Mr. Eric La Fleche reports

METRO REPORTS 2017 FIRST QUARTER RESULTS

Metro Inc. has released its results for the first quarter of fiscal 2017 ended Dec. 17, 2016.

2017 first quarter highlights

• Fully diluted net earnings per share of 58 cents, up 3.6 per cent;
• Sales of $2,971.3-million, up 0.3 per cent;
• Same-store sales up 0.7 per cent;
• Operating income before depreciation and amortization and associate's earnings up 3.1 per cent;
• Net earnings of $138.1-million, down 1.2 per cent;
• Declared dividend of 16.25 cents per share, up 16.1 per cent.

                               FINANCIAL HIGHLIGHTS
                (millions of dollars, except for net earnings per share)
                                                                           First quarter      
                                                                       2017         2016

Sales                                                              $2,971.3     $2,961.6
Operating income before depreciation
and amortization and associate's earnings                             216.8        210.3
Net earnings                                                          138.1        139.8
Fully diluted EPS                                                      0.58         0.56
 

President's message

"We are pleased with our first quarter results as we grew sales and operating income in a challenging environment of food deflation and intense competition. We will continue (1) to execute our business plan and are confident of sustaining (1) our growth in 2017," stated Eric R. La Fleche, president and chief executive officer.

2017 first quarter results

Sales

Sales in the first quarter of 2017 reached $2,971.3-million, up 0.3 per cent compared with $2,961.6-million in the first quarter of 2016. Same-store sales were up 0.7 per cent (2.8 per cent in the same quarter last year). The company's aggregate food basket experienced deflation of 1.0 per cent versus an inflation of 2.8 per cent last year, which largely explains the company's lower sales growth. Certain other factors also impacted the company's sales negatively, namely the company's decision not to renew a supply agreement for a network of hospitals in the company's wholesale pharmaceutical business, as well as the closure for conversion of some Metro stores that has not been offset in the first quarter by sales of the newly opened discount stores.

Operating income before depreciation and amortization and associate's earnings

This earnings measurement excludes financial costs, taxes, 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 2017 totalled $216.8-million or 7.3 per cent of sales versus $210.3-million or 7.1 per cent of sales for the same quarter last year, up 3.1 per cent.

Gross margin on sales for the first quarter of 2017 was 19.7 per cent versus 19.4 per cent for the corresponding quarter of 2016. Operating expenses as a percentage of sales for the first quarter were 12.4 per cent versus 12.3 per cent for the corresponding quarter last year.

Depreciation and amortization and net financial costs

Total depreciation and amortization expense for the first quarter of 2017 was $43.2-million versus $40.3-million for the corresponding quarter of 2016.

Net financial costs for the first quarter of 2017 totalled $14.6-million compared with $14.4-million for the same quarter last year.

Share of an associate's earnings

The company's share of earnings in Alimentation Couche-Tard was $23.9-million for the first quarter of 2017 versus $30.6-million for the corresponding quarter of 2016.

Income taxes

The 2017 first quarter income tax expense of $44.8-million represented an effective tax rate of 24.5 per cent compared with the 2016 first quarter tax expense of $46.4-million for an effective tax rate of 24.9 per cent.

Net earnings

Net earnings for the first quarter of 2017 were $138.1-million, a decrease of 1.2 per cent from $139.8-million for the first quarter of 2016. Fully diluted net earnings per share rose 3.6 per cent to 58 cents from 56 cents last year. The decrease in net earnings is due to a $6.7-million decline in the company's share of an associate's earnings (Alimentation Couche-Tard).

Normal course issuer bid program

Under its normal course issuer bid program, the corporation may repurchase up to 12 million of its common shares between Sept. 12, 2016, and Sept. 11, 2017. Between Sept. 12, 2016, and Jan. 13, 2017, the corporation has repurchased 5,376,346 common shares at an average price of $41.13 for a total of $221.1-million.

Dividends

On Jan. 23, 2017, the corporation's board of directors declared a quarterly dividend of 16.25 cents per common share payable March 13, 2017, an increase of 16.1 per cent over the dividend declared for the same quarter last year. On an annualized basis, this dividend represents approximately 25 per cent of 2016 net earnings, in accordance with the payout target communicated to shareholders in January, 2014.

Conference call

Financial analysts and institutional investors are invited to participate in a conference call for the 2017 first quarter results at 2 p.m. Eastern Standard Time today, Jan. 24, 2017. To access the conference call, please dial 647-427-7450 or 1-888-231-8191. The media and investing public may access this conference via a listen mode only.

Notice to readers

Metro's first quarter of 2017 interim condensed consolidated financial statements and management's discussion and analysis are available on the Internet at the company's website -- corporate site -- investor relations -- 2017 quarterly results -- 2017 first quarter results.

We seek Safe Harbor.