Q3 2026 Metro Inc Earnings Call

August 12, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the METRO INC. 2026 third-quarter results conference call. At this time, note that all participant lines are in a listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Metro Inc. 2026 Q3 Results Conference Call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press *0 for an operator. Also note that this call is being recorded on 12 August 2026. I would now like to turn the conference over to Sharon Kadoche, Director, Investor Relations and Corporate Finance. Please go ahead.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require me assistance, please press star zero for an operator.

Speaker #1: Also note that this call is being recorded on August 12, 2026. I would now like to turn the conference over to Sharon Kadoche, Director, Investor Relations and Corporate Finance.

Speaker #1: Please go ahead.

Speaker #2: Merci, Sylvie. Good morning, everyone, and thanks for joining us today. Our comments will focus on the financial results of our third quarter, which ended on July 4.

Sharon Kadoche: Good morning, everyone, and thanks for joining us today. Our comments will focus on the financial results of our Q3, which ended on 4 July. With me today is Eric La Flèche, President and CEO, Nicolas Amyot, Executive VP and CFO, Marc Giroux, Chief Operating Officer, and Jean-Michel Coutu, President of the Pharmacy Division. During the call, we will present our Q3 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 can be construed as forward-looking information. In general, any statement which does not constitute a historical fact may be deemed a forward-looking statement. Words or expressions such as expect, intend, are confident that, will, and other similar words or expressions are generally indicative of forward-looking statements.

Speaker #2: With me today are Mr. Eric Lefleche, President and CEO; Nicolas Amyot, Executive VP and CFO; Marc Giroux, Chief Operating Officer; and Jean-Michel Coutu, President of the Pharmacy Division.

Speaker #2: During the call, we'll represent our third-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 can be construed as forward-looking information.

Sharon Kadoche: Before we begin, I would like to remind you that we will use in today's discussion different statements that can be construed as forward-looking information. In general, any statement which does not constitute a historical fact may be deemed a forward-looking statement. Words or expressions such as expect, intend, are confident 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 2026 action plan.

Speaker #2: In general, any statement which does not constitute a historical fact may be deemed a forward-looking statement. Words or expressions such as "expect", "intend", or "confident that" will and other similar words are or expressions are generally indicative of forward-looking statements.

Speaker #2: The forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy or annual budget, and our 2026 action plans.

Sharon Kadoche: The forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy, our annual budget, and our 2026 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 2025 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 statement except as required by applicable law. I will now turn the call over to Eric.

Speaker #2: 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 defer materially.

Sharon Kadoche: 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 2025 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 statement except as required by applicable law. I will now turn the call over to Eric.

Speaker #2: Risk factors that could cause actual results or events to defer materially from our expectations as expressed in or implied by our forward-looking statements are described under the risk management section in our 2025 annual report.

Speaker #2: 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.

Speaker #2: I will now turn the call over to Eric.

Speaker #3: Good morning, everyone. I will start with an update on the labor conflict in our Quebec operations, followed by comments on our quarterly results. Marc Giroux will then discuss the network optimization initiatives announced today, and Nicolas will address their financial impact as well as our financial performance for the quarter.

Eric La Flèche: Good morning, everyone. I will start with an update on the labor conflict in our Quebec operations, followed by comments on our quarterly results. Marc Giroux will then discuss the network optimization initiatives announced today, and Nicolas will address their financial impact as well as our financial performance for the quarter. As you will recall, on 25 June, we provided an update on the ongoing strike at our produce distribution center in Laval, which has significantly impacted our operations and results in the quarter. Our adjusted EPS for Q3 of CAD 1.24 is within the guidance provided at the time of the update. Our Q3 was certainly challenging. The contingency plan we put in place is working and steadily improving, and our stores are generally well-stocked and in good condition. Our focus is on restoring full assortment, strengthening store execution, and driving back traffic to our stores.

Speaker #3: As you will recall, on June 25, we provided an update on the ongoing strike at our produce distribution center in Laval. Which has significantly impacted our operations and results in the quarter.

Speaker #3: Our adjusted EPS for Q3 of $124 is within the guidance provided at the time of the update. Our third quarter was certainly challenging. The contingency plan we put in place is working and steadily improving, and our stores are generally well stocked and in good condition.

Eric La Flèche: Our Q3 was certainly challenging. The contingency plan we put in place is working and steadily improving, and our stores are generally well-stocked and in good condition. Our focus is on restoring full assortment, strengthening store execution, and driving back traffic to our stores. That said, it remains a contingency measure, and it does not replicate the effectiveness of our own network. Moreover, the labor disruption required significant attention and resources from our teams, which affected our operating focus in Quebec and to a lesser extent in Ontario, as our Toronto fresh DC supported a portion of our Quebec stores.

Speaker #3: Our focus is on restoring our full assortment, strengthening store execution, and driving traffic back to our stores. That said, it remains a contingency measure, and it does not replicate the effectiveness of our own network.

Eric La Flèche: That said, it remains a contingency measure, and it does not replicate the effectiveness of our own network. Moreover, the labor disruption required significant attention and resources from our teams, which affected our operating focus in Quebec and to a lesser extent in Ontario, as our Toronto fresh DC supported a portion of our Quebec stores. I want to be clear, we remain committed to reaching a negotiated agreement with the union. The global offer presented by Metro provides competitive wage and working conditions that compare very favorably with the market, in addition to offering quality long-term jobs here in Quebec. While the strike is having a significant temporary impact, we must preserve the long-term competitiveness of our operations and our ability to continue serving our customers effectively in a competitive market. We will not compromise on this objective.

Speaker #3: Moreover, the labor disruption required significant attention and resources from our teams, which affected our operating focus in Quebec and, to a lesser extent, in Ontario, as our Toronto Fresh DC supported a portion of our Quebec stores.

Speaker #3: I want to be clear: we remain committed to reaching a negotiated agreement with the union. The global offer presented by METRO provides competitive wage and working conditions that compare very favorably with the market, in addition to offering quality long-term jobs here in Quebec.

Eric La Flèche: I want to be clear, we remain committed to reaching a negotiated agreement with the union. The global offer presented by Metro provides competitive wage and working conditions that compare very favorably with the market, in addition to offering quality long-term jobs here in Quebec. While the strike is having a significant temporary impact, we must preserve the long-term competitiveness of our operations and our ability to continue serving our customers effectively in a competitive market. We will not compromise on this objective. I want to thank our teams for their resilience and our customers for their understanding as we continue working to provide the best possible shopping experience.

Speaker #3: While the strike is having a significant temporary impact, we must preserve the long-term competitiveness of our operations and our ability to continue serving our customers effectively in a competitive market.

Speaker #3: We will not compromise on this objective. I want to thank our teams for their resilience and our customers for their understanding as we continue working to provide the best possible shopping experience.

Eric La Flèche: I want to thank our teams for their resilience and our customers for their understanding as we continue working to provide the best possible shopping experience. After 4 weeks in our Q4, food same-store sales remained negative at -1.5%. Based on current operating conditions and the absence of clear resolution timeline for the conflict, we expect that our Q4 results will continue to be significantly impacted while our teams actively manage operations, service levels, and customer recovery. Going back to our Q3 results, the quarter reflected continued strength in pharmacy, sustained online growth, and progress on our retail investment plan. Sales grew by 1.4%, adjusted EBITDA was down 11.3%, and adjusted EPS were down 18.4%. These figures are not adjusted for an estimated strike impact of approximately CAD 0.32 per share. Total food sales were up 0.5%, while same-store sales were down 1.5%.

Speaker #3: After four weeks in our fourth quarter, food safe store sales remain negative at minus 1.5%. Based on current operating conditions, and the absence of clear resolution timeline for the conflict, we expect that our fourth quarter results will continue to be significantly impacted, while our teams are actively manage operations service levels and customer recovery.

Eric La Flèche: After four weeks in our Q4, food same-store sales remained negative at -1.5%. Based on current operating conditions and the absence of clear resolution timeline for the conflict, we expect that our Q4 results will continue to be significantly impacted while our teams actively manage operations, service levels, and customer recovery. Going back to our Q3 results, the quarter reflected continued strength in pharmacy, sustained online growth, and progress on our retail investment plan. Sales grew by 1.4%, adjusted EBITDA was down 11.3%, and adjusted EPS were down 18.4%. These figures are not adjusted for an estimated strike impact of approximately CAD 0.32 per share. Total food sales were up 0.5%, while same-store sales were down 1.5%.

Speaker #3: Going back to our third quarter results, the quarter reflected continued strength in pharmacy, sustained online growth, and and progress on our retail investment plan.

Speaker #3: Sales grew by 1.4%, adjusted EBITDA was down 11.3%, and adjusted earnings per share were down 18.4%. These figures are not adjusted for an estimated strike impact of approximately 32 cents per share.

Speaker #3: Total food sales were up 0.5%, while same store sales were down 1.5%. In pharmacy, total sales were up 5%, with same store sales growth of 4.8% on top of 5.5% last year.

Eric La Flèche: In pharmacy, total sales were up 5%, with same-store sales growth of 4.8% on top of 5.5% last year. Our internal food basket inflation was in line with the reported food CPI of 3.9%. We continue to manage supplier cost increases through ongoing negotiations and a rigorous validation process with the objective of limiting the impact on our customers. During the quarter, comparable store customer traffic was down, partly offset by growth in the average basket. Promotional activity remains elevated as the competitive environment remains intense but rational. Online sales grew by 16.3% in the quarter, driven by third-party marketplaces, the ramp-up of click and collect services, and delivery within our discount banners. This growth, together with the customers' increasing demand for same-day delivery, supports the evolution of our e-commerce model, which Marc will discuss in more detail shortly.

Speaker #3: Our internal food basket inflation was in line with the reported food CPI of 3.9%. We continue to manage supplier cost increases through ongoing negotiations and a rigorous validation process with the objective of limiting the impact on our customers.

Speaker #3: During the quarter, comparable store customer traffic was down, partly offset by growth in the average basket. Promotional activity remains elevated, as the competitive environment remains intense, but rational.

Speaker #3: Online sales grew by 16.3% in the quarter, driven by third-party marketplaces to ramp up of click-and-collect services and delivery within our discount banners. This growth, together with the customers' increasing demand for same-day delivery, supports the evolution of our e-commerce model which Marc will discuss in more detail shortly.

Speaker #3: Turning to pharmacy, the business continued to perform well this quarter, with prescription sales up 6.4%, driven by continued organic growth, specialty medications, and GLP-1 therapies.

Eric La Flèche: Turning to pharmacy, the business continued to perform well this quarter, with prescription sales up 6.4%, driven by continued organic growth, specialty medications, and GLP-1 therapies. Commercial sales grew by 1.4%, led by cosmetics, beauty, and seasonal categories, and supported by a strong promotional mix. These results build on strong underlying momentum, with prescription sales delivering a two-year stacked growth rate of 13% and commercial sales delivering a two-year stacked growth rate of 5.5%. During the quarter, generic semaglutide entered the market, causing some price deflation within the category. However, demand fundamentals remain strong, with early evidence of increased patient adoption and higher prescription volumes. As generic supply continues to build, we expect ongoing expansion of the GLP-1 category to drive low teen volume and contribution growth.

Speaker #3: Commercial sales grew by 1.4%, led by cosmetics, beauty, and seasonal categories, and supported by a strong promotional mix. These results build on strong underlying momentum with prescription sales delivering a two-year stack growth rate of 13% and commercial sales delivering a two-year stack growth rate of 5.5%.

Speaker #3: During the quarter, generic semaglutide entered the market, causing some price deflation within the category. However, demand fundamentals remain strong, with early evidence of increased patient adoption and higher prescription volumes.

Speaker #3: As generic supply continues to build, we expect ongoing expansion of the GLP-1 category to drive low teens volume and contribution growth. In addition, following the agreement in principle between the pharmacists' association AQPP and the Quebec government, we expect professional services to gain renewed momentum beginning in the second quarter of fiscal 27.

Eric La Flèche: In addition, following the agreement in principle between the Pharmacists Association, AQPP, and the Quebec government, we expect professional services to gain renewed momentum beginning in the Q2 of fiscal 2027. Our retail CapEx plan remains on track. We opened five new discount stores in the quarter, including one conversion and one relocation, and we will achieve our plan to open a dozen discount stores by fiscal year-end. We are very satisfied with the performance of our new and converted discount stores. On the pharmacy side, our renovation program is also progressing well, with 30 projects planned for the year, including seven pharmacies under our new concept. Newly renovated pharmacies continue to outperform average network sales growth, supported by enhanced layouts and expanded consultation areas. To conclude, we are focused on restoring momentum and strengthening our market execution.

Speaker #3: Our retail CapEx plan remains on track. We opened five new discount stores in the quarter, including one conversion and one relocation, and we will achieve our plan to open a dozen discount stores by fiscal year-end.

Speaker #3: We are very satisfied with the performance of our new and converted discount stores. On the pharmacy side, our renovation program is also progressing well, with 30 projects planned for the year including seven pharmacies under our new concept.

Speaker #3: Newly renovated pharmacies continue to outperform average network sales growth, supported by enhanced layouts and expanded consultation areas. To conclude, we are focused on restoring momentum and strengthening our market execution, we are confident that our merchandising programs strong private label offering, more loyalty program, and consistent store-level execution will continue to provide value to customers and support long-term shareholder value.

Eric La Flèche: We are confident that our merchandising programs, strong private label offering, Moi loyalty program, and consistent store-level execution will continue to provide value to customers and support long-term shareholder value. With that, I will now turn the call over to Marc, who will discuss the network optimization initiatives we announced today.

Speaker #3: With that, I will now turn the call over to Marc, who will discuss the network optimization initiatives we announced today.

Speaker #2: Thank you, Eric, and good morning, everyone. Today we announced network optimization initiatives that are aligned with METRO's long-term strategy, and our disciplined approach to network investments.

Marc Giroux: Thank you, Eric, and good morning, everyone. Today, we announced network optimization initiatives that are aligned with Metro's long-term strategy and our disciplined approach to network investments. Together, they are intended to better position our network and the markets we serve and to respond to evolving customer needs. First, we announced the conversion of 10 Metro stores to Food Basics in Ontario. This initiative should allow us to grow market share, strengthen our competitiveness in key markets, and generate returns above our typical investment thresholds. These conversions are expected to improve store contribution beginning in fiscal 2027, with benefits ramping up over the next 2 years. This builds on the strong performance of our discount banners.

Speaker #2: Together, they are intended to better position our network and the markets we serve, and to respond to evolving customer needs. First, we announced a conversion of 10 METRO stores to food basics in Ontario.

Speaker #2: This initiative should allow us to grow market share strengthen our competitiveness in key markets, and generate returns above our typical investment threshold. These conversions are expected to improve store contribution beginning in fiscal 27, with benefits ramping up over the next two years.

Speaker #2: This builds on the strong performance of our discount banners. Over the last three years, we've expanded our discount presence through new and converted stores in Ontario and Quebec, adding 31 locations bringing the food basic banner to 155 stores and the Super C banner to 121 stores.

Marc Giroux: Over the last 3 years, we've expanded our discount presence through new and converted stores in Ontario and Quebec, adding 31 locations, bringing the Food Basics banner to 155 stores and the Super C banner to 121 stores. This is a disciplined market-by-market optimization of our network with the objective of having the right banner in the right market. Customers are responding well to our discount store format, and we are encouraged by the sales results and overall returns of our new and converted stores. Second, we are evolving our e-commerce fulfillment model in Quebec. We will be closing our dark store in Montreal and transitioning to a store-based pick pack model and delivery through third parties. Customer expectations in online grocery continue to evolve with growing demand for same-day delivery.

Speaker #2: This is a discipline market-by-market optimization of our network, with the objective of having the right banner in the right market. Customers are responding well to our discount store format, and we are encouraged by the sales results and overall returns of our new and converted stores.

Speaker #2: Second, we are evolving our e-commerce fulfillment model in Quebec. We will be closing our dark store in Montreal and transitioning to a store-based pick-pack model and delivery through third parties.

Speaker #2: Customer expectations in online grocery continue to evolve, with growing demand for same-day delivery. By transitioning to a store-based fulfillment model, we will position ourselves closer to the customer and pick orders from our store network, allowing us to increase same-day delivery capacity while continuing to delivery to deliver the freshness, service, and broader assortment customers expect from our stores.

Marc Giroux: By transitioning to a store-based fulfillment model, we will position ourselves closer to the customer and pick orders from our store network, allowing us to increase same-day delivery capacity while continuing to deliver the freshness, service, and broader assortment customers expect from our stores. We expect to improve customer satisfaction, while at the same time reducing our fixed cost structure. We are confident that this evolution will enable us to support more profitable and sustainable online grocery over time. In addition to these network initiatives, we recently announced a strategic partnership with FGF Brands for the commercial bakery manufacturing operations of the Première Moisson group. As part of the transaction, FGF will acquire the group's production facility located in Baie-D'Urfé for a total consideration of CAD 90 million. This facility manufactures Première Moisson products sold in food stores.

Speaker #2: We expect to improve customer satisfaction while at the same time reducing our fixed-cost structure. We are confident that this evolution will enable us to support more profitable and sustainable online grocery over time.

Speaker #2: In addition to these network initiatives, we recently announced a strategic partnership with FGF Brands for the commercial bakery manufacturing operations of the Première Moisson group.

Speaker #2: As part of the transaction, FGF will acquire the group's production facility located in Bidoureffe for a total consideration of 90 million dollars. This facility manufactures Première Moisson products sold in food stores.

Speaker #2: By partnering with a company recognized for its manufacturing expertise, we will continue to offer customers the Première Moisson products sold in our food stores, while benefiting from enhanced innovation, product development capabilities, and operational scale.

Marc Giroux: By partnering with a company recognized for its manufacturing expertise, we will continue to offer customers the Première Moisson products sold in our food stores while benefiting from enhanced innovation, product development capabilities, and operational scale. The transaction reflects our ongoing commitment to focus our investments and resources on our core food and pharmaceutical retail and distribution operations while simplifying our operating model. The Première Moisson group will remain a subsidiary of Metro and will retain ownership of the Première Moisson brand and its network of 25 artisanal retail bakeries across Quebec. Taken together, these actions are intended to improve the quality and performance of our network while reinforcing our disciplined approach to capital allocation. Before turning the call to Nicolas, I would like to take a moment to thank Eric for his outstanding leadership as President and Chief Executive Officer of Metro for 18 years.

Speaker #2: The transaction reflects our ongoing commitment to focus our investments and resources on our core food and pharmaceutical retail and distribution operations, while simplifying our operating model.

Speaker #2: The Première Moisson group will remain a subsidiary of METRO and will retain ownership of the Première Moisson brand and its network of 25 artisanal retail bakeries across Quebec.

Speaker #2: Taking together, taken together, these actions are intended to improve the quality and performance of our network while reinforcing our discipline approach to capital allocation.

Speaker #2: Before turning the call to Nicolas, I would like to take a moment to thank Eric for his outstanding leadership as President and Chief Executive Officer of METRO for 18 years.

Speaker #2: Under his leadership, the company consistently delivered strong results strengthening its market position, made the transformational acquisition of the Jean Couture group, and created substantial long-term value for our customers, our employees, and our shareholders.

Marc Giroux: Under his leadership, the company consistently delivered strong results, strengthened its market position, made the transformational acquisition of The Jean Coutu Group, and created substantial long-term value for our customers, our employees, and our shareholders. On a more personal note, I am grateful for his guidance and support over the last 17 years, and I look forward to continuing working with him as he becomes Chairman of the Board in September. With that, I will now turn the call to Nicolas to discuss our financial results and the financial impact of these initiatives. Thank you.

Speaker #2: On a more personal note, I'm grateful for his guidance and support over the last 17 years, and I look forward to continuing working with him as he becomes chairman of the board in September.

Speaker #2: With that, I will now turn the call to Nicolas to discuss our financial results and the financial impact of these initiatives. Thank you.

Speaker #3: Okay. Thank you, Marc, and good morning, everyone. From a financial perspective, the initiatives described by Marc resulted in pre-tax, non-recurring restructuring expenses of $25.7 million, as well as impairment of assets of $32.1 million in the quarter.

Nicolas Amyot: Okay. Thank you, Marc, and good morning, everyone. From a financial perspective, the initiatives described by Marc resulted in pre-tax, non-recurring restructuring expenses of CAD 25.7 million, as well as impairment of assets of CAD 32.1 million in the quarter. The results include a CAD 42.6 million after-tax adjustment for these charges, or CAD 0.20 per share. These network optimization initiatives are expected to be completed by the end of fiscal 2027 and generate estimated recurring annual after-tax earnings of CAD 15 million by the end of fiscal 2028, with about half of the benefits expected to be realized by the end of fiscal 2027. The benefits will primarily come from improved store contribution as well as from a lower-cost e-commerce fulfillment model. The capital required to execute these initiatives is expected to fit within our total CapEx envelope of CAD 500 to CAD 550 million per year.

Speaker #3: The results include a $42.6 million after-tax adjustment for these charges, or $0.20 per share. These network optimization initiatives are expected to be completed by the end of fiscal 2027 and generate estimated recurring annual after-tax earnings of $15 million by the end of fiscal 2028, with about half of the benefits expected to be realized by the end of fiscal 2027.

Speaker #3: The benefits will primarily come from improved store contribution as well as from a lower-cost e-commerce fulfillment model. The capital required to execute these initiatives is expected to fit within our total capex envelope of $500 to $550 million per year.

Speaker #3: Separately, the sale of the Première Moisson Group's bakery manufacturing operation is expected to generate proceeds of $90 million upon closing. The proceeds will be deployed in line with our capital allocation priorities, and the transaction is expected to close in the fourth quarter.

Nicolas Amyot: Separately, the sale of the Première Moisson group's bakery manufacturing operation is expected to generate proceeds of CAD 90 million upon closing. The proceeds will be deployed in line with our capital allocation priorities, and the transaction is expected to close in the Q4. Turning to the Q3 results. Sales reached CAD 6.97 billion, an increase of 1.4% versus the Q3 last year. Sales were positively impacted by new store openings but were unfavorably impacted by the ongoing labor conflict at our produce distribution center in Laval and its consequences on our food retail network. Food same-store sales were down 1.5% in the quarter. On the pharmacy side, same-store sales grew by 4.8%, supported by a 6.4% growth in prescription sales and a 1.4% growth in front-store sales.

Speaker #3: Turning to the third quarter results, sales reached $6.97 billion, an increase of 1.4% versus the third quarter last year. Sales were positively impacted by new store openings but were unfavorably impacted by the ongoing labor conflict at our produce distribution center in Laval and its consequences on our food retail network.

Speaker #3: Food same-store sales were down 1.5% in the quarter. On the pharmacy side, same-store sales grew by 4.8%, supported by a 6.4% growth in prescription sales and a 1.4% growth in front-store sales.

Speaker #3: Gross profit stood at 1.3 billion for the quarter, or 18.8% of sales, which compares with 19.8% of sales in the corresponding period last year.

Nicolas Amyot: Gross profit stood at CAD 1.3 billion for the quarter, or 18.8% of sales, which compares with 19.8% of sales in the corresponding period last year. The decrease versus last year is mainly driven by CAD 87 million of estimated lost profit and incremental direct costs related to the ongoing labor conflict. Operating expenses were CAD 725.1 million, up 3.2% year over year. As a percentage of sales, operating expenses were 10.4% compared with 10.2% last year. The operating expenses in the quarter included CAD 3 million of incremental direct costs related to the labor conflict. EBITDA for the quarter amounted to CAD 555.7 million or 8% of sales, a decrease of 15.3% year over year. Excluding the non-recurring restructuring charges of CAD 25.7 million I mentioned before, adjusted EBITDA stood at CAD 581.4 million, down 11.3% year over year and represented 8.3% of sales versus 9.5% recorded in Q3 last year.

Speaker #3: The decrease versus last year is mainly driven by 87 million of estimated lost profit and incremental direct costs related to the ongoing labor conflict.

Speaker #3: Operating expenses were $725.1 million, up 3.2% year over year. As a percentage of sales, operating expenses were 10.4% compared with 10.2% last year. The operating expenses in the quarter included $3 million of incremental direct costs related to the labor conflict.

Speaker #3: EBITDA for the quarter amounted to 555.7 million, or 8% of sales, a decrease of 15.3% year over year. Excluding the non-recurring restructuring charges of 25.7 million, I mentioned before, adjusted EBITDA stood at 581.4 million, down 11.3% year over year, and represented 8.3% of sales, versus 9.5% recorded in Q3 last year.

Speaker #3: The third quarter of 2026 was unfavorably impacted by an estimated 90 million of lost profit and incremental direct costs related to the strike. Depreciation and amortization expense for the quarter was 193.6 million, versus 184.9 million last year.

Nicolas Amyot: The Q3 2026 was unfavorably impacted by an estimated CAD 90 million of lost profit and incremental direct costs related to the strike. Depreciation and amortization expense for the quarter was CAD 193.6 million versus CAD 184.9 million last year. The increase in depreciation and amortization is mainly due to the increase in retail network investments, including right-of-use assets and technology investments. Net financial costs for the Q3 were CAD 50.5 million, compared to CAD 45.3 million in the corresponding quarter of 2025. The increase in net financial cost is mainly due to the higher interest expense on net debt. Our effective tax rate in the quarter was 24.4%, while the effective tax rate in the Q3 last year was 24.1%, both supported by the continued tax benefit associated with our investment in our Tabernac.

Speaker #3: The increase in depreciation and amortization is mainly due to the increase in retail network investments, including right-of-use assets and technology investments. Net financial costs for the third quarter were $50.5 million, compared to $45.3 million in the corresponding quarter of 2025.

Speaker #3: The increase in net financial costs is mainly due to the higher interest expense on net debt. Our effective tax rate in the quarter was 24.4%, while the effective tax rate in the third quarter last year was 24.1%, both supported by the continued tax benefit associated with our investment in our Terrebonne DC.

Speaker #3: Adjusted net earnings in the third quarter totaled 262.6 million, compared with 331.8 million for the same quarter last year, down 20.9% year over year.

Nicolas Amyot: Adjusted net earnings in the Q3 totaled CAD 262.6 million, compared with CAD 331.8 million for the same quarter last year, down 20.9% year over year. Adjusted fully diluted net earnings per share amounted to CAD 1.24 versus CAD 1.52 last year, down 18.4% year over year. As mentioned before, these figures are adjusted for a CAD 42.6 million after-tax impact associated with the network optimization initiatives, or CAD 0.20 per share, but they were not adjusted for an estimated unfavorable after-tax impact from the labor conflict of CAD 66 million, or CAD 0.32 per share. Our capital expenditures in Q3 totaled CAD 167.3 million, versus CAD 145.5 million last year. After 40 weeks in fiscal 2026, the company opened 10 stores, including 2 conversions. We also relocated 1 store and carried out major expansions and renovations of 7 stores for a net increase of 245,000 square feet, or 1.1% of our total food retail network square footage.

Speaker #3: Adjusted fully diluted net earnings per share amounted to $1.24, versus $1.52 last year, down 18.4% year over year. As mentioned before, these figures are adjusted for a $42.6 million after-tax impact associated with the network optimization initiatives, or $0.20 per share, but they were not adjusted for an estimated unfavorable after-tax impact from the labor conflict of $66 million, or $0.32 per share.

Speaker #3: Our capital expenditures in Q3 totaled 167.3 million, versus 145.5 million last year. After 40 weeks in fiscal 26, the company opened 10 stores including two conversions.

Speaker #3: We also relocated one store and carried out major expansions and renovations of seven stores, for a net increase of 245,000 square feet, or 1.1% of our total food retail network square footage.

Speaker #3: On the pharmacy side, we are on track to complete 30 major projects this fiscal year. Under our normal course issuer bid program, as of July 31, we have repurchased 4.9 million shares for a total consideration of $463.1 million at an average share price of $94.56.

Nicolas Amyot: On the pharmacy side, we are on track to complete 30 major projects this fiscal year. Under our normal course issuer bid program, as of 31 July, we have repurchased 4.9 million shares for a total consideration of CAD 463.1 million at an average share price of CAD 94.56. In closing, our Q3 results were significantly impacted by the ongoing strike at our produce distribution center in Laval, a non-recurring event that affected sales, margins, and costs. We remain focused on restoring momentum and continuing to execute with discipline on costs, investments, and capital allocation. To that effect, we are confident that the network optimization initiatives announced today will contribute to improve the position of our network in the markets we serve and to respond to evolving customer needs. On this, I will turn it back to Eric for closing remarks. Thank you.

Speaker #3: In closing, our third quarter results were significantly impacted by the ongoing strike at our produce distribution center in Laval, a non-recurring event that affected sales, margins, and costs.

Speaker #3: We remain focused on restoring momentum and continuing to execute with discipline on costs, investments, and capital allocation. The that effect we are confident that the network optimization initiatives announced today will contribute to improve the position of our network in the markets we serve and to respond to evolving customer needs.

Speaker #3: On this, I will turn it back to Eric for closing remarks. Thank you.

Speaker #1: Thank you, Nicolas. So, as previously announced, I will retire as CEO at the end of this fiscal year and become Chairman of the Board.

Eric La Flèche: Thank you, Nicolas. As previously announced, I will retire as CEO at the end of this fiscal year and become chairman of the board. It has been an honor and a privilege to lead METRO and to work alongside such talented and dedicated teams across our stores, distribution centers, and offices. I would obviously have preferred to exit on a more positive note, but I am proud of what we accomplished over the last 18 years. Alongside my board colleagues, I look forward to METRO's continued success under Marc Giroux's leadership, and I am confident that the company will continue to deliver long-term value to customers, employees, and shareholders. Finally, I want to express my appreciation to you, the investment community, for your support and interest over the years. I have always valued our discussions, and I will miss engaging with many of you.

Speaker #1: It has been an honor and a privilege to lead METRO and to work alongside such talented and dedicated teams across our stores, distribution centers, and offices.

Speaker #1: I would obviously have preferred to exit on a more positive note, but I'm proud of what we accomplished over the last 18 years. Alongside my board colleagues, I look forward to METRO's continued success under Marc Giroud's leadership, and I'm confident that the company will continue to deliver long-term value to customers, employees, and shareholders.

Speaker #1: Finally, I want to express my appreciation to you, the investment community, for your support and interest over the years. I have always valued our discussions and I will miss engaging with many of you.

Speaker #1: So, thank you. We will now take your questions.

Eric La Flèche: Thank you, and we will now take your questions.

Speaker #2: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone.

Operator: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you are using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions. Thank you. First, we will hear from Irene Nattel at RBC Capital Markets. Please go ahead.

Speaker #2: You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two.

Speaker #2: And if you're using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions.

Speaker #2: Thank you. First, we will hear from Irene Natel at RBC Capital Markets. Please go ahead.

Speaker #4: Thanks, and good morning, everyone. Before I ask my question, a huge thank you to you, Eric, for the past 18 years. It's been an honor and a pleasure, and I wish you all the best of luck. Hopefully, you won't be going too far away.

Irene Nattel: Thanks, and good morning, everyone. Before I ask my question, a huge thank you to you, Eric, for the past 18 years. It has been an honor and a pleasure and wishing you all the best of luck and, hopefully, you will not be going too far away. With that, I guess, normally you do not address difference in performance necessarily between Quebec and Ontario. But given the impact of the strike this quarter, can you talk a little bit about what you might have seen in Ontario, which presumably was not disrupted or not meaningfully disrupted? Then, I guess, where within the stores in Quebec are you seeing the greatest pressure on same-store sales?

Speaker #4: And with that, I guess normally you don't address the difference in performance necessarily between Quebec and Ontario. But given the impact of the strike this quarter, can you talk a little bit about what you might have seen in Ontario, which presumably was not disrupted and not meaningfully disrupted, and then I guess where within the stores in Quebec are you seeing the greatest pressure on same-store sales?

Speaker #1: Like you said, Irene, thank you for your kind words, number one. Number two, for competitive reasons, we're not going to disclose by provenance, by banner.

Eric La Flèche: Like you said, Irene, thank you for your kind words, number one. Number two, for competitive reasons, we are not going to disclose by province, by banner. We have said that many times. Clearly, the strike is having an impact in Quebec mostly. Both of our banners are affected by the supply, or were affected by the supply of produce to our stores. So yeah, clearly, it has had a bigger impact there. Ontario, we are pleased with our business overall. It is a very competitive market. We are holding share in Ontario, so I will leave it at that. We did impact our operations a bit in Ontario by serving our Quebec stores. So that created a bit of disruptions that people are working through. So a lot of hard work by our teams to do a good job in both of our markets. So that is what I would say.

Speaker #1: We've said that many times. Clearly, the strike is having an impact in Quebec mostly. Both of our banners are affected by the supply, or were affected by the supply, of produce to our stores.

Speaker #1: So, yeah, clearly it's had a bigger impact there. Ontario we're pleased with our business overall. It's a very competitive market. We're holding share in Ontario, so I will leave it at that.

Speaker #1: But we did impact our operations a bit in Ontario by serving our Quebec stores. So that created a bit of a disruptions. The people are working through.

Speaker #1: So, a lot of hard work by our teams to do a good job in both of our markets. So, that's what I would say.

Speaker #4: Much appreciated. Thank you. And then maybe it's very hard, but kind of teasing through, we continue to see elevated pricing for consumers. What can you tell us about underlying consumer spending behavior and promotional penetration trade down, et cetera?

Irene Nattel: Much appreciated. Thank you. Maybe it is very hard, but kind of in teasing through, we continue to see elevated pricing for consumers. What can you tell us about underlying consumer spending behavior and promotional penetration, trade down, et cetera?

Speaker #1: Mac, you want to take that?

Eric La Flèche: Marc, you want to take that?

Speaker #3: Yeah, I can. Hi, Irene. I would say that the trends are similar to previous quarter. Consumers are focused on value. This proportionately buying private label, participating to promotion, and we're continuing to see volume greater volume and discount than in conventional.

Eric La Flèche: Yeah, I can. Hi, Irene. I would say that the trends are similar to previous quarter. Consumers are focused on value, disproportionately buying private label, participating to promotion, and we are continuing to see greater volume in discount than in conventional. We believe this is going to continue, and that is why we are continuing to invest in our network and investing in the right store in the right market as we announced.

Speaker #3: We believe this is going to continue. And that's why we've we're continuing to invest in our network and investing in the right store and the right market as we announced.

Speaker #4: Excellent. Thank you. And welcome, Mac.

Irene Nattel: Excellent. Thank you, and welcome, Marc.

Speaker #3: Thank you. Thanks, Irene.

Marc Giroux: Thank you. Thanks, Irene.

Speaker #2: Next question will be from Tammy Chen at BMO Capital Markets. Please go ahead.

Operator: Next question will be from Tamy Chen at BMO Capital Markets. Please go ahead.

Speaker #5: Hi, good morning. Thank you. And Eric wanted to wish you well as well. For my questions, on the strike, I don't know if you're able to comment, but I think the last update you gave was the union rejected your proposal.

Tamy Chen: Hi. Good morning. Thank you. Eric, wanted to wish you well as well. For my questions, on the strike, I do not know if you are able to comment, but I think the last update you gave was the union rejected your proposal. Are you able to say if both parties are back negotiating right now?

Speaker #5: Are you able to say if both parties are back negotiating right now?

Speaker #1: So we gave you an update on June 25. So there have been some discussions after that date. There have been no formal negotiations for a few weeks now.

Eric La Flèche: We gave you an update on 25 June. There have been some discussions after that date. There have been no formal negotiations for a few weeks now. That said, we remain committed to reaching a negotiated agreement that recognizes the contribution of our employees, enables their return to work. We are prepared to resume discussions with the union, but these discussions have to take place in a realistic framework that reflects the competitive market that we compete in. We presented a global offer to the employees that provides competitive wages, good working conditions that compare very favorably with the market, in addition to offering quality long-term jobs here in Quebec. In our minds, the ball is in the union's court, and we look forward to resuming negotiations.

Speaker #1: That said, we remain committed to reaching a negotiated agreement that recognizes the contribution of our employees and enables their return to work. We're prepared to resume discussions with the union, but these discussions have to take place in a realistic framework that reflects the competitive market that we compete in.

Speaker #1: So we presented an offer a global offer to the employees that provides competitive wages, good working conditions that compare very favorably with the market.

Speaker #1: In addition to offering quality long-term jobs here in Quebec, so in our minds, the ball is in the union's court, and we look forward to resuming negotiations.

Speaker #5: Okay. I see. And the costs and the disruptions from the strike, I would have thought maybe in the first few weeks it'd be most costly, as you're sort of scrambling.

Tamy Chen: Okay. I see. The costs and the disruptions from the strike, I would have thought maybe in the first few weeks it would be most costly as you are scrambling, and now with the contingency plan in place for some time, has the magnitude of the cost from the strike, is it a bit better now than initially? Or should we think it is a very similar cost drag that has been consistent throughout this period since the strike began?

Speaker #5: And now, with the contingency plan in place for some time, is the magnitude of the cost from the strike a bit better now than initially?

Speaker #5: Or is it just should we think it's a very similar cost drag that's been consistent throughout this period since the strike began?

Speaker #1: So, Nicola, gave you the numbers. We said 80 million dollar loss profit and cost impact. The large, large majority of that is lost profit and margin on lost sales.

Eric La Flèche: Nicolas Amyot gave you the numbers. We said CAD 90 million of lost profit and cost impact. The large majority of that is lost profit and margin on lost sales. The direct costs associated with this contingency plan were quantified in the quarter at CAD 3 million. Those costs, some of them are ongoing. Security costs, for example, continue to be incurred. The large majority is related to the sales decline and the associated margins. As long as we are on strike or as long as our same-store sales remain negative, that is why it is continuing to have an impact on our results. That said, we are in better shape every week. The assortment is not 100%, but getting close to that. It was not that certainly at first. People couldn't find organic produce, for example, for a while in our stores, so that clearly lost us sales and some traffic associated with that.

Speaker #1: The direct cost associated with this contingency plan are were quantified in the quarter at 3 million. So it's those costs are some of them are ongoing security costs, for example, are continue to be incurred.

Speaker #1: The large majority is related to the sales decline. And the associated margins. So as long as we're on strike or as long as our same-store sales remain negative, that's why it's continuing to have an impact on our results.

Speaker #1: That said, we're in better shape every week. The assortment is not 100%, but getting close to that. It wasn't that, certainly, at first. People couldn't find organic produce, for example, for a while in our stores.

Speaker #1: So that clearly lost sales and some traffic associated with that. But like I said, we're improving every week. Stores are in good shape, and we can compete.

Eric La Flèche: But like I said, we are improving every week. Stores are in good shape and we can compete, but we have work to do to bring traffic back to our stores, and that is what we are trying to do day in, day out.

Speaker #1: But we have work to do to bring traffic back to our stores, and that's what we're trying to do, day in and day out.

Speaker #3: And maybe it's Nicola here, adding a bit of clarification. As Eric mentioned, the direct cost of $3 million primarily associated with security services and other very direct costs, but within margin, we also have in addition to lost margin on lost sales, additional costs for the actual operational operating the contingency plan with third-party logistics provider.

Nicolas Amyot: And maybe, it's Nicolas here, adding a bit of clarification. As Eric mentioned, the direct cost of CAD 3 million primarily associated with security services and other very direct costs, but within margin, we also have, in addition to lost margin on lost sales, additional costs for the actual operating the contingency plan with third-party logistics provider. That is obviously costing more to us than the normal operating conditions of our own infrastructure. So that is also included in margin.

Speaker #3: That is obviously costing us more than the normal operating conditions of our own infrastructure, so that is also included in margin.

Speaker #5: Right. Okay. Thank you. Last one for me is on the network optimization, specifically the rebranding of 10 locations in Ontario to discount. Are you able to talk about is that mostly in the Greater Toronto area and why now?

Tamy Chen: Right. Okay. Thank you. Last one from me is on the network optimization, specifically the rebranding of 10 locations in Ontario to discount. Are you able to talk about, is that mostly in the Greater Toronto Area, and why now? Thanks.

Speaker #5: Thanks.

Speaker #1: It's mainly it's across the province, both in the GTA and the rest of Ontario. Did I answer your question, Tammy?

Eric La Flèche: It's across the province, both in the GTA and the rest of Ontario. Did I answer your question, Tamy?

Speaker #5: Yeah. And I'm just wondering out of respect for our employees, we will announce gradually to our stores and our employees as this plan is deployed.

Tamy Chen: Yeah. I'm just wondering

Eric La Flèche: Out of respect for our employees, we will announce gradually to our stores and our employees as this plan is deployed. A few stores will be advised very shortly or have been advised very recently, but not all stores. That will roll out as per our plan. But there is some in the GTA, there is one in Ottawa that will open by the end of this fiscal year. And there is some in other parts of Ontario. We will keep you posted on future calls.

Speaker #5: So a few stores have been advised will be advised very shortly or have been advised very recently. But not all stores. So that will roll out as per our plan.

Speaker #5: But there are some in the GTA. There's one in Ottawa that will open by the end of this fiscal year. And there are some in other parts of Ontario.

Speaker #5: We'll keep you posted on future calls. Okay. I was also wondering timing. Why now? Is it just from the entry of competitors discount banners nearby?

Tamy Chen: Okay. I was also wondering the timing, like why now? Is it just from the entry of competitors' discount banners nearby?

Speaker #1: No, I think it's a question of the evolution of the market. And like Mark said, we optimize our network on a continual basis, market by market.

Eric La Flèche: No, I think it is a question of the evolution of the market. Like Marc said, we optimize our network on a continual basis, market by market. We plan and we look at the future of every store, what is the best format for it, and we make decisions. This was a good time to relook at the network as we were preparing the plans for next year. For those 10 locations, we feel discount is the way to go. All these stores will be done over the next fiscal year, and we will ramp up with better contribution, better sales in all of those markets. We look forward to a higher contribution, which was singled out by Nicolas in the opening remarks.

Speaker #1: We plan and we look at the future of every store. What's the best format for it? And we make decisions. So this was a good time to relook at the network as we were preparing the plans for next year.

Speaker #1: And for those 10 locations, we feel discounts the way to go. And within all these stores will be done, over the next fiscal year, and we'll ramp up with better contribution, better sales, and all of those markets and we look forward to a higher contribution.

Speaker #1: Which was singled out by Nicolas in the opening remarks.

Speaker #5: Got it. Thank you.

Tamy Chen: Got it. Thank you.

Speaker #2: Next question, if I'm Vishal Sridhar. At National Bank, please go ahead.

Operator: Next question is from Vishal Shreedhar at National Bank. Please go ahead.

Speaker #4: Hi. Thanks for taking my questions. With respect to the total impact associated with the strike, on Metro's results, in order to forecast next year's results more accurately, you highlighted the 32, the 32 cents on EPS.

Vishal Shreedhar: Hi. Thanks for taking my questions. With respect to the total impact associated with the strike on METRO's results in order to forecast next year's results more accurately, you highlighted the CAD 0.32 on EPS, and then there is the CAD 3 million, and then there is the 3PL costs. How would I think about the totality of costs so I can forecast next year more accurately?

Speaker #4: And then there's the $3 million, and then there's the 3PL costs. So, how would I think about the totality of costs so I can forecast next year more accurately?

Speaker #3: Well, so Vishal, thank you for your question. Just to clarify again, the $3 million that you've quoted is obviously included within the $90 million.

Eric La Flèche: Well, Vishal, thank you for your question. Just to clarify again, the CAD 3 million that you have quoted is obviously included within the 90. I would say that initially, and to an earlier question, initially as the strike started, we had what I would call abnormal level of shrink and lost inventory, which hopefully should not repeat as much. I think on an ongoing basis for now, what we see in Q4 is a per-period level that perhaps is slightly less than the CAD 90 million we have seen over four periods. Slightly less, but same ballpark figure. I would say that about one-third of that number would be associated with direct costs operating the contingency plan and two-thirds has to do with lost margin on lost revenues.

Speaker #3: I would say that, initially, and to an earlier question, as the strike started, we had what I would call a normal level of shrink and lost inventory, which hopefully should not repeat as much.

Speaker #3: So I think on an ongoing basis for now, what we see in the fourth quarter is a period level that perhaps is slightly less than the 90 million we've seen over four period.

Speaker #3: Slightly less, but same ballpark figure. And I would say that about one third of that number would be associated with direct costs operating the contingency plan and two thirds has to do with lost margin on lost revenues.

Speaker #4: Okay, thank you for that. Related to the network reorganization and the changing of the stores, is there a negative sales impact as you close the stores and change them to the discount banners?

Vishal Shreedhar: Okay. Thank you for that. Related to the network reorganization and the changing of the stores, is there a negative sales impact as you close the stores and you change them to the discount banners, or is the subsequent growth in the discount banners sales growth going to more than recover that, and we should expect a sales benefit through the totality of the plan?

Speaker #4: Or is the subsequent growth in the discount banners sales growth going to more than recover that and we should expect a sales benefit through the totality of the plan?

Jean-Michel Coutu: Good morning, Vishal. Yes, the impact is positive. There is a decline in sales in the 2 weeks prior to the closing, but it is compensated by the growth of that new discount store that is growing the first year but also will be continuing to grow the year after. If we are deciding to convert a store, it is because the store is not the right store for that market, and the store has not been performing as we would want to. The overall impact on sale is positive first year and ongoing after that.

Speaker #1: Good morning, Vishal. Yes, the impact is positive. There is a decline in sales in the two weeks prior to the closing. But then it's compensated by the growth of that new discount store.

Speaker #1: That's growing the first year, but it will also continue to grow the year after. If we're deciding to convert a store, it's because the store is not the right store for that market.

Speaker #1: And the store has not been performing as we would want it to. So the overall impact on sales is positive in the first year and ongoing after that.

Speaker #1: But when we do convert a store, depending on the work required, there could be a closure for two months for the conversion. So you see a drop in total sales.

Eric La Flèche: When we do convert a store, depending on the work required, there could be a closure for 2 months for the conversion, so you see a drop in total sales. We will take those out of comparable sales anyways. Short-term, there might be a drop in sales during the work, but as soon as we open, we are expecting higher sales than before and bigger returns and better contribution.

Speaker #1: We will take those out of comparable sales anyways. So short term, there might be a drop in sales during the work. But as soon as we open, we are expecting a higher sales than before.

Speaker #1: And bigger returns and better contribution.

Speaker #4: Thank you. And related to did I hear it correctly that notwithstanding for the GLP ones, notwithstanding the reduction in pricing for the GLP ones associated with genericization, the contribution dollars are expected to increase?

Vishal Shreedhar: Thank you. Related to, did I hear it correctly that for the GLP-1s, notwithstanding the reduction in pricing for the GLP-1s associated with genericization, the contribution dollars are expected to increase? Did I hear that correctly? If so, does that reflect benefits from Pro Doc in that comment?

Speaker #4: Did I hear that correctly? And if so, does that reflect benefits from PRODOC in that comment?

Speaker #3: Yeah. So you did hear correctly. So I think you're right. The generic semaglutide is creating some deflation. But when you look at the overall category, and the trends that we've been seeing since the generic entered the market, we are seeing increase in unit volume.

Jean-Michel Coutu: Yeah. You did hear correctly. I think you are right. The generic semaglutide is creating some deflation, but when you look at the overall category, and the trends that we have been seeing since the generic entered the market, we are seeing increase in unit volume overall, and the category trends are being maintained despite the genericization of semaglutide. When you take all that into consideration, the category overall is going to continue to grow, and it is going to continue to be a net positive for our contribution and as Nicolas mentioned in the low teens. That does not include Pro Doc. Pro Doc, we are still continuing to refine that strategy and determine what is the best go-to-market approach. This is just really looking at GLP-1 category overall.

Speaker #3: Overall, the category trends are being maintained despite the genericization of semaglutide. So, when you take all that into consideration, the category overall is going to continue to grow.

Speaker #3: And it's going to continue to be a net positive for our contribution and as Nicola mentioned in the low teens. And that does not include PRODOC.

Speaker #3: PRODOC, we're still continuing to refine that strategy and determine what's the best go-to-market approach. So this is just really looking at GLP one category overall.

Speaker #4: Okay. And to be clear, when you said contribution, that's dollars, right?

Vishal Shreedhar: Okay. Just be clear that when you said contribution, that is dollars, right?

Speaker #3: Yes.

Jean-Michel Coutu: Yes.

Speaker #4: Thank you.

Vishal Shreedhar: Thank you.

Speaker #2: Next question will be from Chris Lee at Desjardins. Please go ahead.

Operator: Question will be from Chris Li at Desjardins. Please go ahead.

Speaker #4: Hi. Good morning, everyone. Eric, let me first add my congratulations on the stellar career. It’s been a pleasure working with you, and you’ll definitely be missed.

Chris Li: Hi. Good morning, everyone. Eric, let me first add my congratulations on a stellar career. It has been a pleasure working with you, and you will definitely be missed.

Speaker #1: Thank you.

Eric La Flèche: Thank you.

Speaker #4: You noted that food sales for Q4 today are also down around one and a half percent. I know it's hard to say, but how much of the decline would you say is still the lingering impact from the strike versus the general challenging market conditions?

Chris Li: You noted that food same store sales for Q4 to date is also down around 1.5%. I know it's hard to say, but how much of the decline would you say is still the lingering impact from the strike versus the general challenging market conditions?

Eric La Flèche: Well, as weeks go by, it gets tougher to predict, but it's essentially the strike that has caused all of this.

Speaker #1: Wow. As weeks go by, it gets tougher to predict. But it's essentially the strike that has caused all of this. If you looked at our same-store sales and our total sales and our financial performance, Q2 year to date, we're in a very strong position, gaining share in both markets, doing really well.

Chris Li: Okay.

Chris Li: If you looked at our same store sales and our total sales and our financial performance Q2 year to date, we're in a very strong position, gaining share in both markets, doing really well. This has had a significant impact as we're repeating ourselves here, and we've been fighting with our hands tied behind our backs for a while. We're in better shape today, but it's been a challenging quarter. We attribute the drop in our sales and our momentum to the strike, for sure. That said, the market's very competitive. Population growth is very small or flat and there's square footage. It's a competitive market, but that's what we expected, and we were facing that in the first two quarters anyways.

Speaker #1: So clearly, this has had a significant impact. We're repeating ourselves here, and we've been fighting with our hands tied behind our backs for a while.

Speaker #1: So we're in better shape today, but it's been a challenging quarter. We attribute the drop in our sales and our momentum to the strike, for sure.

Speaker #1: That said, the market's very competitive. Population growth is very small. Or flat. And there's square footage. So it's a competitive market, but that's what we expected.

Speaker #1: And we were facing that in the first two quarters anyways.

Speaker #4: Okay, okay. That's helpful. Yeah, no, perfect. And also to ask, if you exclude the impact from the strike in the quarter, it looks like your underlying EPS was up, I think, 3 or 4 percent, which is slightly below your long-term target.

Chris Li: Okay. That's helpful. Yeah. No, perfect. I just also wanted to ask, if you exclude the impact from the strike in the quarter, it looks like your underlying EPS was up, I think, 3% or 4%, which is slightly below your long-term target. Can you provide some colors around that? Was there other sort of non-recurring or one-time impact that would have impacted your growth?

Speaker #4: Can you provide some colors around that? Was there other sort of non-recurring or one-time impact that would have had impacted your growth?

Speaker #3: Yeah, I would start by saying, Chris, that the strike number is obviously an estimate, so we're trying to understand what the reality would have been.

Nicolas Amyot: Yeah. I would start by saying, Chris, that the strike number is obviously an estimate, so trying to understand what the reality would've been. So that's the first caveat to the adjustment or normalization. Then, as Eric mentioned, being in a limited capacity to promote at some point as we were ramping up the contingency plan, so fighting the fight with the MBI in our back as well. But I would say that, on top of that, we haven't mentioned fuel costs, but fuel costs for us were a few cents of impact in the quarter, given the increase in fuel. That's what I would say to answer your question. But it's not an easy formula to just say normalize it to 156 and then that's it. I think these factors contribute to the lack of clarity, if you will, in the quarter results.

Speaker #3: So that's the first caveat to the adjustment or normalization. Then as Eric mentioned, being in a limited capacity to promote, at some point, as we were ramping up the contingency plan, so fighting the fight with the hands behind our back as well.

Speaker #3: But I would say that on top of that, we haven't mentioned fuel cost, but fuel cost for us were a few cents of impact in the quarter.

Speaker #3: Given the increase in fuel, that's what I would say to answer your question. But it's not an easy formula where you can just say, "Normalize, it's 156," and that's it.

Speaker #3: So I think these factors contribute to the lack of clarity, if you will, in the quarter results.

Speaker #4: Okay. That's great. And Nicola, maybe my last question. Just if you exclude the strike impact, it does look like your gross margin were actually improved once again.

Nicolas Amyot: Okay. That's great. Nicolas, maybe my last question, just if you exclude the strike impact, it does look like your gross margin rate actually improved once again. What were some of the underlying drivers that caused the growth?

Speaker #4: What were some of the underlying drivers that caused the growth?

Speaker #3: Yeah, so I would say that if we were to normalize for the strike, the gross margin percent would be relatively in line, I would say.

Nicolas Amyot: Yeah. I would say that if we were to normalize for the strike, the gross margin percent would be relatively in line, I would say, Chris. I think, obviously, it's not a quarter where we can talk about the improvement in the distribution center operating conditions. But I would say that normalizing for the strike, the margin would've been very comparable to last year, so equivalent conditions.

Speaker #3: Chris, so I think obviously it's not a quarter where we can talk about the improvement in distribution center operating conditions. But I would say that normalizing for the strike, the margin would have been very comparable to last year.

Speaker #3: So equivalent conditions.

Speaker #4: Great. Okay, thank you, and all the best.

Chris Li: Great. Okay. Thank you, and all the best.

Speaker #3: Thank you.

Nicolas Amyot: Thank you.

Speaker #2: Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next, we will hear from John Zamparro at Scotiabank.

Operator: Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next, we will hear from John Zamparo at Scotiabank. Please go ahead.

Speaker #2: Please go ahead.

Speaker #5: Good morning. I'll just echo my thanks and congratulations to you, Eric. You've been a face of this company and a fixture of this industry. And we'll miss you.

John Zamparo: Good morning. I will just echo my thanks and congratulations to you, Eric. You have been a face of this company and fixture of this industry, and we will miss you, and we hope you will still hang out with us on these earnings calls for a little bit longer. Congratulations to you as well, Marc.

Speaker #5: And we hope you'll still hang out with us on these earnings calls for a little bit longer. And congratulations to you as well, Mark.

Marc Giroux: Thank you.

Speaker #5: I wanted to follow up on the GLP-1 commentary that's really helpful. I just want to clarify. So I think you'd said it's a double-digit volume growth you expect from the category.

John Zamparo: I wanted to follow up on the GLP-1 commentary. That is really helpful. I just want to clarify. I think you said it is a double-digit volume growth you expect from the category. It is also double-digit dollar growth you expect, and just to be clear, is that sales? If it is, what do you expect to be the impact on METRO's EBITDA in F27 or F28 from this process of genericization?

Speaker #5: It's also double-digit dollar growth you expect. And just to be clear, is that sales? And if it is, what do you expect to be the impact on Metro's EBITDA in F27 or F28 from this process of genericization?

Speaker #3: So yeah, it's double-digit unit growth. In terms of sales, we're looking at low single digits. And then contribution, it was in dollars—yeah, low teens in dollars.

Jean-Michel Coutu: Well, it is double-digit unit growth. In terms of sales, we are looking at low single digits. Then contribution, it was in dollars.

Nicolas Amyot: Okay.

Nicolas Amyot: Yeah, low teens in dollars for the overall category. John, I guess we do not provide EBITDA figures for any specific categories, and that applies, I would say, to GLP-1. As Jean-Michel mentioned, with the growth in the category, we do see EBITDA growing low teens, which is obviously positive. We are not providing dollar figures for that category per se.

Speaker #3: For the overall category, yeah. And John, I guess we don't provide the EBITDA figures for any specific categories, and that applies, I would say, to GLP-1.

Speaker #3: But as Jean-Michel mentioned, with the growth in the category, we do see EBITDA growing in the low teens, which is obviously positive. But we're not providing dollar figures for that category per se.

Speaker #5: Okay. Understood. That's helpful. Thank you. Moving to your announcement on network changes. The $15 million in after-tax earnings that you gained from that, is that primarily coming from the e-commerce portion of the network changes?

John Zamparo: Okay. Understood. That's helpful. Thank you. Moving to your announcement on network changes, the CAD 15 million in after-tax earnings that you gained from that, is that primarily coming from the e-commerce portion of the network changes?

Speaker #3: I would say about half and half. So half for the e-commerce fulfillment model adjustment, if you will. And then the other half from the improved contribution from the stores as they are converted and as they grow as a food basic store.

Nicolas Amyot: I would say about half and half. Half for the e-commerce fulfillment model adjustment, if you will, and then the other half from the improved contribution from the stores as they are converted and as they grow as a Food Basics store. It's about half and half.

Speaker #3: So it's about half and half.

Speaker #5: Okay, understood. And then, last question from me: there's a lot of noise in the same-store sales number, but I wonder if you can comment on traffic versus basket in the quarter.

John Zamparo: Okay. Understood. Last question from me. There's a lot of noise in the same-store sales number, but I wonder if you can comment on traffic versus basket in the quarter. Is the impact you're seeing primarily from fewer visits, or is it from spending levels per trip?

Speaker #5: Is the impact you're seeing primarily from fewer visits, or is it from spending levels per trip?

Speaker #1: So the transactions are down because of the strike mainly. And so half of the sales lost or produce considering the strike in our produce warehouse.

Marc Giroux: The transactions are down because of the strike, mainly. Half of the sales lost are in produce, considering the strike in our produce warehouse, and half of the sales are in transaction. Basket are slightly up.

Speaker #1: And half of the sales are in transaction. Baskets are slightly up.

Speaker #5: Okay, got it. I'll pass it on. Thank you very much.

John Zamparo: Okay. Got it. I'll pass it on. Thank you very much.

Speaker #2: Question will be from Brian Morrison at TD Cowan. Please go ahead.

Operator: Question will be from Brian Morrison at TD Cowen. Please go ahead.

Speaker #4: Yes. Good morning. A couple of follow-up questions. Just on that 32 cents. I understand the opportunity costs, but I heard you mention the example of supply of Quebec from Ontario and some additional items.

Brian Morrison: Yes, good morning. A couple follow-up questions. Just on that 32 cents, I understand the opportunity costs, but I heard you mention the example of supply of Quebec from Ontario and some additional items. Are these backed out as well, or just more so referring to Chris's question on the implied 3% growth. I assume that there's still some inefficiencies that remain within your results that are not taken into account in that.

Speaker #4: Are these backed out as well, or is this more so referring to Chris's question on the implied 3% growth? I assume that there are still some inefficiencies that remain within your results that are not taken into account in that.

Speaker #3: Yeah. So that's possible in the sense that we tried to come up with our best estimate. With regards to your comment in Ontario and as Eric mentioned, before our Toronto fresh PC in Ontario is, was, and is currently supporting our Quebec store network.

Nicolas Amyot: Well, that's possible in the sense that we tried to come up with our best estimate. With regards to your comment in Ontario, and as Eric mentioned before, our Toronto fresh DC in Ontario was, and is currently supporting our Quebec store network. So that is obviously overall impacting operations to a certain extent. So trying to answer your question here. So the impact of the strike does include a small figure, if you will, in the big picture for the estimated Ontario impact of having to support.

Speaker #3: So that is obviously overall impacting operations to a certain extent. So, trying to answer your question here, the impact of the strike does include a small figure, if you will, in the big picture for the estimated Ontario impact of having to support.

Speaker #3: Does that answer your question?

Eric La Flèche: Does that answer your question?

Speaker #4: Yeah. Yes, it does. I mean, just maybe following up on the impact of the strike. I'm curious if you feel you may need to invest in SG&A to regain what appears a dip in your market share from this.

Brian Morrison: Yes, it does. Just maybe following up on the impact of the strike, I am curious if you feel you may need to invest in SG&A to regain what appears a dip in your market share from this.

Speaker #1: Yeah. When we say we're working hard to get our traffic back to our stores, that's what we're talking about. Yes, merchandising has to be sharp, and we'll have to make some investments.

Eric La Flèche: Well, when we say we are working hard to get our traffic back to our stores, we are talking, yes, the merchandising has to be sharp and we will have to make some investments. We do it in a disciplined way. We have a plan. But clearly, we have some traffic to recoup, and we will invest appropriately with our shareholders in mind. But we need to attract customers back to our stores. Top-line growth in our industry, obviously, is fundamental to the rest. It starts with that, and we will act accordingly in a disciplined way.

Speaker #1: So we do it in a disciplined way. We have a plan. But clearly, we have some traffic to recoup. And we will invest appropriately.

Speaker #1: With our shareholders in mind, but we need to detract customers back to our stores. Top line growth in our industry, obviously, is fundamental to the rest.

Speaker #1: So, it starts with that. And we will act accordingly in a disciplined way.

Speaker #4: Okay, maybe last question. The pharmacy front-store sales at 1.4%—a bit below the sequential rate and consensus. Is this simply prior year strength, as you called it—the two-year stack—or thoughts on the performance and why it may appear a bit soft?

Brian Morrison: Okay, maybe last question. The pharmacy front-store sales at 1.4%, a bit below the sequential rate and consensus. Is this simply prior year strengths, as you called it, the two-year stack, or thoughts on the performance, why it may appear a bit soft?

Speaker #3: Yeah. Yeah. So I can comment about that with pleasure. So I think you mentioned it. You I think you highlight it well. The two-year stack was very strong.

Jean-Michel Coutu: Yeah. I could comment about that with pleasure. I think you mentioned it. I think you highlighted well the two-year stack was very strong. I think that's a good starting point. We did maintain market share in the quarter also. Last year, we did have a little bit of a tailwind, especially in P7 from the last few weeks of the cough and cold. This year, the allergy season started a little bit later. But when we look at the fundamentals in the quarter, our cosmetics, our beauty, our seasonal programs continue to perform very well. I do not think there's anything to be alarmed by in the quarter.

Speaker #3: I think that's a good starting point. We did maintain market share in the quarter also. And last year, we did have a little bit of a tailwind, especially in P7 from the last few weeks of the cough and cold.

Speaker #3: And this year, the allergy season started a little bit later. But when we look at the fundamentals in the quarter, our cosmetics, our beauty, our seasonal programs continue to perform very well.

Speaker #3: So I don't think there's anything to be alarmed for. To be alarmed by in the quarter.

Speaker #4: Thank you very much.

Brian Morrison: Thank you very much.

Speaker #2: Two. And at this time, we have no other questions registered. Please proceed.

Operator: Thank you. At this time, we have no other questions registered. Please proceed.

Speaker #6: Thank you all for your interest in Metro and please mark your calendars for our fourth quarter results on November 18th. Thank you.

Eric La Flèche: Thank you all for your interest in Metro Inc., and please mark your calendars for our Q4 results on 18 November. Thank you.

Speaker #2: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.

Operator: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your line.