Mr. Eric La Fleche reports

METRO: EARNINGS PER SHARE INCREASE OF 22.6% IN THE FIRST QUARTER OF 2015 AND DIVIDEND INCREASE OF 16.7%

Metro Inc. today released its results for the first quarter of fiscal 2015 ended Dec. 20, 2014.

Highlights:

• Sales of $2,840.5-million, up 5.2 per cent;
• Same-store sales up 3.8 per cent;
• Net earnings of $112.5-million, up 13.4 per cent;
• Fully diluted net earnings per share of $1.30, up 22.6 per cent;
• Adjusted fully diluted net earnings per share of $1.35, up 21.6 per cent;
• Declared dividend of 35 cents per share, up 16.7 per cent;
• Three-for-one stock split.

                           HIGHLIGHTS
(in millions of dollars, except for net earnings per share/EPS)

                                                       12 weeks

                                                2015       2014

Sales                                       $2,840.5   $2,701.3
Operating income
before depreciation and amortization,
and associate's earnings                       190.0      171.1
Adjusted operating income before
depreciation and amortization,
and associate's earnings                       190.0      177.5
Net earnings                                   112.5       99.2
Fully diluted EPS                               1.30       1.06
Adjusted net earnings                          116.8      103.9
Adjusted fully diluted EPS                      1.35       1.11

President's message

"Building on the momentum of the fourth quarter of 2014, our sales growth was strong, and we are pleased with our first-quarter results. Our merchandising strategies and investments in our retail network are well received by our customers, and we are confident that we are well positioned to continue to grow over the coming quarters," stated Eric La Fleche, president and chief executive officer.

2015 first-quarter results

Sales

Sales in the first quarter of 2015 totalled $2,840.5-million, up 5.2 per cent compared with $2,701.3-million for the same quarter last year. Same-store sales were up 3.8 per cent, the highest increase since the third quarter of 2009, and the company's aggregate food basket experienced inflation of 3.0 per cent in the first quarter. In a market that remains intensely competitive, the company's merchandising strategies and investments in the company's store network enabled it to increase sales.

Operating income before depreciation and amortization, and associate's earnings

Operating income before depreciation and amortization, and associate's earnings (Alimentation Couche-Tard), for the first quarter of 2015 totalled $190.0-million or 6.7 per cent of sales against $171.1-million or 6.3 per cent of sales for the same quarter last year (6.6 per cent excluding the non-recurring Quebec City produce warehouse closure costs of $6.4-million).

In the first quarter of 2015, gross margin on sales was 19.3 per cent against 18.8 per cent for the same quarter of 2014. The operating expenses as a percentage of sales were 12.6 per cent for the first quarter of 2015 against 12.2 per cent for the corresponding quarter of last year. These changes are largely attributable to the acquisition of Premiere Moisson in the fourth quarter of fiscal 2014.

Depreciation and amortization, net financial costs and early redemption fees

Total depreciation and amortization expenses for the first quarter of 2015 amounted to $40.0-million against $41.0-million in 2014.

Net financial costs for the first quarter of 2015 totalled $13.4-million compared with $10.3-million for the corresponding quarter last year. This difference is due, among others, to the issuance of notes in the first quarter as the corporation deemed market conditions to be favourable to long-term financing. On Dec. 1, 2014, the corporation issued a private placement of $300.0-million aggregate principal amount of Series C unsecured senior notes, bearing interest at a fixed nominal rate of 3.20 per cent and maturing Dec. 1, 2021, and $300.0-million aggregate principal amount of Series D unsecured senior notes, bearing interest at a fixed nominal rate of 5.03 per cent and maturing Dec. 1, 2044, for a total of $600.0-million.

The corporation allocated the proceeds to repayment of existing debt, working capital and other general corporate purposes. On Dec. 5, 2014, the corporation paid off its $335.0-million unsecured renewable revolving credit facility, which had a weighted average rate of 2.39 per cent. On Dec. 31, 2014, the corporation also redeemed its $200.0-million aggregate principal amount of Series A notes, at a fixed nominal rate of 4.98 per cent, maturing Oct. 15, 2015. Early redemption fees of $5.9-million were incurred.

Share of an associate's earnings

The company's share of earnings in Alimentation Couche-Tard was $17.9-million for the first quarter of 2015 against $13.1-million for the corresponding quarter of 2014.

Income taxes

First-quarter 2015 income tax expense of $36.1-million represented an effective tax rate of 24.3 per cent compared with 2014 first-quarter tax expense of $33.7-million for an effective tax rate of 25.4 per cent.

Net earnings

Net earnings for the first quarter of 2015 were $112.5-million, an increase of 13.4 per cent over net earnings of $99.2-million for the same quarter of 2014. Fully diluted net earnings per share rose 22.6 per cent to $1.30 from $1.06 last year.

Adjusted net earnings

Excluding after-tax Series A notes early redemption fees of $4.3-million in the first quarter of 2015 and after-tax Quebec City produce warehouse closure costs of $4.7-million in the first quarter of 2014, 2015 first-quarter adjusted net earnings and adjusted fully diluted net earnings per share were up 12.4 per cent and 21.6 per cent respectively over those for 2014.

Normal course issuer bid program

Under its normal course issuer bid program, the corporation may repurchase up to 5.7 million of its common shares between Sept. 10, 2014, and Sept. 9, 2015. As at Jan. 16, 2015, the corporation has repurchased 1,174,400 common shares at an average price of $79.50 for a total of $93.4-million.

Dividends

On Jan. 26, 2015, the corporation's board of directors declared a quarterly dividend of 35 cents per common share, payable March 16, 2015, an increase of 16.7 per cent over the current quarterly dividend of 30 cents. On an annualized basis, this dividend represents approximately 25 per cent of 2014 adjusted net earnings compared with the percentages of the previous two fiscal years, which were 22 per cent and 20 per cent, in accordance with the new payout target communicated to shareholders in January, 2014.

After the record date (Feb. 6, 2015) of the stock split mentioned below and as a result of this stock split, Metro's quarterly dividend declared on Jan. 26, 2015, payable March 16, 2015, to all shareholders of common shares at the close of business Feb. 18, 2015, will go from 35 cents to 11.66667 cents per common share.

Events after the reporting period

Three-for-one stock split

The board of directors of the corporation approved on Jan. 26, 2015, a three-for-one stock split of its common shares to increase the number of shares outstanding and enhance affordability to investors. This stock split is subject to obtaining all necessary regulatory approvals.

The record date of the stock split will be Friday, Feb. 6, 2015, at 5 p.m., and the payment date will be Wednesday, Feb. 11, 2015, at which time the corporation's transfer agent, Computershare Trust Company of Canada, will promptly send shareholders of record a physical share certificate representing two additional common shares for each common share held at such record date. In addition, Computershare will electronically issue the appropriate number of common shares to CDS & Co. for distribution to the non-registered beneficial shareholders, resulting in the brokerage account of beneficial owners being automatically updated to reflect the stock split. Shareholders do not need to take any action in order to receive additional shares under this stock split.

The Toronto Stock Exchange has determined to implement due-bill trading in connection with the stock split. A due bill is an entitlement attached to listed securities undergoing a material corporate action, such as a stock split. In this instance, anyone purchasing a common share of Metro during the period commencing two trading days before the record date (Wednesday, Feb. 4, 2015), and ending on the payment date (Wednesday, Feb. 11, 2015), inclusively, shall receive a payable right. Any trades that are executed on the Toronto Stock Exchange during the due-bill period will be identified to ensure purchasers of Metro's common shares receive the entitlement.

The common shares will commence trading on an ex distribution basis on Thursday, Feb. 12, 2015, as of which date purchases of the corporation's common shares will no longer have an attaching entitlement. The due-bill redemption date will be Tuesday, Feb. 17, 2015.

After the record date (Feb. 6, 2015), of the stock split and as a result of this stock split, the corporation's quarterly dividend declared on Jan. 26, 2015, payable March 16, 2015, to all shareholders of common shares at close of business Feb. 18, 2015, will go from 35 cents to 11.66667 cents per common share.

Brunet Target pharmacies

On Jan. 15, 2015, Target announced the closure of all its Canadian stores. As franchisor, the corporation supplies 14 Brunet Target pharmacies in Quebec Target stores. The company will proceed shortly with the closure of these pharmacies, and the costs incurred will not be significant for the corporation.

Annual general meeting of shareholders

The annual general meeting of shareholders of the corporation will be held today, Tuesday, Jan. 27, 2015, at 11 a.m. (EST) at the Centre Mont-Royal located at 2200 Mansfield St., Montreal, Que. At the meeting, the corporation will honour Pierre Lessard and Paul Gobeil, respectively chairman and vice-chairman of the board, who have reached the mandatory board retirement age and will be retiring after more than 24 years with the corporation.

Conference call

Financial analysts and institutional investors are invited to participate in a conference call for the 2015 first-quarter results at 3 p.m. (EST) today, Jan. 27, 2015. To access the conference call, please dial 647-427-7450 or 888-231-8191. The media and investing public may access this conference through a listen mode only.

Notice to readers

Metro's first quarter of 2015 interim condensed consolidated financial statements and management's discussion and analysis are available on the Internet at the Metro website.

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