underlying drivers that are going to continue to maintain that momentum in F 2026 for us.

[Operator]

Next question will be from Irene Nattel at RBC Capital Markets.

[Irene Nattel, analyst]

I think we're all kind of hyper focused on any marginal changes in the environment, kind of competitive intensity consumer behavior. But based on your comments, Eric, like are there really any or is it fairly stable to, let's say, earlier in the year?

[Eric La Flèche, executive]

I think it's fairly stable, like very consistent environment, I would say, and consumer behavior. The accelerating square footage growth is not new for this quarter, but it's been something that we've opened stores, others have opened stores. So there's industry square footage growth out there that's having an effect. It's making the market certainly more competitive. So the level of same-store sales we're reporting, I think, reflects some of that new competition, new square footage in the market. So that's the only comment I would add.

[Irene Nattel, analyst]

That's really helpful. And then just coming back to a comment that you made about requests for price increases being in excess of the historical 2% to 3%. I think you called out meat, but what about other categories? And what would be your expectation for where things actually settle out versus the request?

[Eric La Flèche, executive]

So price request of over 2%, 3% is not unusual. We've seen that before, mid-single digits, high single digits, sometimes more, it depends on the category, the ingredients, particular situations. So this is, I would say, normal situation. The quantity remains elevated of price increase request, but we deal with it as best we can. We negotiate in good faith with our vendors. We pushback when we can. And when it's justified, it will be a market increase and we will have to take it.

As I said in the opening remarks, we're in the freeze right now. So there were some price increases before November 15, and the next wave will not come before February. So consumers -- we're trying to protect consumers as much as we can and give value as much as we can. What the outcome of those negotiations are, we expect to be normal and we expect it to be manageable and we expect to stay in a range of inflation in the 2%, 3%. But the jury is out, and I don't have the famous crystal ball. We'll see where it lands.

[Irene Nattel, analyst]

That's great. And just one final one for me, please. You mentioned the accelerating square footage growth, yours and the others notably in discount. What kind of returns are you seeing as you open these real estate projects? And are they any different from historically?

[Eric La Flèche, executive]

In general, we're pleased with our returns. We analyze investments very carefully. We have our internal thresholds. We're meeting our investment thresholds. So market by market, investment by investment, we're careful to make the decisions that will contribute to long-term shareholder growth and capture the market share that we think is out there to capture for us in a responsible and disciplined way. So short answer is we're meeting our financial targets.

[Operator]

Next question will be from Michael Van Aelst at TD Cowen.

[Michael Van Aelst, analyst]

I just wanted to go back on your answer to one of the earlier questions about the industry's square footage growth. And I mean, I think it makes sense that it's moderating the levels of same-store sales growth. But you also said that it's making the industry more competitive.

Now I guess I'm wondering, is it just making it more competitive in terms of lowering that same-store sales growth? Or is it also impacting your gross margins? Because your gross margin up 23 basis points was actually quite solid. And so I'm kind of curious as to whether you're seeing pressure on the gross margin.

[Eric La Flèche, executive]

The comment was more of the same. When there's a new store opening across the street, it makes it more competitive for your existing networks. So I said, square footage makes it more competitive because it adds competition in certain markets and it impacts same-store sales for that market. So for me, it's one and the same.

The gross margin, we're pleased with our results this quarter. So we're able to manage through this competitive environment and pleased with our performance. I think we have experienced merchandisers, and we're doing what we can to meet our targets. But we're in a competitive environment and we always have been.

[Michael Van Aelst, analyst]

Okay, so okay. And then Nicolas mentioned that the DC efficiencies that you're getting are helping to drive that gross margin higher. I mean that was the case, obviously, in this quarter in the face of some of these competitive pressures. So what might change? What do you think might change over the next -- over fiscal '26 that might require you to reinvest some of that margin improvement back into promo activity like you suggested might be necessary?

[Eric La Flèche, executive]

I don't want to speculate. We are competitive. We always will be competitive in the market to protect our share, protect our sales and deliver decent margins to our shareholders for the business. What might change? It's hard to give you a straight answer or clear answer to that. We're in a competitive market and we're confident in our position and our ability to compete. We're well positioned with our network of stores, both Metro and discounts in both provinces with a very good market share. I think we're well positioned to continue to do well.

[Michael Van Aelst, analyst]

Okay. So maybe just I'll ask it a little bit clearer. Is there anything that you're seeing now that's causing you to reinvest some of that gross margin gain that you got in Q4? Or is that just a possibility in future quarters?

[Eric La Flèche, executive]

Well, it's always a possibility, but we don't give guidance like that, and I think we should. That's all I'm going to say.

[Michael Van Aelst, analyst]

Okay. Just to be clear on the DC impact. When you talked about the direct impact of $6 million, all of that was in OpEx, I believe you said. So when you say you got -- you had -- I don't know, you said 30 basis point impact from 2 factors. So let's call it 20 basis points from the freezer. Was that adjusted for in the EPS? Or is that not? Or was that left to flow through?

[Nicolas Amyot, executive]

No. So what I said, as you've mentioned, is that all the direct costs associated with the freezer were recorded under OpEx. When the freezer situation happened, we completely stopped operating the freezer, shipping products out of the freezer. So the gross margin benefit that we've seen was realized, if you will, prior to that situation and is "not adjusted for." It just does not include any impact for the freezer. All the direct cost, incremental costs are in OpEx.

[Eric La Flèche, executive]

Just to pick up on that, we did not adjust for the lost sales and the margins on those lost sales. We adjusted for the loss of inventory in the warehouse and the direct cost.

[Nicolas Amyot, executive]

Was that clear, Mike?

[Michael Van Aelst, analyst]

Yes, that's clear.

[Operator]

Next question will be from Mark Petrie at CIBC.

[Mark Petrie, analyst]

Thanks for all the comments on the consumer and the competitive environment. That's very helpful. Hoping you can elaborate on the steps you took with regards to the frozen DC just to get it back on track to full operations. Was it repair, replace? And how have you sort of addressed the risks of recurrence?

[Eric La Flèche, executive]

Thank you for that question. So I'm not an engineer, and I don't want to say things that are way out of my league. But there was a complex repair and set up. So it involved compressors that were repaired, heat exchanger that is being replaced. So we are changing some components of the heat exchanger system to a different system, and we will be adding some redundancy so that we will avoid the situation. We will do eventually or in the not-too-distant future. We don't face the same risk in Terrebonne, our other frozen automated frozen facility in Quebec. That one is a fresh and frozen building on a different refrigeration system. We made sure that we have enough capacity and redundancy there. We will add even more, but we are in a good position there. And I think the risk is well managed.

I think the good news in this catastrophe is what Terrebonne, our Quebec DC was able to pick up from Ontario. So very pleased that we were able to increase capacity in Terrebonne in short order quite substantially. So that proves that we have good networks, good facilities with good systems that can operate. Again, the breakdown in Toronto was really mechanical, refrigeration related, not IT or automation related at all. I hope this answers your question.

[Mark Petrie, analyst]

Yes, it does. And I'm not an engineer either, so that's more than enough for me. But I guess maybe just to follow up, the cost for whatever you did have to do with Terrebonne, that's included in the $15 million to $20 million for Q1 or that's just included in your overall CapEx budget? Or where do those costs fall?

[Eric La Flèche, executive]

So the $15 million, $20 million that we flagged out for Q1, a lot of that is transportation costs, and that includes Terrebonne. So we're shipping from Terrebonne to Ontario stores all over the province. So that has a substantial cost, transportation costs, and that's in that number.

[Mark Petrie, analyst]

Yes. Okay. Sorry, I just meant the cost of the equipment, but I think it was probably relatively small. And then my only other follow-up question, just on the same-store sales and, I guess, specifically to inflation. It seemed like the gap to CPI was wider this quarter than it has been in the last number of quarters. Would that be a fair interpretation? And if so, when you look at your internal data, what would account for that?

[Eric La Flèche, executive]

I wouldn't say the gap to CPI increased. We're in the same ballpark. CPI for our markets was 3.4% We're in the 3% range. So it was about a similar gap in the previous quarter, if I recall. And we don't see a huge gap, but there's a gap.

[Operator]

Next question will be from Vishal Shreedhar at National Bank.

[Vishal Shreedhar, analyst]

I just wanted to circle back to the GLP-1s that will go generic and have an impact on Metro's drugstore business. Is it fair to suggest that there'll be an impact on same-store sales growth and gross margin dollars? Or do you anticipate some of that being completely or more than offset by volume?

[Jean-Michel Coutu, executive]

Yes. So I could take this one. So it's a good question. Right now, the challenge is we don't have a crystal ball, so we can't really tell you when Ozempics could be genericized. There's been some delays. We know that the first submission did receive a notice of noncompliance. So clearly, it's going to be pushed further into F 2026 for us. Some people are saying spring.

And then the question becomes, will they have enough supply to meet the demand. That also is going to change the dynamic and the impact of GLP-1s for us. But when you look at it right now, the submission is for Ozempic, which is primarily for diabetes. Are they going to be prescribing also for weight loss? Chances are, yes. But there are other alternatives, as I mentioned earlier, on market right now that have also continued to bring a little bit more dynamics to that category.

But yes, it will -- a generic, if the demand doesn't pick up because of the lower cost, will create some deflation in our same-store sales. Right now, when we look at latent demand, we do expect some pickup because of the accessibility of the new price point. And then in terms of margin, in our model, it can create some margin decrease as we make margin as a percentage from wholesale. So that's, I mean, that's the dynamic right now in the market, but there's still a lot of unknowns for F 2026.

[Vishal Shreedhar, analyst]

Okay. That was helpful. With respect to the Jean Coutu network, is that sufficiently outfitted to capture the growing demand for professional services? And how can I think about the size of that business for Metro?

[Jean-Michel Coutu, executive]

Yes. So right now, it's more of a same-store sale business, and we get royalties on those fees. But when we look at our network, we are very well positioned. We've invested for a long time in making sure that our stores have sufficient consulting rooms on average 2 per store. And now we're looking at stores with 3 and 4 as we're renovating and continuing to expand our stores. So we are in a very strong position to continue to offer these professional services across our network. It's something we've always invested in, and we see it right now, we're capturing our fair share of professional services and it's continuing to grow.

[Operator]

The next question will be from John Zamparo at Scotiabank.

[John Zamparo, analyst]

I wanted to follow up on the gross margin gain topic. The year-over-year gain this quarter was significantly more than what Metro had posted over the last 3 quarters. I know you called out shrink improvements and productivity gains from the DC. But is there any color you can add on why this made a more meaningful improvement this quarter versus the past 3?

[Eric La Flèche, executive]

Not really. Maybe Marc can add color, but not really.

[Marc Giroux, executive]

Maybe a comment on the 2 questions regarding margin. Gross margin is a very dynamic and fluid concept of results. Our focus is winning on customer value and driving tonnage and maintaining share and delivering, as Eric said, the bottom line and shareholder value. So the rate itself for us is a guiding post but not an objective in itself. So depending on the quarter, depending on the dynamic, depending of the tonnage available, our merchandising team will invest and deploy strategy to win in the marketplace.

As you've seen in the past, our gross margins have been quite stable for multiple quarters. Some -- to Nicolas' point earlier, some of the productivity gain and shrink gain sometimes are reinvested to drive tonnage and sometimes they're flowing to the bottom line. I don't know if that helps and provides additional color.

[John Zamparo, analyst]

Yes. And just a follow-up on that, the fact that shrink is listed as the first factor, should we interpret that as that was the larger of the 2 drivers between that and productivity?

[Nicolas Amyot, executive]

Not necessarily, John. I would say it's a combination of shrink, DC productivity, including DC within the DC as well as all of our logistics around transportation. So I would say that they are similar contributors.

[John Zamparo, analyst]

Got it. Okay. And then in the outlook, you talked about 12 new or converted stores in F '26. Apologies if I missed it, but can you say what you expect for net square footage growth for this year?

[Eric La Flèche, executive]

It's a little -- for fiscal '26, we're seeing above 1%, 1% to 1.4% where we land.

[Operator]

[Operator Instructions] Next is a follow-up from Michael Van Aelst.

[Michael Van Aelst, analyst]

Just a quick one on the insurance claim. I know you said you're still negotiating it. But is your expectation that it's going to cover most or all of the direct and indirect inventory hit or just one of them? And then do you have any idea of the timing?

[Eric La Flèche, executive]

Michael, I would have liked to report that exactly that we're going to get it all back. These are complex policies with several insurers. So what I read is -- what I'm told, I should say, we're making our claims. We're going to get as much as we can. We think we're well covered with good coverage, and hope -- we will keep you posted, and we hope to get most, if not all of it back, but we'll see. We'll see where it ends up.

[Michael Van Aelst, analyst]

Yes. Can you comment at all on the timing?

[Eric La Flèche, executive]

Hard to say, too. We're going to get some advances. It looks like they're going to -- they recognize liability. So we're going to get some money pretty early. For the rest, I don't know how long it will take. So we'll keep you posted.

[Operator]

Next question is a follow-up from Chris Li.

[Christopher Li, analyst]

Sorry. I'm sorry if you talked about this already, but just a question on your SG&A expenses for the quarter. If we exclude the $6 million of nonrecurring costs, it was fairly normal. I think it was up just under 3%. And I know you don't give any sort of guidance for this year, but I'm just wondering like is there anything over the horizon that would cause you perhaps to deviate from that 3% growth for this year if you exclude the onetime costs that are still coming in Q1?

[Nicolas Amyot, executive]

Yes. So as you've mentioned, I think adjusted for the direct cost of the freezer, the year-over-year growth of SG&A was 2.8%. Nothing specific to highlight, multiple categories contributed "normally" to the increase. Nothing that we see on the horizon that should have a material impact. We have always ongoing union labor negotiations that could come and have an impact. But as you've mentioned, we don't give specific guidance. And I would say nothing specific to highlight.

[Christopher Li, analyst]

Okay. That's helpful. And then on the share buyback. You bought back, I think, $800 million of shares in fiscal '25. Do you expect a similar amount in fiscal '26? And then maybe related to that, you do have still a very strong balance sheet. I think your leverage is only 2.2x, which is below your target. Do you anticipate there's more room maybe to use that to accelerate the buybacks if you think it's appropriate?

[Nicolas Amyot, executive]

Yes. I think at this point, as I've mentioned, we've -- as of November 7, we have repurchased 8.7 million shares. The total approved program was 10 million shares. We're obviously not going to get to that by November 26. I would say that next year, at this point, I would expect a similar program and similar kind of operating conditions, meaning we're not necessarily going to totally fill it. And I think leverage wise, we've been saying that we are in a good position balance sheet wise. We might increase leverage in the future depending on conditions and I would say, for the moment, message is the same.

[Operator]

Thank you. And at this time, we have no other questions registered. Please proceed.

[Sharon Kadoche, executive]

Thank you all for your interest in Metro, and please mark your calendars for our first quarter results on January 27. Thank you.

[Operator]

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you disconnect your lines. Have yourselves a good day.