Thank you, operator. Good afternoon everyone and thank for joining us today.

Our comments today will focus on the financial results of Metro's first quarter which ended December 17, 2016. With me today is Eric La Fleche, President and Chief Executive Officer; and Francois Thibault, Executive Vice President and Chief Financial Officer.

During this call, we will present our first quarter results and comment on first quarter highlights. We will then be happy to answer your questions.

Before we begin, I would like to remind you that we will use in today’s discussions different statements that could be construed as being forward-looking information. In general, any statement which does not constitute historical fact, may be deemed a forward-looking statement.

Expressions such as expect, intend, are confident that, will, and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements are based upon certain assumptions regarding the Canadian food industry, the general economy and our annual budgets, as well as our 2016-2017 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 significantly. A description of the risks, which could have an impact on these statements can be found under the Risk Management Section of our 2016 Annual Report.

We believe these 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 would now like to turn the call the Francois.

Thank you, Roberto, and good afternoon everyone. Sales for the first quarter totaled $2.971 billion, an increase of 0.3% versus the same quarter last year.

Same-store sales came in at plus 0.7% for the quarter and our internal measure food basket deflation was 1%. We were comping an inflation level of plus 2.8% in Q1 of last year.

While deflation explains in great part the modest increase in sales, there are also other factors that impacted our sales negatively. Namely, the sales decline in our pharmaceutical business, following our decision not to renew supply agreement for a network of hospitals, as well as the closure for conversion of some Metro stores that has not been offset in the first quarter by sales of the newly-opened discount stores.

This largely explains why our same-store sales increase was higher than our total sales increase. Our gross margin in Q1 was 19.7%, compared to 19.4% at the same quarter in 2016, and operating expenses as a percentage of sales stood at 12.4% for the first quarter versus 12.3% for the same quarter last year.

EBITDA in Q1 totaled $216.8 million, that's up 3.1% from last year's level, and it stood at 7.3% of sales versus a margin of 7.1% last year. Our depreciation expense was CAD43.2 million, CAD3 million higher than last year, reflecting the higher level of capital investments we made in 2016.

Our share of earnings from our investment in Alimentation Couche-Tard was $23.9 million in the first quarter, versus $30.6 million for the corresponding quarter last year. Last year's figure included non-recurring gain, and that $6.7 million pretax difference negatively impacted our net earnings, which came in at $138.1 million versus $139.8 million last year, as a 1.2% decrease, but excluding Couche-Tard, our net earnings increased 3.6%.

Our fully diluted net earnings per share increased from $0.56 a share to $0.58 a share, representing a 3.6% increase. Under the normal course issuer bid program, the Company may repurchase up to 12 million of its common shares between September 12, 2016 and September 11, 2017, and as of January 13, we have repurchased 5.4 million shares for a total consideration of $221 million, representing an average share price of $41.13.

Yesterday the Board of Directors approved a quarterly dividend of $0.1625 a share, which represents a 16.1% increase from last year. On an annual basis, the dividend increases from $0.56 to $0.65, the 23rd consecutive year of growth.

Our financial leverage increased this quarter, with the ratio of adjusted debt to EBITDAR above 2.2 times, moving closer to our target of 2.5 times. The ratio of non-recurring debt to total capital stood at 34.2% at the end of the quarter, and that's up from a level of 31.4% at the end of Q4 2016.

So to conclude, our financial position remains strong. I would now like to turn it over to Eric La Fleche.

Thank you.

Thank you, Francois, and good afternoon, everyone. Overall, we are pleased with our first quarter results, as we were able to grow our sales and operating income, despite experiencing food deflation of 1% in a quite intensive competitive environment.

Same-store sales for the quarter came in at 0.7%. Tonnage and basket size were up, but transactions were down slightly.

There was also a small transfer of Christmas sales to the second quarter which affected Q1 sales. Gross margin for the quarter increased by 30 basis points.

This increase was mostly the result of sales mix and lower shrink. Deflation also contributed, as some costs can decline a little faster than retail prices.

Our teams continue to execute well, and our results reflect their commitment. CapEx investments totaled approximately $84 million for the quarter as we opened two new stores and expanded or remodeled 11 stores, for a net expansion of 62,000 square feet or 0.3%.

The market environment remains competitive, but rational. We are still currently in a deflationary period, especially in produce and some key staple items like butter and eggs.

This obviously puts pressure on top line growth in the current quarter. However, we will be comping lower inflation numbers in the back half of the fiscal year, and that should be reflected in our sales.

So to conclude, we are able to perform well in a deflationary environment, as we remain focused on our long-term objectives, and I'm confident that with our experienced management team, strong execution, and sustained investments in our retail network, we will continue to grow and create value for our shareholders. That concludes my comments, and we'll now take your questions.

Thank you.

Good afternoon. Eric, on the deflation discussion, last quarter on the conference call, you reported that the Company exited the quarter with some modest level of inflation, so I'm just wondering what happened through the course of the quarter that you ended up with a deflationary trend overall?

Well, what I recall Peter is that we exited the last quarter pretty much flat. We had some internal inflation in the last quarter overall, but the quarter ended up pretty much flat, and started that way.

And then we got some inflation or deflation that accelerated throughout the quarter, and we're at 1% for Q1. So that's the way, if I didn't express it clearly, my apologies, but that's the picture.

Okay and with the deflation now in the current quarter presenting a headwind for top line growth, not only for METRO but for the industry, are you seeing any -- is there any change in your behavior with respect to your merchandising programs, or are you seeing in terms of your competitors in terms of competitive intensity? I'm just wondering if this deflation is causing any kind of reaction?

Well, deflation complicates matters, it's obviously, it's challenging to manage top line growth and good margin control. In that environment, I think our teams did a pretty good job in Q1, and we will try to do the same thing in Q2.

Teams are focused on top line growth, we want to grow our tonnage in a deflationary environment, so that we hold our share and hopefully grow our share. So it takes careful management of the top line to have effective merchandising, and still deliver some margins, so that's what we are focused on.

Okay, thanks very much.

Thanks and good afternoon. Just wondering if you could talk a little bit about what you're seeing in terms of consumer behavior buying patterns, trading up, trading down?

I guess the traffic to discount versus conventional and sort of flier intensity -- so I guess that the intensity of flier promotion?

So in reverse order, fliers are typically very promotional, as you know, and quite intense, that's what I said in my earlier remarks, so I would qualify Q1 as quite intense on the promotional front fliers were aggressive. Again, referring back to the prior question, in a deflationary environment some costs allow for lower retail price points, and those are played out or played up in the fliers, so it has an impact.

So I would say that all banners, all formats are aggressive in this type of environment, and can flash lower price points. So I wouldn't say that there is huge shift in patterns from discount to conventional in this environment.

I think it's holding pretty steady, I would say, but consumers obviously are benefiting, it's highly promotional with lower retails.

Eric, I think on the prior call, you noted that one of -- I guess the few silver linings of deflation is it enables you to maybe play around with some of your offering, and notably in the flier, with items, say in the meat category that a year ago were just simply too expensive, or maybe selling more fresh, as opposed to frozen; just sort of wondering if you're still seeing those kinds of trends?

Yes, we did, thank you for that. So when last year, we were having severe inflation, you saw those patterns were fresh vegetables were expensive, and people trading down to frozen vegetables.

I said in the last quarter that we generated internal inflation with mix, so that happened again in Q2. We're reporting lower deflation than the CPI would suggest, because of that mix.

The lower price points, especially in meat, allows us to merchandise differently, and pricier cuts of meat for example, prior to Christmas in Quebec, filet mignon [ph] was on ad a couple times, it didn't happen last year, so that inflated the mix and created some inflation versus last year for us. So there are always market situations like that that we have to be on top of, and so when I say effective merchandising, it's all of the above; so I think the teams again did a good job.

And just finally if I might add, I think that you noted in your opening remarks that transaction count was down. Was it down even if you adjust for the stores that were closed for conversions?

When we report the traffic and basket, that's all in a comparable basis, so it doesn't account for stores that are closed; it's a comparable number. So yes, traffic was down a little bit slightly, I don't think it's alarming.

We like to see a traffic patterns or transaction count up, not slightly down, so we have to work on that. There is always room to improve.

I think the fact that two significant days, not the biggest days, but two significant days went over to Q2 that affected the transaction number in the quarter. So overall, I would say not alarming, but we are watching carefully.

And I mean, to the best of serve your ability, do you think that you're losing traffic to other players or do you think that really is just a matter of lower transaction count, and the calendar shift?

Well, our basket is up, our tonnage is up, I think we're holding or maybe slightly gaining share, nothing spectacular, so I think we're doing okay versus the rest of the market. I think I'll leave it at that.

Thank you.

I think you've covered most of it, but I guess just on the -- the tonnage growth was quite strong again, but it did slow a little bit versus the prior three quarters whereas the gross margin trend went the other way and improved. Was there any sort of kind of easing up in promotion on your part to protect or boost margins?

No. In a very competitive environment, we try to be there all the time, so there is no intent to protect margin at the expense of sales.

We try to manage both carefully, and come up with the right equilibrium [ph]. Sometimes it's not an exact science, after the fact, I would like to have a little more sales and a little less margin, but more margin dollars.

But actually I think under the circumstances in a challenging market, we ended up okay with the results. In a deflationary environment, as I said, some costs are declining and the retail price doesn't decline as quickly because the flier is printed two weeks ahead of time, and by the time we get the merchandise, especially produce, costs can come down a bit, which helps margin.

So that's one example but it's not because we traded or put the brakes on sales to generate margins.

Okay. And are you able to quantify all the impact on sales or operating expense for the Hospital Supply Agreement that you exited?

It's not a big contract, a hospital contract, McMahan, our pharma wholesale business supplies a few hospitals in the Quebec network, that was the smaller contract and we chose not to renew because we didn't make any money out of it. So it affected our top line, not materially but it affected it, it was immaterial on the bottom.

That's right, on margin it's not material.

All right, thank you.

Hi, good afternoon. Just wondering if you could comment on your wages and benefits line, it was actually down year-over-year; could you just talk about the mix within that and how you're managing that line?

I guess in particular, store labor?

Well, I think we're doing a good job managing store labor. We have -- we think competitive labor agreements and then it's a question of productivity and managing the hours and providing the service and good store conditions; so we're pleased with our productivity and where the labor number came in.

So again, not to throw flowers but we're -- the guys did a good job.

Okay. So the progress or sort of improved execution there is something that you think would be sustainable in terms of SG&A growth?

I think so. We try to progress all the time and we squeeze and we tweak all the time, we're investing in systems, productivity and labor scheduling; so those are giving us some returns, so we're confident that we can maintain those levels of productivity.

Okay. And then could you just elaborate on the drivers of lower shrink number; given the various top line puts and takes?

Well, I'll give you an example, with -- produce is an important source of deflation; tonnage and produce is improving, so rotation, higher sales and produce drive lower shrink, it's just better turnover in our produce whereas last year with high inflation produce was challenged with high sticker prices and tougher to manage on the shrink side. So we benefited from that in this quarter with produce.

Okay, very helpful. And I guess just the last question and I guess it's been about a year of the shift to discount sort of taking hold.

I think you commented that you feel like it's kind of stabilized now but just sort of taking a step back, I wonder if you could comment about how that shift impacts your capital investment plans and how you expect that balance to play out over the next year? The balance between conventional and discount I guess from a consumer perspective.

So the shift of discount, overall, total market I think it's still happening; there is faster growth on the discount side. We're opening a few more discount stores than we are conventional stores, so we're experiencing the same thing.

On the capital front, I don't have exact numbers, we don't disclose by banner or by province but there might be -- about 50/50 I would say on the CapEx because we'll do maybe fewer conventional projects but they cost more money and the discount stores will do more but they cost less money per store. So overall, the CapEx we spent in the network is pretty much similar between the two.

There is a shift in growing sales and discount but we have strong and solid sales in Metro in both provinces that require investment as the number of stores is significant and we're investing in them.

Okay, that's really helpful, thank you very much.

Good afternoon. Just on your SG&A, I just wanted to go back and clarify; so the SG&A for the quarter in totality was only up 0.5% and obviously almost flat from an expense rate standpoint.

So as your expectation, you can generally hold the line on the expense rate or that you can actually keep SG&A virtually flat through the rest of this year versus last year?

Well, it would be aggressive to say we can hold the dollars flat as hopefully volume continues to grow, top line grows, holding rate is a good thing and then the dollars may be up a little but I think we'll manage the rate well and deliver the dollars, so we work on both. To say dollars are going to stay flat forever that would be pushing it.

And in vegetables and fruits, is it mostly FX that's causing the deflation or is there other supply dynamics that are driving that?

I didn't get the first part, sorry?

Sorry. In the vegetable and produce and fruit's area, is it mostly FX that's causing a deflation or is there supply issues that are contributing to that?

Well, there is abundance in the market. We haven't heard of any head crops or situations that would drive inflation, it's a contrary, so there is abundance creating some deflation and the currency contributed in the first quarter too, a little bit.

Okay, that's great, thank you.

Thank you.

Hi, good afternoon. I'm just wondering we're about a year out from some reasonably meaningful store closures by some of your competitors and I'm wondering if you can just speak to the variance and performance across the network.

Did you see sort of other course this year? Any sort of anomalies in those markets where you had competitive closures or are they performing more or less in line with the rest of the network?

When the competitor closes a store nearby we tend to benefit so it's really market by market. Last year at the end of Q1 and in Q2 one competitor closed several stores and we had a benefit from that, no doubt, and we're cycling that as we speak so that makes it a little more challenging also on the comp sales for this quarter.

But if you take that effect out and it's a temporary effect because it cycles out after one year, I would say that the stores that do benefit come back to normal and they performance the rest of the chain does.

Okay, alright. And then just looking at the results from a lot of the branded package goods providers, they are trying to find growth where they can and a lot more referencing of trying to manage trade spends in the channel and I'm just wondering if you can talk after having gone through a year where particularly here in Canada where we still have FX concerns for those vendors and all of the major grocers have sort of come back to push back on pricing; how is that moving forward this year and have you seen any real trade-off in terms of trade spends within the channel?

I would just say that we're satisfied with the relations, negotiations with the CPG companies and more than CPGs, our suppliers in general; so we made sure in the fall that we had competitive costs. We had good meetings with our supplier partners and I think we're in a good position to be competitive in the market going forward.

So I wouldn't want to qualify it more than that.

Okay, that's great. Thank you very much.

Thank you.

Yes, just first on deflation; you mentioned butter and eggs, and I think they are under supply management. So is there sort of a pricing squeamish [ph] on eggs and butter?

Yes, that's a competitive situation, it's not an inflation/deflation commodity situation; it's competitive situation.

And then just in terms of deflation, and I don't want to get into anything that gets too complicated for me but when you measure your meat category, do you sort of do it on price per pound there for the mix is what affects inflation?

That's one criteria, yes. We report -- we measure what we sell, so it's very much a function of the mix by department and then total store, so that's the number we report.

And then just in terms of the pharmacy wholesale business, am I right to understand there's one larger contract left that's outside of the [indiscernible] network or is there something beyond hospitals even?

No, you're essentially right. There is one other contract that we currently have, wholesale in pharma to hospital networks in Quebec.

So we'll see where that goes as they say. For competitive reasons, I don't want to say more.

Let those contracts come up for bid and next time it comes up for bid, we'll see where we end up. The other contract we decided not to renew.

And then just in terms of the conventional closures and the opening of discount, you mentioned that you opened two stores so am I correct that you closed two conventional and opened two discounted or…

Not quite, sorry, if it's confusing -- we opened two new discount stores in the quarter, brand new and we converted towards the end of the quarter three former Metros were converted to discount but for most of the quarter the stores were closed for the conversion projects; so two in Ontario, one in Quebec in Q1 were closed for most of the quarter and generated sales towards the last week or two of the quarter; so that's why there is a difference between total sales and same-store sales.

Thanks. And then just on the online, I think your pilot started in Q4 in three stores; can you just speak to how that's progressing?

Thank you for the question. Its progressing well, the system is working.

We have three stores in Montreal that offer it, so we do picking at store level in three locations. I think the website we built and the interface with customers is great and we're getting good customer feedback from that.

There is some adjustments to make in that field, it's a constant test and learn and adjust; so there is adjustments at store level for the ordering, the picking, the deliveries; so work in progress, happy so far, we're on-track in terms of spend and in terms of the metrics that shall remain private for now but in terms of basket size, margin, generation, it's pretty much aligned to what we expected; now it's a question of ironing out the details and scaling it up a bit because clearly we're losing money at this rate for building this system for only three stores, we will roll out more stores gradually progress every over the course of this year in the Montreal area and hopefully go beyond that after that.

Thank you.

Thank you.

Hi there, good afternoon. I had a number of questions, Eric.

And Keith just asked my last one, so I'm good.

Great.

Thank you, good afternoon. Eric with respect to the two new discount stores, could you provide a little bit of insight into how they performed relative to your expectations but also what impact if any of you noticed the opening having on the competitive dynamic in the markets in which you opened them?

Well these are two, one in Ontario, one in Quebec discount stores, I would call them standard format and small Markets, so it's early days. There are a few weeks old so I reserve my comments on the success but I'd just say that it's pretty much in line with our expectations and very much early days, it's part of our strategy to go into markets where we don't have a presence and with either format and there's perhaps room for discount or conventional.

In this case it was for discount and that's we went with it, confident about the potential. There's some growth in more than one location than the other but we think we can get our share of those markets and do well.

And then just a second question; with the way the market has moved in the competitive dynamics being what they are, do you think the case for sort of loyalty and loyalty and discount is getting stronger and weaker or that we're getting to a tipping point in Canadian grocery where loyalty and discount perhaps becomes something of a norm or do you think that dynamics haven't changed sufficiently to support that move by the markets?

Well again, we don't want to disclose our plans going forward. We do not have loyalty programs in our discount stores.

We have no plans short-term to introduce any loyalty plans in our discount stores. We focus those store on the offer, the pricing, the promotion, and the in-store execution, price being the number one factor for those stores.

So we're comfortable with our position, I won't comment on the rest of the market but we will not introduce short-term any discount in our -- any loyalty in our discount stores.

Great, thanks very much. I'll leave it there.

Yes, so I just wanted to ask about is, as we need to have first the store in Griffin Town was doing [ph] -- I gather it's on the second floor I haven't seen it. And secondly, just what the broader plans are over the next couple of years.

Thanks. The store in in Griffin Town, yes it is on the second floor in a developing area, trendy area; it's doing well, it's pretty much in line with our pro forma, so happy with that.

We hope to open more Danah [ph] stores over the next few years. There are two in Ontario today in the Toronto area, we hope to open more in the next few years.

We are not ready yet to announce the next one, could be this calendar year 2017, could be the year after, but definitely we will open more stores and that's it for now.

And then maybe just finally on premier, you've gone into Quebec City as I understand it, but what are the plans there?

Yes, we did open outside of Montreal for the first time. They opened a bakery store cafe and outside of Quebec City.

Good results and encourages us to go in other markets outside of Montreal. We recently opened one in the Montreal area near not far from the airport by the way, so a couple of stores a year, we have a development plan and we're executing on it, so happy with that relationship too.

Thank you.

Okay. So thank you for having joined us this afternoon and we will be speaking with you again to discuss our second quarter results on April 26 of 2017, thank you.