Thank you, Amanda. Good morning, everyone, and thank you for joining us today.

Our comments will focus on the financial results of our third quarter, which ended July 1, 2017. With me today is Mr.

Eric La Flèche, President and Chief Executive Officer; and François Thibault, Executive Vice President and Chief Financial Officer. During this call, we’ll present our third quarter financial results and comment on third quarter highlights.

We’ll then be happy to take 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 a historical fact may be deemed as 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 budget, as well as our 2016-2017 action plan. These forward-looking statements do not provide any get 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 will now like to turn the call François.

Thank you, Roberto, and good morning, everyone. Sales for the third quarter totaled $4.073 billion, an increase of 1.4% versus a strong quarter last year when sales by grew 4.5%.

Our internal measured food basket deflated again this quarter by approximately 1%. Gross margins stood at 19.5%, a 10 basis point decrease versus the same quarter last year, as certain commodity price increases had to be absorbed as the promotional environment remained intense.

Operating expense as a percentage of sales came in at 12.1% versus 12.2% for the same quarter last year, as we continue to relentlessly work on our cost controls. EBITDA totaled $301.5 million versus $297.4 million in Q3 last year, up 1.4% and representing 7.4% of sales same as last year.

Our depreciation expense was $60.3 million, that is $3.9 million higher than last year as planned with the increase in capital expenditures. Our share of earnings from our investment in Alimentation Couche-Tard was $20.7 million in the third quarter versus $15.5 million for the same quarter last year, an increase of $5.2 million.

Income tax expense of $60.6 million represented an effective tax rate of 24.9% compared with last year’s figure of $61.7 million for an effective tax rate of 25.9%. Net earnings were $108 million, up 3.7% from the third quarter of 2016, and our fully diluted net earnings per share increased from $0.72 a share to $0.78 a share, up 8.3%.

Under normal course issuer bid program, the company may repurchase up to 12 million of its common shares. As of July 28, we have repurchased over 7.8 million shares for a total consideration of $219 million, representing an average share price of $40.82.

Yesterday, the Board of Directors approved a quarterly dividend of $0.1625 a share, which represents a 16.1% increase from last year. Our financial position remains strong.

At the end of the quarter, the company had an unused authorized revolving credit facility of $600 million and the ratio of our nonrecurring debt to total capital stood at 34.4%. Finally, the announcement of wage increase in Ontario represents an impact of about $45 million to $50 million on an annualized basis for 2018.

For our fiscal year 2018, the impact is about $35 million. That concludes my comments for now.

I would like to send it over to Eric La Flèche.

Thank you, François, and good morning, everyone. Our third quarter results were satisfactory in the context of a challenging environment, marked by intense competition, continued food price deflation and bad spring and early summer weather.

As we cycled strong third quarter sales last year, same-store sales were essentially flat this quarter with food deflation moderating to about minus 1%, half of what we experienced in Q2. Traffic was down in the quarter, offset by an increase in the average basket.

Our 2017 CapEx plan is on track. For the first 40 weeks, CapEx totaled $240 million as we opened eight new stores and expanded and renovated 30 stores for a net expansion of 180,000 square feet or 0.9%.

Ontario is getting the lion’s share of our investments this year as we accelerate store renovations in the province with good results so far. We are also progressing on e-commerce.

We are expanding our coverage in Québec and by the end of this calendar year, we will offer home delivery and click-and-collect in the major urban areas of the province covering 60% of the population. Still very early days, we are constantly learning and adapting.

But we’re pleased with the average transaction size and customer satisfaction scores are encouraging. On August 1, 2017, we announced the partnership with MissFresh, a small Montreal-based startup company specialized in online sales and home delivery of meal kits.

This allows us to add another feature to our digital strategy and complement our in-store offer to better meet the evolving needs of consumers. So as François mentioned, the announced minimum wage increase in Ontario will put pressure on the industry as a whole in 2018.

As a team, we will strive to mitigate this impact as much as we possibly can through productivity and cost reduction initiatives as the size and pace of these increases pose a significant challenge. We have faced headwinds before and I’m confident that we will continue to both satisfy our customers and create long-term value for our shareholders going forward.

That concludes my comments, and I’ll be happy to take your questions. Thank you.

Hi. Good morning.

Hi.

I was just wondering if you could talk in the quarter whether there were any – you felt that there were any stumbles you made internally on merchandising or you thought you caught the opportunities you could. I think we’ve seen in the past quarters where you’ve sort of been able to merchandise around deflation or some of the other impacts on the quarter.

Well, I’ll just say that it was very competitive. As I said in my opening statement, promotional intensity is very high.

I would qualify Q3 as more intense than Q2 on the promotional side. So I wouldn’t call it stumbles, I would just call it a very competitive market with very active players.

So I think we hold our own pretty well and we’re satisfied that our merchandising strategies are the right ones for our different formats.

Okay. And then, just looking at a bit forward.

When you – what sort of your internal working assumption on where inflation will be over the next couple of quarters?

Well, as we exited at Q3, inflation was essentially flat and we’re basically in that neighborhood right now. So as we said on the previous call a few months ago, we had expected moderating deflation, which is basically what’s been happening.

We have not moved to inflation yet. We’ll see where that goes.

Don’t have a crystal ball, but as we cycle deflation in the next few quarters, we would expect perhaps a reversal of the trend based on some commodity price increases, also it’s the weather conditions, but typically, there – we will budget as for every year and every plan that we make, we budget for some inflation. So I won’t give you that number, but we’ll budget for some inflation.

Okay. And then just finally on the – with the pending generic drug deal coming in Québec, do you see that changing your appetite at all for M&A in that industry?

I would say, it seems like you had obviously been a little bit cooler with the disruption that had been in place, post the deal that you see that remains still a priority for you? Or where are your thoughts about pharmacies and the business still going forward?

So my only comment would be to say that any time uncertainty is removed, I think it’s a good thing. So I think the deal on generic drugs between the government and the manufacturers was, I think, a positive.

And in general, we don’t have details of that deal. We just read the headlines and we read about the significant price reduction.

So that will have an impact on us as the franchise or as a distributor, it’s not that material to us. But it’s a headwind and in that industry also.

That said, less uncertainty is probably a good thing and we are always on the lookout for good opportunities, both on food and pharma and that hasn’t changed.

All right. Thanks very much, everyone.

Hey. Good morning.

I just wanted to ask you about the evolution of consumer behavior regarding channels. And if you’re still seeing consumers shifting from conventional to discount, and are the trends any different in Ontario or Québec.

What should I say, consumer behavior hasn’t been that much of a change. I think pricing is very intense and very promotional as I said on the promotional side.

But I think on the consumer side, the economy is doing better in both of our markets. I think food prices with the deflation that we’ve been living for the last two quarters is less top of mind.

So I think that has favored conventional a little and over this last couple of quarters. So – but in general, the added square footage is still coming mostly on the discount side – on our side and on our competitors’ side.

So the long – the shift to discount has happened and continues, but the consumer behavior, I would say, in the last couple of quarters has not been bad for conventional.

Okay, that’s helpful. Just with regards to the MissFresh partnership.

Could you just sort of tell us a bit more about what drew you to them in particular, in that meal box space? And how you expect this business is going to integrate with your stores, with your existing physical stores?

So we keep abreast of all emerging trends and different things that are happening and how people buy food and who buys and what they buy and how they cook and not cook. So the meal kit industry or business started out in the U.S.

As you know, it’s still in the early days. So we’ve been looking at it for a little while.

We talked to a few different players. So we wanted to see what was the best fit for us.

We like the partnership model where we keep founders interested. This is a very small business with a good young team with good technology.

So it was a basically small investment with good promises of future development and we’ll see where it goes. We think it’s something that will add to our digital strategy.

So loyalty and consumer – direct-to-consumer marketing that we do and e-commerce and now MissFresh, it’s just another tool in the toolbox for digital. And we also think it fits in well with our in-store offer in the Metro banner.

I think we can sell meal kits in our stores and do some cross pollination or synergies between the two. So I’ll leave it at that.

I don’t want to disclose all the competitive plans. But – it’s again, it’s a small thing.

It’s a lab and it’s some innovation that we think holds some promise. We’ll see.

Okay, thanks. And I guess just one follow-up on that.

What did they have in terms of physical assets? Like did they have a commissary that they’re leasing?

Or how does their business work?

They have a facility where they prepare the meal kits. So they assemble these meal kits in one centralized facility in the Montreal area and they deliver from there.

They have their own distribution o they’re using third-party?

Third-party.

Okay. Thank you very much.

Yes.

Thanks, and good morning. Eric, you mentioned in our commentary that the competitive intensity kind of dialed up a little bit in this quarter.

Can you kind of talk us through how that manifests in the marketplace?

Well, it’s very active. In the deflationary environment, everybody is chasing some sales and some top line.

So all players, including ourselves, have been quite active on the promotional front. There is active marketing campaigns on the part of everybody in both provinces.

So there is intensity. I say dialed up just a little deeper promotions.

Some of the meat cost increases that have happened in poultry, for example, and a few cuts of beef, we were unable to pass it at retail. With some of these cost increases, we normally would have had higher future prices, but that didn’t happen because it’s competitive.

So we were not backing down and we are competitive and that’s where we are. So you see a slight decline in our gross margin, that’s largely because of that.

So it has to do with, I guess, the depth of the promotional activity or the breadth as well?

Well, I don’t want to make too many comments for competitive reasons, but the depth was, in certain categories for certain periods, was more intense. I’ll leave it at that.

Okay. That’s great, thank you.

And just one more. I mean, I know we all hate to blame the weather, but certainly here in this province, we had three – four long weekends in your quarter.

How much you of a role did that play in the same-store sales decline?

I won’t give you a specific number, but I’m pretty confident that with average or better weather, we would have had positive comps. I’ll just leave it at that.

It certainly had an effect. But I don’t want to hide behind weather.

It’s part of life and we have to live with that and adjust. So the numbers are what they are, but yes, the long weekends and [indiscernible] on a Saturday this year, kind of the excellent Saturday this year, that also had a bit of an impact.

So net-net, it wasn’t a great spring.

No, sadly not a great summer either. Thanks a lot, Eric.

Yes.

Hi. Just wanted to go back to – this is the same topic.

So looking at your results, so presumably, some of the competitive intensity was in response to the poor demand for seasonal products, because of the poor weather. Do you expect that, that’s more of a transient experience or do you think that there is a dialed up focus on volume and market share grab by some of your competitors on a more sustained basis?

I can’t comment for our competitors. We’re – as I said, we are competitive.

We will remain competitive and we will do what we have to do to hold our shares and it’s part of the merchandising world. So we compete in all of our formats in both markets.

And the intensity ebbs and flows, and we sort of roll with the punches. So sorry to be vague, Jim.

No, no. I know it’s complex.

I just want to go back and just make sure I heard you properly. So I think that you said that basket was down in the quarter.

Did you comment on traffic?

Traffic was down, basket was up. Net-net same-store sales were essentially flat.

It’s traffic that’s down.

And on your e-commerce strategy, you’ve talked about expanding your deployment in the Québec market. What’s your sense of game plan for the Ontario market?

Is that a next year thing? Or how do you view that?

Yes, it’s part of the plan to go to Ontario eventually. I don’t want to give you a specific date at this stage.

So we’re doing the learnings and testings and adjusting in Québec right now and it’s going well. We will increase the number of stores before the end of the calendar year, and eventually, we plan to enter Ontario.

So I guess you will just have to stay tuned and we’ll communicate when we’re ready to do that.

Okay. And then last question, just going back to the offsets on the minimum wage.

I mean, obviously, a very tall mountain to climb. Is your hesitancy in terms of we can offset it that there is just too many moving parts in the marketplace right now?

Or that you are not far enough along and trying to nail down exactly what initiatives you can deploy incrementally to give more confidence that you can overcome that number?

Well, I think over time, we are confident that we will overcome cost increases that are inherent in our business. Energy, for example, in Ontario has gone up significantly over the last few years and we have been able to manage and offset.

The trouble with the announced minimum wage increase is not only the size of it, it’s the pace of it mostly. I don’t want to comment on what’s the appropriate minimum wage, that is not my job.

Our job is to manage our costs. So we will focus on what we can control.

It’s a very short notice. It’s a big amount.

So to offset all of that on our own in the next short-term, it’s very hard to give you guidance on that. We, I think, are pretty efficient already, but there is always opportunities to look at all of our costs.

Labor and other SG&A to mitigate. So we will – we are doing that right now and working hard to find some offsets.

To say how much? Exactly when?

Hard to say. It’s the pace, again, that makes it a pretty big challenge, but we are confident that we’ll find some offsets on our own that we can control on the cost side.

Productivity, technology, automation, all stuff we’ve been doing and looking at, will, I’m sure, accelerate with this cost increase, because some of these initiatives will be more attractive on a return basis now with higher minimum wage. So we’ll be looking at that and then we’ll be able to offset some of it.

There are other expenses that we will also look at. And at the end of the day, it’s going to take some time and we’re confident that we will be able to absorb.

Thanks, Eric. I appreciate the insight.

Yes.

Thank you. So just on that line of questioning, are you, I guess, implying that because of the size and the pace that comments on taking time that we could see several quarters of greater margin pressure initially before you can get to some of these implement some of the changes you might be considering?

Well, it’s a short time to make some changes and start initiatives. We will do stuff and they will compensate for some of this.

Again, I’m not going to say exactly how much, but over time, we’re confident that we can – we will be able to offset this in our cost structure in the total picture. So I’m not going to give you guidance quarter-by-quarter, 20%, 40%, 60%, we can’t do that.

We’re tight on costs, we will continue to be. We will do everything we can.

We will spare no effort to manage this properly so that we are competitive and we have a good control of our expenses.

It’s tough to imagine an entire industry accepting lower returns from a structural change like this in wages. So to what – to the degree that the industry can’t pass it all or offset at all with costs, what’s your sense of the potential for price – for inflation to pick up a little bit more next year to offset it?

Hard to say. I think some of our cost of goods sold maybe going up partly because of this or because of this.

So we’ll see how we manage that and how the industry manages that. We intend to be competitive and we will remain competitive.

But again, I think over time, if structural costs go up, that could have an inflationary impact. But again, I’m not giving you guidance and more details.

It’s an industry issue.

Right, I understand that. And then, as you see the cost of goods sold, inflation coming through on commodities or just general – goods in general because of minimum wage increases and other factors, there seems to be some hesitancy to pass it along.

I mean, there’s always the fight to make sure that you’re getting treated equally to your peers. But how do you balance out, I guess, the need to be competitive and the need to get some inflation in the top line type of an environment?

We manage with – carefully and with experience and by staying competitive. So again, I don’t want to repeat myself.

It’s an industry issue and we will be competitive.

And just to be clear on the pharmacy reforms. Can you comment on whether at all there is any impact at all on your business?

Well, there is – again, we don’t have the full details of this generic agreement, but what we read is a $300 million price reduction. So the price reduction typically will translate into lower sales on which we make a royalty, a franchise royalty.

And we’ll also have an impact on our distribution fee, which is also government regulated. As a distributor, we make 6.5% on distribution of medication.

So McMahon is proportionate to our size and our generic sales, there will be an impact. So there is one, it’s offhand in the $2 million range, but we don’t have the details.

So it could be less, could be – in that neighborhood. It’s not that material, but it’s a headwind.

Okay. Thank you.

Eric, you talked about your direct-to-consumer marketing ability. I’m just curious, is all that data coming from your loyalty programs, AIR MILES and metro&moi?

Or are there other sources of data that you’re applying to market to your consumers?

Well, the direct-to-consumer is mostly through our loyalty programs where we fire off e-mails and offers and coupons and targeted merchandising. So we’ve been doing that for a while.

We – again, through that can access our customers for MissFresh and do cross promotions. That is what I was referring to.

Okay. And as you develop your e-commerce program – e-commerce platform, will you be able to identify that this consumer who has just – give us an order, e-commerce you will know if they’re also part of your loyalty program?

For sure. We know that today.

We know exactly if they’re metro&moi members. If they’re not, most are, by the way.

So yes, we have good relations and good information and we can make good offers to those customers, those most loyal customers, yes, for sure.

Okay, thank you.

Hi, thanks for taking my questions. On the drug distribution side related to all the volatility in pharmacy reform, are you seeing any shortages in drugs as maybe suppliers decide that there are other regions to ship drugs to?

No, not to our knowledge. Haven’t heard of that.

Okay. On competitive activity that you noted, in your perception for the industry, was that more related to just the tail end of deflation and people trying to catch up on sales?

Or was it weather? Or is it some factor that is probably more long term than those transient ones?

Well, who knows why people do what they do all the time. And just saying the competitive activity was a little more intense in Q3 than Q2.

So again, we watched it closely and we plan to be who we are and we plan to remain competitive. So if we have to be at a certain price on a certain item in a certain week, we will be and we do what we have to do.

So is it because of deflation? Is it because of square footage?

All of the above, maybe. I don’t know.

Okay. So it’s hard to narrow down what the reasons are.

Okay. In terms of automated DCs, is that something that – I know Metro looks at it from time to time, but your wage costs, one of the bigger kind of factors in deciding if management proceeds with that or not?

I think it’s something we look at. I don’t want to comment too much, but we’re actively looking at all sorts of issues to improve our business long term.

Automated DCs is one of them. No great insight into that.

Anytime you automate, you have an impact on labor, that’s for sure. So that’s part of the formula for the economics of automated DCs.

But there are other issues that can favor it. So availability of labor, scheduling, deliveries, service levels, there is all sorts of potential advantages.

So it’s something we have looked at. And we’ll continue to look at but we have no announcements to make.

As e-commerce ramps up, is the strategy – and I guess, it’s still early days, is the strategy to pick from store and then ship? Or could there be a model where the DC gets involved as well for direct-to-consumer?

So we started with picking at store because, again, it’s just starting. Demand is – it’s – in the scheme of things, a small number, so we don’t have the scale yet to justify a dedicated facility.

If the scale builds up to a bigger number and over time, we see more efficiencies to go with a dedicated facility, we will consider it at that time. You see in other parts of the world where e-commerce is more developed and there is scale, they do, I think, tend to function more with a dedicated facility.

So we’re not there yet, but we could get there eventually.

Okay. And in terms of the capacity of your DCs, no issues there in the near term, or are there?

Well, as we grow – capacity is something we need to look at. So some of our Ontario facilities are quite old.

So we will communicate in due time if some of the potential investments to improve our distribution platform in Ontario. So yes, capacity as we grow is something that we have to look at.

Okay. Thanks for your time .

Thank you.

Thank you, good morning. Just on the Adonis and Phoenicia and you’re going to buy out the minority interest subsequent to the end of the year.

Can you talk, Eric, about the implications of your having full ownership of that and what that means to the growth of that business as we look out several years?

Okay, thank you for the questions. Yes we will buy out the minority partners after this fiscal year.

I’m very happy with that partnership. It’s 11 stores today and we see potential for more.

So we have stores planned for 2018 in Québec and in Ontario. So I won’t give you locations and exact timing.

But yes, we have a growth plan and hopefully, we will be able to grow a little faster going forward. That is our plan and I won’t give you more targets than that.

Okay, so we should look at it companies.

As the partnership was coming to an end, clearly, there was less appetite on the founders to actively open stores, but we are planning to open more in the next stage. We have a good team in place there, they’re internal.

They grew up in the business and I think they will work well with the Metro team to pursue the growth.

Okay, thank you.

Yes, I had a question on the minimum wage impact on the conventional banners in Ontario versus the discount. Is there our differential amount of entry-level or part-time employees at one versus the other?

Or is there uniform impact?

Well, I don’t want to say uniform because I don’t have offhand the exact percentage of our minimum wage by banner. I have it for the province.

I’ll keep it to myself, but the entry-level job tends to be at or very close to minimum wage in both banners as part of our labor agreements. So they’re both impacted.

I don’t have more detailed info by banner.

Some of your national competitors have a national pricing program where they essentially price at the same number everywhere. Does that – how do you factor-in passing through or adjusting for the minimum wage to view it as an Ontario-specific issue?

Or a broader a company issue?

Well, the minimum wage is an Ontario-specific issue that affects the whole industry. Some, I guess, national players have a national pricing for certain categories, maybe, but I would venture to say that pricing varies by region, even for national players to quite an extent.

In fresh categories for sure, and in certain grocery categories too. I wouldn’t say that a uniform national pricing would be the norm, to be honest.

So I would say that the industry cost structure increase is an Ontario issue for now. I think there is another province out west, that is going to $15 and we’ll just have to manage it more closely in that province.

And then just on the e-commerce program in Québec. When, or maybe you already some dealer – some of your affiliates on the program?

Or is it all corporate stores at this time?

So all stores on the program today are franchisees, which you call corporate. They are not corporate, but they’re low equity franchisees are on the e-commerce rollout program, the affiliates are clearly behind it.

They want us to test and learn and do all of that and they could eventually participate, so not an issue with them at all. But the participants so far are the franchisees.

Thank you.

If Keith is still on the line, congratulations on that weather report. I think it was very helpful.

Thank you, good morning. Eric, how should we think about the opportunity on the technology front, specifically on point of sale?

Do you think of your current capabilities as competitive or as leading edge?

Well, I hate to use the word leading edge and pump up the volume too much, but there is opportunities. I think our platform at POS is state-of-the-art and it’s fine.

I think there are opportunities to improve all the time. So better ordering, better scheduling.

So we have systems that I think there is always room for improvement. We’re looking at electronic shelf tags, that is new technology.

We’ve piloted it in a couple of stores. We will accelerate that.

I think with wage increases, we’ll have to see. So I would qualify our technology as good and always improving.

Great. And then just switching gears briefly.

Just with the evolution of markets, some of the other changes coming through, ramp-up your e-commerce, could you perhaps provide an update on your current thinking around your having two currencies in market? And whether or not you sort of increasingly look at that as creating barriers to your business?

Or whether you still look at the market as being very local and the two-currency strategy not perhaps creating any barriers in your business? Perhaps just some sort of update on your thinking there on having the two currencies.

I’m not sure, I’m sorry, Kenric, there. Two currencies

Eric, just a single view of the customer versus having two currencies in you’re two respective markets. Perhaps you could just update on your thinking there on metro&moi and AIR MILES and how you’re working with those two currencies versus having a single view of the customer.

Well, okay. No.

So we have the metro&moi view, which is our proprietary program, as you know. We have a very similar view of the customers through the AIR MILES program.

So I think in our ability to make offers, it’s similar. The currency of reward is very different, and for now, we’re happy with the metro&moi program, I said it before.

The AIR MILES program has had issues this year. We’re working with them to find solutions to stimulate engagement.

But it’s still a strong program AIR MILES. It’s still working in Ontario for us and for now, there is no change.

Great. Thanks so much.

Just another question on the minimum wage just to – whether it cascades upwards, whether if the entry-level positions get a bump that everybody above them is automatically bumped.

Well, not automatically, but it certainly will be part of the bargaining going forward and part of our management of our salaries going forward. So the number we gave, or the guidance we gave on the impact, excludes potential cascading above.

But there could be something we’ll have to manage. The number we gave was for the rise of minimum wage and for the labor agreements that we have that have minimum wage plus.

So that has been factored in. And – so above that, could there be some cascading?

It’s a good question and it’s something that will have to be addressed.

Thank you.

Thank you.

Again, thank you, everyone, for having joined us today and our next fourth quarter conference call will be held on November 22. Thank you.