METRO REPORTS 2023 THIRD QUARTER RESULTS

MONTRÉAL, Aug. 9, 2023

• Sales of $6,427.5 million, up 9.6%
• Food same-store sales⁽¹⁾ up 9.4%
• Pharmacy same-store sales⁽¹⁾ up 5.9%
• Net earnings of $346.7 million, up 26.1%, and adjusted net earnings⁽¹⁾ of $314.8 million, up 10.9%
• Fully diluted net earnings per share of $1.49, up 30.7%, and adjusted fully diluted net earnings per share⁽¹⁾ of $1.35, up 14.4%

"We delivered solid results in the third quarter fueled by strong same-store sales and good operating leverage. With persistent food inflation, our teams did an excellent job to offer good value to our customers, resulting in market share gains and tonnage growth, driven by our discount food stores. Our loyalty program MOİ was successfully launched this quarter and we are pleased with the strong customer response so far. This enhanced program provides even more value to customers by offering multiple ways to earn and redeem points on food and pharmacy purchases in Québec. We are clearly disappointed with the current labour dispute in 27 of our Metro stores in the Greater Toronto Area given that we had reached a very good agreement that was unanimously recommended by union representatives. We look forward to a resolution and the re-opening of our stores as soon as possible, while ensuring the long-term competitiveness of our company⁽²⁾", declared Eric La Flèche, President and Chief Executive Officer.

Sales in the third quarter of Fiscal 2023 remained strong, reaching $6,427.5 million, and up 9.6%. Food same-store sales⁽¹⁾ were up 9.4% (1.1% in the third quarter of 2022) driven by the continuing shift to discount and high inflation. Online food sales⁽¹⁾ were up 99.0% versus last year (flat in the third quarter of 2022), mostly driven by higher partnership sales. Our food basket inflation was about 8.0%, lower than reported food CPI and lower than the previous quarter. Pharmacy same-store sales⁽¹⁾ were up 5.9% (7.2% in the third quarter of 2022), with a 6.7% increase in prescription drugs⁽¹⁾ and a 4.1% increase in front-store sales⁽¹⁾, with increases across most categories except over-the-counter products.

Sales in the first 40 weeks of Fiscal 2023 totalled $15,652.9 million, up 8.3% compared to $14,456.3 million for the corresponding period of 2022.

This earnings measurement excludes financial costs, taxes, depreciation and amortization.

Operating income before depreciation and amortization for the third quarter of Fiscal 2023 totalled $612.3 million, or 9.5% of sales, an increase of 8.4% versus the corresponding quarter of Fiscal 2022. Included in the third quarter of Fiscal 2023 are launch costs of $5.1 million related to our loyalty program MOİ. Included in the third quarter of Fiscal 2022 are $7.7 million of direct costs related to the one-week labour conflict and collective agreement ratification with our distribution center employees in Toronto offset by a non-recurring gain on the sale of assets of $8.7 million. Operating income before depreciation and amortization for the first 40 weeks of Fiscal 2023 totalled $1,521.6 million or 9.7% of sales, up 8.4% versus the corresponding period of 2022.

Gross margin⁽¹⁾ for the third quarter and the first 40 weeks of Fiscal 2023 were 19.6% and 19.8% respectively, versus 19.8% and 19.9% for the corresponding periods of 2022, reflecting the decline in our food margin. Gross profit for the third quarter of 2022 included $5.3 million of direct costs related to the one-week labour conflict with our distribution center employees in Toronto.

Operating expenses as a percentage of sales for the third quarter and for the first 40 weeks of Fiscal 2023 were 10.1% versus 10.3% in the corresponding periods of 2022. Operating expenses in the third quarter of Fiscal 2023 were impacted by $5.1 million of launch costs related to our loyalty program MOİ as well as fees related to higher online partnership sales. Included in the third quarter of Fiscal 2022 are $2.4 million of direct costs related to the one-week labour conflict with our distribution center employees in Toronto.

Total depreciation and amortization expense for the third quarter of Fiscal 2023 was $159.5 million versus $154.7 million for the corresponding quarter of 2022. For the first 40 weeks of Fiscal 2023, total depreciation and amortization expense was $400.2 million versus $383.5 million for the corresponding period of 2022.

Net financial costs for the third quarter of Fiscal 2023 were $37.1 million compared with $35.8 million for the corresponding quarter of 2022. The increase is mostly due to higher debt partly mitigated by higher capitalized interests on our distribution center automation projects. For the first 40 weeks of Fiscal 2023, net financial costs were $92.5 million compared with $92.3 million for the corresponding period of 2022.

The income tax expense of $69.0 million for the third quarter of Fiscal 2023 represented an effective tax rate of 16.6% compared with an income tax expense of $99.6 million and an effective tax rate of 26.6% in the third quarter of Fiscal 2022. The Corporation recorded tax assets of $40.7 million in the quarter ($8.2 million of current tax assets and $32.5 million of deferred tax assets) with an equivalent reduction of the tax expense following a favorable judgement at the Tax Court of Canada. Capital losses previously disallowed by the Canada Revenue Agency ("CRA") on the disposition of shares of a subsidiary in the years 2012 to 2014, have now been granted. The CRA subsequently accepted that the Corporation amend a rollover form filed for the tax year ended March 3, 2018, resulting in an increase in the tax base of intangible assets.

The 40-week period income tax expense of $232.3 million for Fiscal 2023 and $246.6 million for Fiscal 2022 represented an effective tax rate of 22.6% and of 26.6% respectively.

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