Merci Sylvie. Good afternoon, everyone, and thank you for joining us today.

Our comments will focus on the financial results of our first quarter, which ended on December 20. With me today is Mr.

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 first 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 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. 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 statements, except as required by applicable law. I will now turn the call over to Nicolas.

All right, thank you Sharon and good afternoon, everyone. First, I will start by mentioning that we are pleased to report that the challenges related to the temporary shutdown of our frozen food distribution center in Toronto are now behind us, as operations have fully resumed.

Our contingency plan was effective in securing supply across our Ontario food store network. The direct costs associated with our freezer issue and our related contingency plan amounted in the quarter to $21.6 million pretax or $15.9 million post-tax, and our results are adjusted for these costs only.

Turning to our Q1 results, total sales reached $5.3 billion, an increase of 3.3% versus the first quarter last year. Sales were negatively impacted by the transfer of one significant pre-Christmas shopping day to the second quarter this year, as well as by the temporary shutdown of our frozen food distribution center, as I've just mentioned.

Food same-store sales grew by 1.6% in the quarter, and they were up 1.9% when adjusting for the Christmas shift. On the pharmacy side, same-store sales grew by 3.9%, supported by a 5.1% growth in prescription sales and a 1.3% growth in front store sales.

Similar to food, when adjusting for the Christmas shift, front store sales were up 1.7%. Our gross margin reached $1.04 billion or 19.7% of sales in the quarter, the same percentage as Q1 last year.

Turning to operating expenses, they were $557.6 million in the quarter, up 5.5% year-over-year. As a percentage of sales, operating expenses were 10.5% versus 10.3% in the first quarter last year, as they were unfavorably impacted by $20.8 million of direct costs related to the temporary shutdown of our freezer.

Excluding these costs, operating expenses grew by 1.6% year-over-year and represented 10.2% of sales. Note that we also had $0.8 million of direct costs impact related to our freezer issue in our losses on asset disposal.

EBITDA for the quarter amounted to $482.6 million. That's up 0.2% year-over-year and stands at 9.1% of sales.

Adjusting for the $21.6 million direct freezer costs, adjusted EBITDA stood at $504.2 million, up 4.7% year-over-year, reaching 9.5% of sales, an increase of 13 basis points over Q1 2025. Total depreciation and amortization expense for the quarter was $143.6 million, up $10 million.

The increase in depreciation and amortization expense is mainly due to the increase in our retail investments, including the opening of new stores from last year, right-of-use assets, as well as the commissioning of investments in our supply chain, including some automation technology in the pharmacy division. Net financial costs for the first quarter were $37.3 million compared to $30.7 million last year.

The bulk of the increase results from the recording in Q1 2025 of interest receivable of $4.2 million regarding the resolution of an income tax position related to prior years, as well as higher interest on net debt. Our effective tax rate of 25% is higher than the effective tax rate of 18.2% in the first quarter last year, largely driven by the resolution of the just-mentioned income tax position related to prior years of $20.6 million in Q1 2025, as well as by the Terrebonne DC tax holiday, which amounted to $4.9 million this quarter versus $6.1 million in the same quarter last year.

Adjusted net earnings were $248.7 million compared to $245.4 million last year, an increase of 1.3%, while adjusted fully diluted net earnings per share amounted to $1.16 versus $1.10 last year, up 5.5% year-over-year. Our capital expenditures in Q1 totaled $61.9 million versus $89.3 million last year.

Looking forward, we expect CapEx in F'26 to reach approximately $550 million as we continue to invest in our retail network. On the food retail side, in Q1 '26, we opened 3 stores and carried out major expansion and renovation projects at 3 other stores for a net increase of 88,600 square feet or 0.4% of our food retail network square footage.

Under our normal course issuer bid program, as of January 16th, we have repurchased 1 million shares for a total consideration of $98.7 million, representing an average share price of $98.72. The board of directors declared yesterday a quarterly dividend of $0.4075 a share or $1.63 per share on an annual basis, and that's an increase of 10.1% versus last year.

This is the 32nd consecutive year of dividend growth for Metro, and it represents a payout of about 33% of last year's adjusted net earnings, in line with our dividend policy. On this, I will now turn it over to Eric for more color on our results.

Thank you.

Thank you Nicolas and good afternoon, everyone. We recorded strong sales and delivered adjusted earnings per share growth in a challenging environment marked by the temporary closure of our freezer in Toronto and persistent food inflation.

As Nicolas mentioned, operations at our frozen DC in Toronto have now fully resumed. I'm pleased with the way our teams came together to ensure a steady supply to our food stores for over 3 months.

Turning to the quarter, we grew sales by 3.3%, adjusted EBITDA by 4.7%, and adjusted earnings per share by 5.5%. As Nicolas said, food same-store sales were up 1.6% and 1.9% when adjusted for the Christmas shift.

We inevitably lost some sales and margins on the items we were not able to supply as part of the contingency plan, and we estimate that impact to be about 30 basis points on same-store sales for the quarter, for which no adjustment was made. Discount continues to drive same-store sales faster than Metro, with the gap between them remaining consistent with the prior quarter.

Total food sales growth of 3.1% reflects the strong performance of our new food stores and conversions. Our internal food basket inflation was below the reported food CPI of 4.1%.

Recall that the food CPI measure is somewhat inflated due to the GST holiday last year. We continue to see inflationary pressures on certain commodity prices, namely in the meat category and grocery.

Our teams continue to work tirelessly at pushing back on those price increases requests and offering the best value possible to our customers. During the quarter, transaction count was slightly down, but offset by an increase in the average basket.

Promotional penetration remains at elevated levels, and private label sales continue to outperform national brands. The competitive environment remains intense, but rational, and we are pleased with our new discount store openings and our growing market share in a very competitive market.

Online sales grew by 25.8% in the quarter. Growth is being driven by third-party marketplaces, the ramp-up of click-and-collect services, as well as the launch of delivery in our discount banners.

Turning to pharmacy, the business sustained its momentum with another quarter of strong Rx sales growth and positive front-end performance. Prescription sales were up 5.1%, driven by continued organic growth, specialty medications, GLP-1s, and clinical services.

Commercial sales grew by 1.3% and were driven by HABA and seasonal, partly offset by a softer performance in OTC. Although the cough and cold season picked up towards the end of the quarter, this acceleration was not sufficient to offset the slow start.

Similar to food, adjusted for the negative impact of the Christmas shift, front-end same-store sales were up 1.7%. We are on track with our plan to accelerate the development of our growing discount banners as we successfully opened 3 new discount stores in Q1.

We continue to see more opportunities, and as mentioned in our previous call, our 2026 capital plan calls for a dozen discount stores, including some conversions, as well as several major renovations in fiscal 2026. To conclude, our teams remain committed to providing the best value possible to our customers, and we're confident that our diversified business model, sustained investments in our retail networks, and strong execution will continue to deliver long-term growth for our shareholders.

Thank you, and we'll be happy to take your questions.

This is Matthew Rothway on for Mark Carden. Was hoping to dive into what you're seeing from the consumer a little bit more.

Are you noticing any change in shopping behavior, any trade down? Do you think food inflation is beginning to have much of an impact there?

Thanks.

No noticeable change in consumer behavior as outlined on previous calls. Discount is growing faster than conventional, we're seeing more traffic there.

People are buying more on promotion. Private label sales are outpacing national brands.

There's no noticeable change in customer behavior. Inflation, reported inflation has risen a bit in the quarter.

We're not seeing that elevated inflation in our stores, but for sure inflation pressures put pressures on customers and it's a concern. That's why we're focused on value in all of our banners and working really hard to deliver value to our customers every day.

Thank you.

Great, thanks. Just a quick follow-up.

Any anything to call out on comp cadence within the quarter? How did that trend?

We don't, no comment on other than what we reported for the company on the food and pharma side. Cadence Pretty consistent, that's all I'd say.

Thank you.

Thanks, and good afternoon, everyone. Just sticking with the topic of inflation, obviously getting a lot of airtime in the media.

Can you talk about what you're seeing in terms of supplier requests, magnitude, frequency, and the types of conversations that you're having? Cuz, ultimately they're the ones asking, right?

That's right. That's where the inflation is coming from.

We see it on the fresh side of the store. Week in, week out, there's commodity price pressures.

Beef, poultry, pork, all those categories are trending up. In the case of beef, it's been for an extended period of time.

Very very challenging for us to procure meat at reasonable cost so that that we can promote and that we can price competitive, but that we can price at prices that consumers are looking for. A big challenge on the procurement side there.

Working hard and looking for alternative sources in other countries like Mexico, Australia, whatever, so that we can access some lower prices. It's for sure challenging.

On the grocery side, the number of requests is consistent with prior years. We're in the normal, quote, unquote, range, but the quantum of the ask we're seeing a little more than we saw in past years.

We're pushing back as much as we can. We're negotiating as much as we can.

Some of it is justified by aluminum prices, commodity prices, chocolate, coffee, name it. There are inflationary pressures that some of our suppliers are facing and trying to push or transfer to us.

We negotiate as best we can. We're and there's going to be inflation going forward.

Working hard to control it as much as we can.

That's really helpful. Thank you, Eric.

Maybe it might be a little bit early to ask this question, cuz I think a lot of the pricing comes in next week. In this environment where consumers are, there's so much value-seeking behavior, when you do pass, or when pricing is increased, what are you seeing in terms of consumer response?

The prices, as you say, some of those price increases will start to take effect next week. We'll see, but as merchandisers, we're trying to minimize the impact on our customers.

Where we increase price, we do it surgically, and we try to incorporate it into our merchandising strategies. There are going to be some price increases as there have been in previous years.

It's the reality we're facing. What the consumer reaction will be we'll have to see over the coming weeks.

We will be price competitive and we will compete as best as we can.

Thank you.

Hi, good afternoon, everyone. I was wondering if I can start off with on the gross margin side.

Can you please talk to us a little bit about the positive and negative factors that impacted the gross margin during the quarter? Thank you.

Gross margins vary from quarter to quarter, as we say. The competitive marketplace, the promotional weight, the cost increases we're getting from our suppliers, all of that impacts on the positive on the gross margin.

For sure, price cost pressures are a drag on gross margin, for sure. We're trying to be the most efficient that we can in our promotions so that we draw customers into our stores and not kill the bottom line, as they say.

For sure, the warehouse investments that we've made over the past years are a plus on the gross margin. They're reducing hours, which reduces the lower that price of the cost of goods sold.

Those efficiencies help. Net, we came up flat on gross margin rate this quarter.

The freezer situation in Toronto did not help, of course. We're not getting efficiencies from that.

We're getting the contrary. That was a drag for sure on our gross margin this quarter.

Going forward, that's all behind us, and we're looking forward to getting back on track on gross margin.

That's helpful. Maybe if I can just double-click on that.

In terms of going forward, now that you are fully behind all these the freezer disruptions, do you expect margin to increase for the rest of the year? I know it's still very dynamic environment, as you pointed out, but just generally is it fair to assume margin should increase the rest of the year?

No, you can't you can't make that call. We don't give guidance.

We don't, we won't give you a number ahead of time. We will, like I said, we're competing in a in a competitive market.

We it's it's it's our job to have effective merchandising to to deliver a gross margin that's that's acceptable for our for our returns and our bottom line. That's what we do every day.

I think we have an experienced team, and we're confident in our ability to just to deliver a decent gross margins. I'm not going to give you a color on up or down.

No, that's fair. Then my other question, just on same-store sales.

Thanks for quantifying the impact in Q1 from the freezer disruption. Are you seeing more impact or do you expect more impact in Q2 or is that fully now resolved?

No, I said, we are back to normal, there is no lost sales anymore. The contingency plan was good, it was effective.

We supplied our stores, quote, unquote, appropriately, but there were some missing items. You look at the bakery departments and frozen categories in meat or grocery, was not the complete assortment, so that we lost sales and we lost margin on those frozen categories.

which going forward is behind us. We're looking forward to more normal sales and margins on those frozen products out of Toronto.

That's great. Thanks and all the best.

Thank you.

Thank you. Just on the refrigeration issue, can you explain how it was resolved?

Did you fix it? Did you change suppliers and change the equipments?

Why was there a charge?

Very big mechanical issue in the refrigeration system. Basically, 2 heat exchangers in place.

One defaulted and contaminated the other, which was never supposed to happen in the first place, but it did. All this to say that the faulty heat exchanger has been replaced by another one using a different technology.

We have 2 we have the old one and we have the new one using 2 different technologies. That's our going forward, that's how we're operating.

I don't know what else I can tell, Mike.

The other equipment that's on the older technology, is there a risk that one faults as well or is it just a fault in the equipment rather than

the design? The exact root cause of the failure of the first one still remains to be determined.

There's a lot of expertise and forensic stuff going on. Net, it the one that's left has never malfunctioned, it's still functioning really well, and now it's backed up by another one that is using a different technology.

We think the risk has been managed well, and we're confident that we're not going to suffer any problem going forward.

Then you had a decent increase in your depreciation this quarter, and you talked one of the things you talked about was pharmacy automation starting to be commissioned. Should we start expecting, or should we expect to start seeing some margin improvement on that side of the business coming from this automation in the coming quarters?

This is Nicolas, Mike. I'll take the question.

That investment was commissioned last year. Obviously, when we make investments in equipment, we ensure that we're going to get our plan for the return on investment.

I would say, yes, over time, we should see some margin improvement in the warehouse distribution for the pharmacy business. I'm not going to quantify that today.

We're still at the beginning of the investment, if you will. Yes, obviously, we expect productivity improvements and return on investment.

The return on investment method that we've communicated before, double-digit cash on cash after tax, is still on. We're going to get, we're very confident we're going to get those returns from those supply chain investments at the pharmacy warehouse in Varennes.

Nicolas said, these are long-term investments, and it will ramp up gradually over time.

All right, thank you.

Thank you.

Thanks. Good afternoon.

Just a couple follow-ups, actually. On the topic of gross margin and the impact from the disruptions at the frozen DC, is there any way to sort of just help shape that?

I don't think you quantified it specifically, but above or below sort of, I don't know, 5 10 basis points?

I gave you some color on the lost same-store sales impact of 30 bps. You can put some dollars on that.

What we I think the key message here is that we suffered in this quarter because of this freezer on a year-over-year basis. A few million dollars of lost margin for sure on that freezer.

We lost a day of Christmas sales that shifted to Q2, if you compare to Q1 last year, there's some sales and margin lost to last year, too. We have some asset disposals that are on our financial statements that is a reversal versus last year.

You put all that together, there's about 3 cents a share of negative impact that are putting a damper on our results this quarter. We're confident going forward.

Understood. Thanks for that.

I guess just you called out the challenging operating environment, and I know you specifically referenced the DC disruption and food inflation, but just to be clear, any shifts related to promo intensity or the pressure from industry square footage growth that has compounded those challenges relative to, I guess, either last quarter or last year?

The DC we just talked about versus last year, and that's behind us. Food inflation, or, quote, unquote, rising food inflation, puts pressure on consumers.

It's pressure on consumers looking for value, and that puts pressure on promotions. It's just a more challenge that we have to face have we been facing.

We're in this environment where cost of living is hard. Price of food is key on people's mind.

People are making choices, making some trade-downs, they're changing stores, they're buying on promotion. All that is has been happening, continues to happen, and we adapt.

That's why we're opening discount stores, and that's why I think our merchandising teams in all of our banners are offering good value. You have no choice.

If you don't offer value, you don't attract customers. That's what we do.

The promotional intensity, I think, is pretty consistent. It's intense.

It's but it's rational. The fact is, there are more stores opening.

We're opening some stores, some of our competitors are opening stores. That's the added square footage puts more pressure in the sense of more competition out there with the same promotional intensity.

These are challenges that we face, that we are I think experienced at, and in a good position to face. I think, like I said, in our diversified business model, we're well balanced between food and pharmacy.

Within food, I think we're all balanced between discount, conventional, and specialty. I think going forward, with all the investments we've made in our supply chain over the past few years, our consistent investments in our retail networks, we're I think well positioned to continue to grow.

Yes, excellent. Thanks for that overview, Eric.

Maybe just another quick one, if I could, probably for Nicolas. Excluding the DC costs, cost control was pretty strong.

Anything to call out there, and what sort of dynamics should we be thinking about for the balance of '26?

As you point out, good cost control. I think, 1.6% increases is perhaps on the low end of what we could expect in the future.

I think what you can expect is perhaps a notch more than that, but continued good cost control and, yeah, focus on execution and delivering the margin above these costs.

Understood. Thanks for all the commentary.

Take care. All the best.

Thank you.

Thank you.

Hi thanks for taking my questions. Eric, you've been asked this question many times, but I just want to get your view, more formally, reflecting on the past.

We're in a period of higher inflation, accelerating square footage growth, and consumer stress. You're saying the consumer backdrop is stable, and we appreciate that you see that.

As you look forward and these pressures continue to accrue, do you feel like the grocery environment is normal and accommodative, or do you think that some of the worries that some investors are articulating are merited?

You can always worry. The situation you describe is factual.

I think the industry square footage number, yes, it has accelerated, but that's after several years of low industry and low company here in our case industry. We've added square footage, but 1 or below percent, whereas population growth has grown, as quite a bit more than that over the past 5 years.

There's a bit of catching up on the square footage factor. The square footage we're adding is on the discount side for the most part, a big portion of it in Ontario where we have lower penetration, lower share, and where we see more opportunity for us.

I think that's I don't think it should be cause for concern as much as seen as an opportunity for Metro and for our shareholders. I see that as a positive.

Inflation and consumer pressures are a fact, and we're dealing with this have been for a while, like I said. It's up to us to deliver that value.

I think we have good programs in all of our banners, good pricing, good promo, a good loyalty program, effective merchandising that can deliver value to customers. We know it's hard on customers.

Cost of living is tough out there, no question about that, but I think we are offering good value at the end of the day.

Okay. With respect to your new stores, can you comment on if they're hitting plan?

Yes, in general. Maybe I'll let Marc Giroux give you some color on the new stores.

Hi Vishal. Yes, we're satisfied with our store opening.

They're not all equal, but overall, we're very satisfied of their performance in their respective market. As Eric mentioned, we have a plan for a dozen more in 2026.

That will continue to contribute to the total sales.

We're hitting our sales forecasts in general, more than in general. The large majority of the store openings, like I said, we're very happy with.

We're exceeding expectations in most of them, meeting expectations elsewhere, and confident that the stores are going to be good contributors short term.

Wonderful. Maybe just want to get your thoughts on the pharmacy side and with respect to the generics that are coming on the GLP-1s.

Do we have any Pro Doc plans and when should we expect the Pro Doc generic equivalency to come out?

Let me pass it to Jean-Michel.

Yep, yep, thank you. Thank you for that question.

Obviously, you there's a lot in the news right now about generic the genericization of Ozempic. It's right now, there we know there's been some delays, there's been some non-compliance notices, we know it's been pushed forward a little bit.

We were expecting something earlier in 2026. Now we There's There's a lot of a lot of discussions around GLP-1s.

We We see it a lot as a catego- category of one right now. Everyone talks about Ozempic, but it's a very dynamic category.

There's some new innovations coming out around Zepbound, and we saw some news in early in December about the oral GLP-1s. The way we see it is we think it will increase demand, but at the same time, it's it's going to the the margins also going to be protected by the fact that there are new therapies coming out.

As a category, it could continue to grow. On the Pro Doc front, obviously, we're always looking to increase the portfolio of Pro Doc, but that's not not something that we could disclose right now.

We need to see how the market shakes up, see how Novo Nordisk also reacts to the generic- genericization of Ozempic in Canada to see if there is space for additional generic companies that Pro Doc could then market in in Quebec where we where we're prevalent. I I hope that answers the the question, but but it's It's as a category, it's growing, and there's a lot of new a lot of new innovation coming in.

You have to take that into account when you look at Ozempic.

Appreciate the color, thanks.

Thank you. Good afternoon.

I wanted to revisit the topic on competition levels and a question I think is for you, Eric. Against whatever base timeline you choose, do you consider the market to be more competitive pretty equally across your network, or is the comment about a very competitive market more specific to certain regions or certain pockets where you are seeing greater store growth from the industry?

In our plan for this year, there's more impact from competition in the Quebec market versus Ontario, but there's impact over there from new competition, be it our own cannibal- cannibalization or competitor square footage. There's a little more in Quebec that's happened over the last year and continues to happen this year.

That cycles throughout this year. That's a wave that's going to pass, but there's still a competitive impact a little more in Quebec this year.

Yeah.

Thank you for that. Then one perhaps for Nicolas.

In the past, you've contemplated at times about looking at slightly higher leverage to facilitate more buybacks, and I wonder where Metro currently stands on that subject.

I would say that we're still contemplating the same. We still have a view that we could progressively increase the leverage over time and then use part of that to buy back shares.

I think we're at the same position, and we would do that very gradually and prudently over time.

Understood. Thank you very much.

Thank you.

Thanks again. Just a follow-up.

Overall, the sales are pretty good, particularly when you adjust for the temporary items and the timing. At the AGM, it sounded like you were going to increase your focus on cost controls this year.

Do you think this combination can allow you to get back into your growth algorithm despite the slower start to the year?

We remain committed to our financial framework objectives, which, as are mid to long-term averages. We're working really hard to make those numbers every quarter, every year.

Yes, the number for Q1 is slightly below on EPS growth than that framework, but we will do everything we can to meet our objectives. No change to our objective, but we're not going to give you guidance for next week or next month or next quarter.

All right. Gave it a try.

Thank you.

Thank you all for your interest in Metro, and please mark your calendars for our second quarter results on April 22nd. Thank you.