Mr. Eric La Fleche reports

METRO: SALES INCREASE OF 1.7% IN THE SECOND QUARTER OF 2014

Metro Inc. has released its results for the second quarter ended March 15, 2014.

Highlights:

• Sales of $2,554.8-million, up 1.7 per cent versus last year;
• Same-store sales up 1.0 per cent;
• Net earnings of $96.9-million and fully diluted net earnings per share of $1.07;
• Declared dividend of 30 cents per share, up 20 per cent;
• Results for the first 24 weeks of 2014 and of 2013, and those for the second quarter of 2013 include non-recurring items, the most important being a gain of $266.4-million after tax on the sale of a portion of Metro's investment in Alimentation Couche-Tard in 2013.

                                     HIGHLIGHTS
                (in millions of dollars, except per share amounts)

                                                               12 weeks/fiscal year        
                                                                     2014      2013     

Sales                                                           $ 2,554.8 $ 2,512.0
Operating income before depreciation and amortization and
associate's earnings                                                168.7     176.3
                                                                --------- ---------
Net earnings                                                    $    96.9 $   362.7
                                                                ========= =========
Fully diluted EPS                                               $    1.07 $    3.73
Adjusted net earnings from continuing operations                $    96.9 $    96.4
Adjusted fully diluted EPS from continuing operations           $    1.07 $    0.98

                                                               24 weeks/fiscal year
                                                                     2014      2013

Sales                                                           $ 5,256.1 $ 5,216.7
Operating income before depreciation and amortization and
associate's earnings                                                339.8     360.8
Adjusted operating income before depreciation and amortization
and associate's earnings                                            346.2     360.8
                                                                --------- ---------
Net earnings                                                    $   196.1 $   480.0
                                                                ========= =========
Fully diluted EPS                                               $    2.13 $    4.91
Adjusted net earnings from continuing operations                $   200.8 $   207.3
Adjusted fully diluted EPS from continuing operations           $    2.18 $    2.10

"We are encouraged by our improved sales performance and the increase in our adjusted net earnings achieved in the second quarter in a market that remains highly competitive. We are confident that our strategies, investments and the commitment of our teams will allow us to continue to grow in future quarters," stated Eric R. La Fleche, president and chief executive officer.

2014 second-quarter results

Sales

Sales in the second quarter of 2014 totalled $2,554.8-million, up 1.7 per cent compared with $2,512.0-million for the same quarter last year. Same-store sales were up 1.0 per cent. The company's total food basket experienced slight inflation. Metro's merchandising strategies and investments, as well as the company's reorganization of its Ontario store network enabled Metro to increase sales in a market that remains intensely competitive.

Sales in the first 24 weeks of fiscal 2014 totalled $5,256.1-million versus $5,216.7-million for the corresponding period of fiscal 2013, an increase of 0.8 per cent.

Operating income before depreciation and amortization and associate's earnings

Operating income before depreciation and amortization and associate's earnings for the second quarter of 2014 totalled $168.7-million or 6.6 per cent of sales versus $176.3-million or 7.0 per cent of sales for the same quarter last year.

Operating income before depreciation and amortization and associate's earnings for the first 24 weeks of fiscal 2014 totalled $339.8-million versus $360.8-million for the corresponding period of the previous fiscal year. Non-recurring closing costs of $6.4-million were recorded in the first quarter of 2014 as a result of Metro's decision to consolidate its Quebec produce and dairy distribution operations in the company's new Laval distribution centre and to close its decades-old Quebec City produce warehouse. Excluding this non-recurring expense, adjusted operating income before depreciation and amortization and associate's earnings for the first 24 weeks of fiscal 2014 was $346.2-million, or 6.6 per cent of sales compared with $360.8-million or 6.9 per cent of sales for the corresponding period of 2013.

This lower profitability is mainly due to the decreases in gross margins which were 19.5 per cent and 19.1 per cent, respectively, for the second quarter and 24-week period of fiscal 2014 compared with 19.8 per cent and 19.4 per cent for the corresponding quarters in 2013, as part of the merchandising strategies Metro adopted in 2014 to improve sales. Strong cost control enabled Metro to maintain operating expenses at a level relatively similar to last year's despite an increase in certain costs, notably energy.

Depreciation and amortization and net financial costs

Total depreciation and amortization expenses for the second quarter and the first 24 weeks of 2014 amounted to $40.5-million and $81.5-million respectively versus $41.4-million and $83.3-million in 2013. Net financial costs for the second quarter of 2014 totalled $11.4-million compared with $11.9-million for the corresponding quarter last year. Net financial costs for the first 24 weeks of fiscal 2014 totalled $21.7-million compared with $24.9-million in 2013. The average financing rate was 5.0 per cent for the first 24 weeks of 2014 versus 4.6 per cent for the corresponding period last fiscal year. This increase in the average rate was due to the repayment in the second quarter of 2013 of Metro's revolving credit facility of $330.4-million which carried a lower interest rate than Metro's other debts. The repayment was made out of the company's operating activity cash flows and the proceeds on disposal of a portion of the investment in Alimentation Couche-Tard.

Share of an associate's earnings

Metro's share of earnings in Alimentation Couche-Tard was $11.0-million for the second quarter of 2014 versus $8.0-million for the corresponding period of 2013.

Metro's share of earnings for the first 24 weeks of fiscal 2014 was $24.1-million versus $27.0-million in 2013. This decline results from the company's reduced holding compared with last year following the sale of nearly half of the company's investment in the second quarter of 2013.

Income taxes

Second-quarter and 24-week-period income tax expenses of $30.9-million and $64.6-million in 2014 represented effective tax rates of 24.2 per cent and 24.8 per cent compared with second-quarter and 24-week-period tax expenses of $76.0-million and $113.7-million respectively in 2013 for effective tax rates of 17.3 per cent and 19.4 per cent. Excluding the $307.8-million gain on disposal of part of Metro's investment in Alimentation Couche-Tard and related income tax of $41.4-million, effective tax rates for the second quarter and 24-week period of 2013 were 26.4 per cent and 25.9 per cent, respectively.

Net earnings

Net earnings for the second quarter of 2014 were $96.9-million, down 73.3 per cent from net earnings of $362.7-million for the same quarter of 2013. Fully diluted net earnings per share were down 71.3 per cent to $1.07 from $3.73 last year.

Net earnings for the first 24 weeks of 2014 were $196.1-million, down 59.1 per cent from $480.0-million for the corresponding period of 2013. Fully diluted net earnings per share were $2.13 compared with $4.91 last year, a decrease of 56.6 per cent.

Adjusted net earnings from continuing operations

Excluding the after-tax gain of $266.4-million on disposal of part of the company's investment in Alimentation Couche-Tard as well as the $100,000 net loss on discontinued operation following the sale of Metro's Distagro division in the second quarter of 2013, 2014 second-quarter adjusted net earnings from continuing operations and adjusted fully diluted net earnings per share from continuing operations were up 0.5 per cent and 9.2 per cent, respectively, compared with the corresponding quarter of 2013.

Excluding after-tax Quebec produce warehouse closing costs of $4.7-million in the 24-week period of 2014 as well as the after-tax gain of $266.4-million on disposal of part of Metro's investment in Alimentation Couche-Tard and net gain of $6.3-million on discontinued operation following the sale of Metro's Distagro division in the 24-week period of 2013, adjusted net earnings from continuing operations for the 24-week period of 2014 were down 3.1 per cent while adjusted fully diluted net earnings per share from continuing operations were up 3.8 per cent compared with the corresponding period of 2013.

Normal course issuer bid program

Under its normal course issuer bid program, the corporation may repurchase up to seven million of its common shares between Sept. 10, 2013, and Sept. 9, 2014. As at April 4, 2014, the corporation has repurchased 4,800,100 common shares at an average price of $62.86 for a total of $301.8-million.

Dividends

On April 15, 2014, the corporation's board of directors declared a quarterly dividend of 30 cents per common share payable June 6, 2014, an increase of 20 per cent over the dividend declared for the same quarter last year. On an annualized basis, this dividend represents approximately 23 per cent of 2013 adjusted net earnings from continuing operations.

Conference call

Financial analysts and institutional investors are invited to participate in a conference call on the 2014 second-quarter results at 10 a.m. (EDT) on Wednesday, April 16, 2014. To access the conference call, please dial 647-427-7450 or 888-231-8191. The media and investing public may access this conference via a listen mode only.

We seek Safe Harbor.