(Reuters) - Canadian supermarket operator Metro Inc (MRU.TO) will partner with Target Corp (TGT.N) to operate the U.S. retailer’s in-store pharmacies in Quebec, a month after Loblaw Cos Ltd (L.TO), Canada’s largest grocer, said it would buy Shopper’s Drug Mart SC.TO.
Metro’s Brunet pharmacies will carry Target-owned brands in majority of Target stores in Quebec and provide prescription, pharmacy and health consultation services, the companies said.
These deals underscore the increasing appetite of Canadian grocers for the pharmacy business as prescription drugs give them higher margins to offset the relatively low returns on basic food staples.
Loblaw said last month it would buy Shopper’s Drug Mart for C$12.4 billion ($11.99 billion).
“The agreement with Target provides an excellent growth opportunity for Metro’s pharmaceutical division ... as it enables us to significantly increase our presence, our purchasing power and our sales potential in Quebec,” Metro Chief Executive Eric La Flèche said in a statement.
Minneapolis-based Target said it expects to open its first 25 stores in Quebec this fall.
An increasing presence of U.S. companies have sent home-grown retailers scrambling to bulk up assets to fend off competition.
Metro, one of the few retailers that has not been part of an acquisition this year, operates a network of food and drug stores in Quebec and Ontario under banners such as Adonis and Brunet.
Metro said it would open 18 Brunet franchisee stores across Quebec by the summer of 2014.
Metro also said it would reorganize its Ontario store network over the next few months that will affect some 15 stores. The company will take a related charge of about C$40 million in the fourth quarter.
Metro’s net earnings rose to C$149.8 million, or C$1.55 per share in the third quarter, from C$144.4 million, or C$1.43 per share, a year earlier.
Higher competition weighed on sales in the quarter ended July 6, Metro said. Revenue fell about 1 percent to C$3.57 billion and same-store sales, a key measure for retailers, fell 0.9 percent.
Reporting by Krithika Krishnamurthy in Bangalore; Editing by Akshay Lodaya, Maju Samuel