Earnings call transcript: Metro Inc.’s Q1 2025 results meet expectations

Metro Inc. (MRU) reported its first-quarter 2025 earnings, meeting analysts’ expectations with an earnings per share (EPS) of $1.02, precisely matching the forecast. Revenue reached $4.91 billion, slightly surpassing the anticipated $4.86 billion. The company, which has raised dividends for 30 consecutive years and maintains a "GREAT" financial health rating according to InvestingPro, saw its stock increase modestly by 0.25% following the announcement, reflecting investor satisfaction with its steady performance.

Key Takeaways

• Metro Inc.’s EPS and revenue met analysts’ expectations.
• The company achieved a 5.5% year-over-year increase in total sales.
• Online sales surged by 26%, highlighting digital growth.
• Metro repurchased 2.849 million shares for $264 million.
• The company maintains an 8-10% medium to long-term EPS growth target.

Company Performance

Metro Inc. demonstrated solid performance in Q1 2025, with total sales rising by 5.5% compared to the previous year. The company, currently valued at $16.07 billion, continued to expand its presence with new store openings and conversions, contributing to its growth. A focus on Canadian and local products, along with innovations in pharmacy services, supported Metro’s competitive position in the market. With a P/E ratio of 23.5x and trading near its 52-week high, InvestingPro analysis suggests the stock is slightly overvalued based on its Fair Value calculations.

Financial Highlights

• Revenue: $4.91 billion, up 5.5% year-over-year
• Earnings per share: $1.02, up 12.1% year-over-year
• Gross margin: 20% of sales, up 10 basis points
• EBITDA: $461 million, up 5% year-over-year
• Adjusted net earnings: $226.6 million, up 9.8%

Earnings vs. Forecast

Metro Inc.’s Q1 2025 EPS of $1.02 matched the forecast, signaling stability in its financial performance. The revenue of $4.91 billion slightly exceeded expectations, reflecting a positive surprise of approximately 1%.

Market Reaction

Following the earnings release, Metro’s stock price increased by 0.25%, closing at $100.88. The stock remains close to its 52-week high of $103.59, with impressive year-to-date returns of 12.63%. This performance, combined with the company’s strong financial health metrics available on InvestingPro, indicates robust investor confidence in the company’s growth trajectory.

Outlook & Guidance

Metro Inc. maintains its medium to long-term EPS growth target of 8-10%. The company is cautiously optimistic about the future, considering potential near-term food inflation. Strategic investments in retail networks and supply chain are expected to drive continued growth.

Executive Commentary

Eric LaFeche, CEO of Metro Inc., expressed confidence in the company’s growth strategy, stating, "We remain confident that our sustained investments in our retail networks and supply chain combined with strong execution will continue to fuel our growth." CFO Francois Sibaud emphasized the importance of loyalty programs, saying, "Loyalty is a way to deliver value to consumers and to allow them to save."

Risks and Challenges

• Potential acceleration of food inflation could impact consumer spending.
• Supply chain disruptions may affect operations and cost management.
• Macro-economic uncertainties pose a challenge to growth projections.
• Increasing competition in the retail and pharmacy sectors.
• Dependence on Canadian market performance for growth.

Metro Inc.’s Q1 2025 earnings call highlighted the company’s steady financial performance and strategic focus on growth, supported by innovations and market expansion. Despite macroeconomic uncertainties, Metro remains well-positioned to achieve its long-term objectives.

Full transcript - Metro Inc. (MRU) Q2 2025:

Conference Operator: This call is being recorded on Wednesday, 04/16/2025.

I would now like to turn the conference over to Mr.

Sharon Kadoshi, Investor Relations, Metro: Sharon Kadoshi. Please go ahead. Well, good morning, everyone. Thank you for joining us today. Our comments will focus on the financial results of our second quarter, which ended on March 15.

With me today is Mr. Eric LaFeche, President and CEO Francois Sibaud, Executive VP and CFO Marc Giraud, Chief Operating Officer Jean Michel Coutu, President of the Pharmacy division and Nicolas Amion, incoming CFO. During the call, we’ll present our second quarter results and comment on its highlights. We will then be happy to take your questions. Before we begin, I would like to remind you that we will use in today’s discussion different statements that could be construed as forward looking information.

In general, any statement which does not constitute a historical fact may be deemed as forward looking statements. Words or expressions such as expect, intend, our confidence, that, will and other similar words or expressions are generally indicative of forward looking statements. The forward looking statements are based upon certain assumptions regarding the Canadian Food and Pharmaceutical Industries, the general economy, our annual budget and our 2025 action plan. These forward looking statements do not provide any guarantees as to the future performance of the company and are subject to potential risks known and unknown as well as uncertainties that could cause the outcome to differ materially. Risk factors that could cause actual results or events to differ materially from our expectations as expressed in or implied by our forward looking statements are described under the Risk Management section in our 2024 Annual Report.

We believe these forward looking statements to be reasonable and pertinent at this time and represent our expectations. The company does not intend to update any forward looking statements except as required by applicable law. I will now turn the call over to Francois.

Francois Sibaud, Executive VP and CFO, Metro: Thank you, Esteb, and good morning, everyone. So total sales reached EUR 4,900,000,000.0 in the second quarter, an increase of 5.5% versus the same period last year. Food same store sales were up 5.2%, with sales positively impacted by the transfer of two significant pre Christmas shopping days from the first quarter to the second quarter of this year. When we adjust for this calendar shift, same store sales were up 3.9%. In pharmacy, we recorded solid same store sales of 7% on top of 5.9% in the previous year.

Our gross margins stood at 20% of sales versus 19.9% in the same quarter last year. Operating expenses were 521,300,000 representing 10.6% of sales versus 10.7% of sales in the same quarter last year. We benefited from the fact that we cycled transition and duplication costs last year related to our Teflon automated distribution center, but these benefits were probably offset by increases in other areas, notably energy costs in Ontario due to cold weather and an increase in fees related to our online partnership fees purchase sales, sorry. EBITDA for the quarter totaled $461,000,000 up 5% year over year and up 6.8% when we removed the gain and losses on disposal of assets. Total depreciation and amortization expense for the quarter was $136,100,000 up $6,600,000 or 5.1%.

The increase in depreciation and amortization expense is mainly due to the commissioning of investments in our supply chain, including some automation technology in pharma and the final phase of our first distribution center in Toronto last summer as well as the timing of retail investments. Net financial costs for the second quarter were $33,400,000 compared to 34,100,000.0 last year, and that decreases in financial costs is mainly due to overall lower interest expense on our debt, partly offset by lower capitalized interest. Our effective tax rate of 24.5% is lower than the effective tax rate of 26.5% in the second quarter last year as a result of the Telkon tax holiday of 6,000,000 Adjusted net earnings were $226,600,000 compared to $206,400,000 last year, a 9.8% increase, and adjusted net earnings per share amounted to $1.02 versus $0.91 last year, and that’s up 12.1% year over year. On the food retail side, after twenty four weeks, we converted two stores and carried out major expansions and renovation at eight stores for a net increase of 18,100 square feet or 0.1% of our food retail network. Following the end of the quarter, we opened a new Food Basics in Ontario and converted another Metro store to superseding Quebec.

Under our normal course issuer bid program as of April 4, we have repurchased 2,849,000.000 shares for a total consideration of $264,000,000 representing an average share price of $92.65 I’ll now turn it over to Eric.

Eric LaFeche, President and CEO, Metro: Thank you, Francois, and good morning, everyone. We delivered solid results in the second quarter, driven by strong sales growth in both food and pharmacy as our teams continue to focus on bringing value to our customers across our different banners. Food same store sales were up 5.3% or 3.9% when adjusting for the two day Christmas shift to the second quarter. Discount continues to grow same store sales faster than Metro with the gap between both remaining stable. Our internal food basket inflation increased versus the preceding quarter, but was slightly lower than the reported food CPI after adjusting for the sales tax holiday.

We are seeing inflationary pressures on certain commodity prices as well as the weaker Canadian dollar. The recently introduced tariffs and counter tariffs did not impact food inflation in the second quarter. For the quarter, transaction count was essentially flat with the average basket up. Promotional penetration is up year over year, but stable compared to our first quarter. Online sales grew by 26% for the quarter.

This growth is driven by the ramp up of our click and collect services in our discount banners and by third party marketplace. We are satisfied with our flexible model meeting customer demand and needs. In this uncertain economic environment, customers are favoring local and Canadian products. As Canadian owned and operated company, we have always sourced the products we sell from Canadian growers and manufacturers as much as possible. In the current context, we are putting even more emphasis on local and Canadian products and optimizing their visibility in all of our banners, whether in store, online or through our various promotional tools like the weekly flyer.

Customers are responding well and sales of Canadian products are outpacing total sales and the gap has accelerated over the past few weeks. On the pharmacy side, we delivered another solid quarter with comp sales of 7% for a two year stack of 13.3%. Prescription sales were up 7.8%, driven by continued organic growth, specialty medications and professional services. We continue to record significant growth in pharmacy services. And in the first twenty four weeks of this fiscal year, we documented more than 2,400,000 clinical acts and services performed through our network.

We are well positioned to capitalize on this growing trend with our dedicated community pharmacists and our leading footprint across Quebec. Commercial sales were up 5.3% or 3.7% when adjusting for the Christmas shift. This strong performance was driven by growth in OTC, HABA and cosmetics. As we begin our third quarter, we faced an uncertain economic environment and it is difficult to predict how the situation will evolve and how it will impact consumers and our business. As I said, to date, the recently introduced tariffs and counter tariffs have not had an impact on our business.

However, the situation remains highly volatile. We remain steadfast in our focus to deliver value to our customers through robust merchandising programs, strong private label and loyalty offers and working with our vendor partners to find alternative sources of supply whenever appropriate. To conclude, we remain confident that our sustained investments in our retail networks and supply chain combined with strong execution will continue to fuel our growth and we maintain our medium to long term average annual EPS growth target of 8% to 10%. Finally, as most of you know, Francois Thibault is retiring at the end of the week and this is his last analyst call. I want to take a moment to highlight a significant contribution to our success since 2012.

I want to personally thank him for his leadership of our finance, legal, and IT teams as well as for his partnership and friendship. Thank you, Francois. He will be replaced by Nicolas Amiou, who joined us about one month ago and I’m sure that like Francois, his aerospace background prepared him really well to be our CFO. So Francois, do want to say

Francois Sibaud, Executive VP and CFO, Metro: a few words? Thank you, Eric. This is my fifty second and last earnings call. It was an honor to be Metro’s CFO for the last twelve point five years. I will definitely miss engaging with all of you and the investor community.

Thank you very much. And we’ll now take your questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you are using a speaker phone, please lift a handset before pressing any keys. One moment please for your first question. Your first question comes from Tammy Chen with BMO Capital Markets.

Your line is now

Sharon Kadoshi, Investor Relations, Metro: Just wanted to start with the your outlook statement. The comment on the current environment, I understand given all the tariff aspects. But just given your business in grocery, it’s a key staple for consumers. I’m just wondering what are you specifically flagging. Are you seeing in recent weeks as the tariff aspects have ramped up that consumer behavior in your banners have changed recently?

Are they shifting back a lot more to discounts? Just if you can talk a bit about that. And how should we think about the rest of this fiscal year, already in the first half, you’ve achieved that 8% to 10% target? Thanks.

Eric LaFeche, President and CEO, Metro: So customer behavior has not changed. Essentially, the focus on value that’s been out there for several quarters remains. We saw that in Q2 just like we did in Q1. So I mentioned the high promotion penetration, high private label, some trading down that there’s no change in customer behavior. I think our outlook statement referred more to the general macroeconomic environment with all this uncertainty and turbulence that we’re all experiencing and how can that affect consumer sentiment, consumer confidence over the rest of the year.

So we as you say, we are a staples, essential goods retailer and distributor. We’re well positioned in any type of environment. We’re confident that we’ll continue to grow. But there’s volatility and uncertainty, and that affects customers, and it ultimately can affect businesses. So that’s all we wanted to point out.

Sharon Kadoshi, Investor Relations, Metro: I see. Okay. And my follow-up is good growth in the pharmacy business that continues. I think it’s outpacing food. I guess I just would have thought maybe see a bit more positive impact from mix on your gross margin from that.

Are you able to talk a bit more about the puts and takes to your gross margin this quarter? Was Food margin down year over year?

Francois Sibaud, Executive VP and CFO, Metro: Yes. We don’t disclose margin between the divisions. I think we don’t we try to be we try to have effective merchandising and have the right pricing for our customers. So we did improve gross margin overall by 10 bps rounded, and that was helped by some top line growth, obviously.

Sharon Kadoshi, Investor Relations, Metro: And sorry, what about

Eric LaFeche, President and CEO, Metro: as Francois said, we don’t disclose gross margin by between food and pharmacy. Yes, there was a good growth in pharma, consistent growth in pharma. So, I don’t think I can just say that it did not have a material impact on Metro total gross margin. Mix has been pretty consistent. Okay.

Sharon Kadoshi, Investor Relations, Metro: Thank you.

Conference Operator: Your next question comes from Michael Van Aelst with TD Cowen. Your line is now open.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Hi, good morning. Congrats on the good results. I wanted to continue on the outlook statement just because you the last, I think, four or five quarters, you’ve had the 8% to 10% long term target in your outlook statement, but it was noticeably absent this quarter. Is there anything that you’re trying to signal there? Or is this just because you’ve kind of gotten past your fiscal ’twenty four period when you were below that range and you no longer feel the need to reassure investors of that long term target?

Francois Sibaud, Executive VP and CFO, Metro: Yes. Hi, Michael. Exactly what you just said, the latter. This is an outlook that was written coming out of our transition year where we said that after that transition year, we expected to gradually resume our profit. We look at where we are after six quarters, we felt that that was no longer relevant as a comment, but we certainly are maintaining our growth targets of 8% to 10% on a medium long term outlook.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay, so there is nothing in your immediate future that led you to be concerned about your near term outlook once again? Absolutely not. Perfect. Thanks for the clarification. Okay.

Just on the top line on the grocery side, it did accelerate in the quarter, particularly the same store tonnage looked quite strong. And I’m hoping that you could help us understand where this is coming from because I’m assuming that people aren’t necessarily eating a lot more tonnage. So you’re gaining share and where is that coming from and why do you think you’re gaining share?

Eric LaFeche, President and CEO, Metro: Well, we’re gaining share slightly. We’re pleased with our market share performance overall the markets where we compete. We will give you by market, by banner, whatever. But overall, we’re pleased with our tonnage and our market share. There’s not much else.

Matt, do you

Francois Sibaud, Executive VP and CFO, Metro: want to The result of a few factors, would say, one, good and effective commercial strategy in market in both discount and conventional, both formats are performing well in each market. Secondly, there’s a bit of Christmas shift in that as well in terms of the tonnage. There are two days of large basket sales from Q1 to Q2, so that had a little bit of an impact. But overall, effective commercial strategy in both markets.

So we’re satisfied with those results.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. And to what degree is the greater capacity, the increased freshness in your supply chain, like greater capacity in your DCs, your increased freshness, I guess, increased in stock positions. How much do you think that might be helping?

Francois Sibaud, Executive VP and CFO, Metro: It’s difficult to evaluate, Michael, but for sure, our new fresh capacity in both provinces are helping our in stock position and service to stores, but I couldn’t evaluate exactly how much.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay, great. Thank you very much.

Conference Operator: Your next question comes from Mark Carden with UBS. Your line is now open.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Good morning. Thanks so much for taking the questions and best of luck, Francois. Start, you talked about customers gravitating towards Canadian made products. Do you believe that you’re seeing much of a lift from shoppers also moving any of their shopping away from American owned retailers as well? Or is it mainly just a shift in what they buy?

Eric LaFeche, President and CEO, Metro: What we’re seeing is a shift in what they buy. They’re looking we put a lot of signage through our stores on the shelf, on displays to help customers make decisions on the products they want to buy. So yes, Canadian, Quebec’s local products, Ontario local products, Canadian products in general are selling well and better than the rest of the store. We’re not going to make a comment on are we attracting from other stores, U. S.-based stores.

We’re pleased, like I said earlier, with our market share, which is sustained over the long term and slight gains and that’s okay. But can we pinpoint to an increase in traffic because of U. S. Stores? I don’t think we can say that.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Got it. That’s helpful. And then as a follow-up, are you guys seeing competitors’ large e marketing products as being tariffed to date? Are many passing these through? And then are you seeing any more flexibility from suppliers in trying to absorb any of the costs?

Eric LaFeche, President and CEO, Metro: I’m not sure I got the first part of your question, but the counter tariffs where the Canadian government is imposing tariffs on U. S. Product coming in here, it’s on a limited number of food products and HABA products. So the effect is limited so far. And yes, some U.

S. Vendors have been working with us to mitigate that and help us to maintain our volume. So it’s been a little over a month of these counter tariffs. It has not had really an impact on retail inflation so far and vendors have been working with us. That said, we’re working with alternative suppliers when we can to satisfy the needs of customers who want to buy non U.

S.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Great. Thanks so much. Good luck, guys.

Francois Sibaud, Executive VP and CFO, Metro: Thank you.

Conference Operator: Your next question comes from Mark Petrie with CIBC. Your line is now open.

Jean Michel Coutu, President of Pharmacy Division, Metro: Yes, thanks. Good morning, and congratulations, Francois, and certainly wish you all the best in future endeavors. It’s been a pleasure dealing with you and working with you. Thank you, Mark. I just wanted to ask about on the tariffs and sort of the impact on consumer behavior, and uncertainty.

If you’ve seen that manifest in the Jean Coutu business at all and thinking maybe of front store and some of the higher price point products, I know you don’t go into prestige beauty, but curious how the beauty category specifically has performed. Yes, yes. Thank you. Our beauty category continues to perform very well. It continues to be one of the driver of growth in our pharmacy division.

Right now, very similar to food, very limited number of SKUs have been affected by the tariffs. So we’re not seeing much change due to the tariffs, but customers continue to look for value. Promotional mix continues to strong. So it’s very reflective of what we’re also seeing in the food sector. Okay.

Thanks for that. Eric, just wanted to follow-up on one of your comments with regards to the relative performance of full service versus discount. I know discount continues to grow faster than full service. I think you said the gap has been has remained steady. Curious if that holds sort of in Q3 to date or if you’ve seen that waiver at all as some of the tariff commentary has ramped up?

Eric LaFeche, President and CEO, Metro: It’s still pretty consistent. I said that the same store sales within our shop between conventional and discount is remaining stable. There’s more growth in discount. That continues. We’ll see how they continue like I said, it’s volatile, it’s fluid.

We’ll see how customers sentiment and behavior evolves week by week. But so far in the third quarter, it’s been pretty consistent.

Jean Michel Coutu, President of Pharmacy Division, Metro: Okay. And then I guess just the last one sort of related to that. Any change in how you’ve seen consumers engage with the loyalty program or any shifts on your part with regards to how you wanna present that to consumers in this kind of environment?

Francois Sibaud, Executive VP and CFO, Metro: Well, loyalty hi, Mark. It’s Mark. Loyalty is a way to deliver value to consumer and to allow them to save. So it’s one of the lever of our commercial strategy. As you all know, we launched in Ontario in Q1.

The program the sign up to the program were positive with good momentum and we’re going to continue to focus on engaging customers and bring them value. Loyalty in both provinces is a lever of value and as part of our commercial strategy and will continue to be and is important in the current context where consumers are looking for value.

Jean Michel Coutu, President of Pharmacy Division, Metro: Yes, understood. Okay, thanks. All the best guys.

Eric LaFeche, President and CEO, Metro: Thank you.

Conference Operator: Your next question comes from Irene Nattel with RBC. Your line is now open.

Sharon Kadoshi, Investor Relations, Metro: Thanks and good morning everyone. I want to add my congratulations to Francois. I’ve been there for each of those 52 calls and enjoyed every single one. So thank

Conference Operator: you time as well.

Francois Sibaud, Executive VP and CFO, Metro: Thank you, Hari.

Sharon Kadoshi, Investor Relations, Metro: Yes. So just focusing for a second on the PJC side. First of all, on front of store, you talked about Haba, you talked about OTC Beauty. Can you talk to sort of rank order those? Because it was a really, really nice print.

I’m wondering about the Q3 momentum to date.

Jean Michel Coutu, President of Pharmacy Division, Metro: So rank order in terms of velocity. So yes, OTC continues to be the main driver of growth in our business, especially heading into a good cough and cold season. It was delayed, but once it started, it was a good one and that really helped drive sales. Then after that, it’s our beauty categories that continue to show really strong growth. The customers are responding well to our commercial programs.

And then after that is what’s unique about Jean Coutu, our sundry and general merchandise overall continues to perform well. So that’s how I would articulate it in rank order.

Sharon Kadoshi, Investor Relations, Metro: That’s great. Thank you. And on the Rx side, are you seeing a stabilization of the specialty or the growth in specialty? Has it started to kind of plateau, are we still seeing that very sharp growth trajectory?

Jean Michel Coutu, President of Pharmacy Division, Metro: We’re seeing sustained growth trajectory. So as you can tell, our numbers are consistently growing. And when we kind of peel away of the layers, it’s really the same drivers proportionally the same too. So specialty pharmacy services and then some organic growth too. We’re seeing our number of patients continue to increase period after period.

Sharon Kadoshi, Investor Relations, Metro: That’s very helpful. And just one final little question. Somebody in the opening remarks mentioned something about pharmacy automation or automation at TJC. Just wondering what that is and where you kind of are with the state of play in terms of the DCs, perhaps any automation or centralized fill? Thank you.

Jean Michel Coutu, President of Pharmacy Division, Metro: Yes. So that automation was it’s continued investment in our automation program. As you know, Varenne is a very sophisticated semi automated warehouse and we’re continuing to make investments to get the best out of our automation system. So we made some investments in our order storage and retrieval system over the past year and we commissioned those a lot of that technology in Q2.

Sharon Kadoshi, Investor Relations, Metro: That’s great. Thank you.

Conference Operator: Your next question comes from John Zampero with Scotiabank. Your line is now open.

Jean Michel Coutu, President of Pharmacy Division, Metro: Thank you. Good morning. And congrats again to you, Francois, and best wishes to you. Thank you. Wanted to ask about same store sales through the quarter and acknowledging the holiday period shift.

Did you see any meaningful change month to month?

Eric LaFeche, President and CEO, Metro: Well, this is a meaningful shift, and we gave you on both food and pharma number, you know, what we printed the reported number, point three on food, 3.9 adjusted for about two days. So it’s a significant shift for only two days. So the rest of the quarter is following that shift and it’s back to normal and it’s been pretty consistent since.

Jean Michel Coutu, President of Pharmacy Division, Metro: Okay, understood. And I know you don’t want get too far into the future on inflation expectations, but is it fair to say all else equal and normalizing for the tax holiday, you’d expect near term acceleration, whether it’s meaningful or modest, you’d expect a near term acceleration in food inflation given a higher U. S. Dollar and the counter tariffs?

Eric LaFeche, President and CEO, Metro: Well, that’s what we experienced from Q1 to Q2, inflation in our basket did increase. We said if we adjust for that tax holiday, our inflation number in Q2 is a bit below CPI, but it’s higher than Q1. And so that was caused by the FX exchange rate. That was caused also by commodity prices. Some of them are quite high, nothing to do with tariffs.

So that’s happened and continues to happen. So we hope it will continue to stay around the current levels and then we’ll see going forward. Counter tariffs are not good for inflation on the food side. We have to manage through it. We’re managing as best we can to find sources of supply to protect our costs, to protect our retails, to minimize inflation, but it puts some inflationary pressures.

So managing that really closely to deliver value to customers because it’s key to satisfying customers today for sure. Hope that answers it.

Jean Michel Coutu, President of Pharmacy Division, Metro: It does. Thank you very much.

Conference Operator: Your next question comes from Chris Lee with Desjardins. Your line is now open.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Good morning, and thanks, everyone. And and let me also please add my congratulations to you, Francois. Best wishes. Congrats on a on a fabulous career. Thank you, Bruce.

Wanted to ask about first, maybe a favorite topic on SG and A expenses. I’m wondering, you know, if you were to exclude the higher energy cost in Ontario, which I think to be more transferable because it was a winter, cold winter. What what would the SG and A rate have been? Would have been notably improved more than what you reported?

Francois Sibaud, Executive VP and CFO, Metro: Yeah. So so the combination of these two, I mean, we have pressure from several lines, as I said, but these two stand out and we’re not making excuses. We’re just giving you facts of what we have to manage. But these two items combined, the energy cost and the partnership fees, this is more than a 20% year over year increase. So they’re the big increases.

If you had removed them, then yes, we would have shown a better SG and A as a percentage of sales and a better year over year increase. But that’s what we had to deal with and that’s how the numbers came out.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. That’s helpful. And I think you mentioned last quarter that Q2 of last year was sort of

Francois Sibaud, Executive VP and CFO, Metro: the peak in terms of the difficulties in Yes, Q2 and Q3 were sort of the peak quarters in terms of duplication costs and transition. So if nothing else had changed, yes, the SG and A would have been better than what we reported today, for sure. We no longer have these costs. But as I said, we’ve had pressures from other lines. Overall, I’m pleased that we were able to end with an SG and A level that still is lower as a percentage of sales than last year.

But you will have a similar situation in Q3 as well that we’re comping.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. Thanks for that. And maybe just a couple of questions for Jean Michel. Just if there’s do you have any sort of update on on on bill 67 of of and you might the government might pass his approval?

Jean Michel Coutu, President of Pharmacy Division, Metro: Yep. So so bill 67 was we were expecting it sometime this spring. There’s been some delays as they work through the regulations and finalizing the scope. So we’re expecting the regulations to pass sometime in June. Now that said, the AQPP is still negotiating pharmacist compensation.

So right now the way we look at it is we think sometime in probably Q1, late Q4 or early Q1 that we’ll start getting the benefits, the full benefits of Bill 67. That’s kind of our outlook on that portion of the business right now.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. That’s great. And my last question is just on specialty drugs. Just because Ozempic is such a big sales seller in Canada, Just wanna get your thoughts as as it becomes generic next year. I think the gross profit dollars on generic drugs are generally higher than branded.

I’m just wondering what type of impact do you think that would have on Bianca two? Is it gonna be notable or, I’m really just maybe high level comments on that would be great. Thank you.

Jean Michel Coutu, President of Pharmacy Division, Metro: Yeah, first of all the genericization of ZYANCA2 remains still to be seen. There’s Obviously no one in order to fight it, so it’s tough to call when it’s going to happen. We know it’s going happen eventually, but when is your guess is as good as mine. We’re not going disclose yet what the impact of it is going to be on financials. But but yes, obviously, will be every time there’s generalization, there is deflation in our top line sales.

So we will we will calculate it based on when the timing when the timing comes.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. But but it’ll be good for your profit line. Right? It should be accretive even though it’s deflation in the top line.

Jean Michel Coutu, President of Pharmacy Division, Metro: Yeah. Generics usually usually it hurts the top line, but it’s good for margin.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Okay. Great. Yes. Thanks and all the best everyone.

Jean Michel Coutu, President of Pharmacy Division, Metro: Thank you, Chris.

Conference Operator: Your next question comes from Michael Van Aelst with TD Cowen. Your line is now open.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Thank you. Can you just clarify or provide more color on how those counter tariffs are being adjusted for or passed through? Think you did mention that you’re getting some support from your vendors, but maybe break down to the degree you can roughly how much is being absorbed by vendors versus absorbed by Metro versus being passed through to higher prices.

Francois Sibaud, Executive VP and CFO, Metro: Michael, it’s Mark here. It’s case by case and it’s a very fluid environment. So it would be very difficult to break that down. Our teams, our sourcing team are looking for alternatives. So in some instances, we’re sourcing elsewhere from The U.

S. Some of the vendors have fields in other countries than The U. S, So they are shipping from those other countries instead of The U. S. So product by product, case by case, it’s a very fluid situation.

But overall, we’ve been able to the impact on price and, as Eric said, the impact on inflation, we haven’t seen any impact in Q1. Q2. In Q2, sorry.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): And is that is Metro being pushed to absorb some of it as a result?

Eric LaFeche, President and CEO, Metro: Like I said, it’s been only a few weeks and it changes every day as we know when we read the papers. So, know, people are trying to wait and see before making big changes. So, we are we received some cost increases related to counter tariffs. We asked for six weeks notice from those suppliers. So in mid April, starting now, some small cost increases related to tariffs can start to be reflected.

But we’ve been working with our vendors to justify, to provide government codes. So whatever is subject to counter tariff, we try to measure as best we can to minimize the cost of use for us and the retail price for the customer. But we’re working with them and they want to protect some of them want to protect their volumes like Marcel, they source the product from different countries. Some of those large berry vendors talk you know, if you think of Driscoll, they have fields in Mexico and some of the barriers that we’re selling these days are coming a lot more from Mexico than in The US. So it’s one way to protect costs here.

So like I said, it’s a fluid situation. It changes every day. We’re monitoring closely and we’re trying to minimize as much as we can the impact.

Conference Operator: All right.

Various Analysts, Analyst, Various (BMO, TD Cowen, UBS): Thank you.

Conference Operator: Your next question comes from Tammy Chen with BMO Capital Markets. Your line is now open.

Sharon Kadoshi, Investor Relations, Metro: Hi. Thanks for squeezing me in here. Just a quick follow-up question on online grocery. Very good growth this quarter. I I see you’ve mentioned the drivers.

Can you just talk about right now, is grocery and commerce as a channel for you? I mean, is it is it earnings dilutive for you? I assume it is because of the fees. And just generally, how do you think about this segment as for several quarters now, I believe you reported very good year over year growth? Like, are you seeing this is starting to gain some more and more momentum?

And do you think at some point in the near future, you may need to invest in some more infrastructure or supply chain of your own to continue to service this? Thank you.

Francois Sibaud, Executive VP and CFO, Metro: Answering your first question, the first part of your question, it is earning so the overall business is profitable for the bottom line, but it is dilutive as a percentage of We’re looking at e commerce also as a loyalty play. Our consumers, our customers that are shopping e commerce are also shopping our stores. So for us, it’s important as we continue to serve and meet the needs of our customers and our flexible delivery platform through third parties, express delivery, click and collect allows us to meet our the customer demand. Growth over the last quarter has been stable. It’s continuing to grow and we want to meet the customer where they are and where their needs are.

And currently, our current delivery platform through third party and our own platform is allowing us to continue to grow. When time will come to reflect on investment, we will. But for now, we have the capacity to continue to serve those customers.

Sharon Kadoshi, Investor Relations, Metro: Thank you.

Conference Operator: There are no further questions at this time. I will now turn the call over to Estelle for closing remarks.

Sharon Kadoshi, Investor Relations, Metro: Thank you for your interest in Metro, and please mark your calendars for our third quarter results on August 13. Thank you.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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