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

Our comments today will focus on the financial results of our first quarter which ended December 22, 2018. With me today are Mr.

Eric La Flèche, President and Chief Executive Officer; François Thibault, Executive VP and Chief Financial Officer. During the call, we will present our first quarter results and comment on its 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 forward-looking statements.

In general, any statement which does not constitute historical fact may be deemed as a forward-looking statement. Expressions such as expect, intend, or 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 and pharmaceutical industry, the general economy, and our annual budget, as well as our 2018-2019 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.

A description of the risks, which could have an impact on these statements, could be found under the Risk Management section of our 2018 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 information except as required by applicable law. I would now like to turn the conference now to François.

Thank you, Roberto and good morning everyone. To start I would like to again remind everyone that the closing of the Jean Coutu acquisition was completed on May 11, 2018 and therefore last year's Q1 does not include the results of the Jean Coutu Group.

In addition the first quarter of last year included significant gains as a result of the disposal of our investment in any matter of Jean Coutu. Before getting into the numbers I wish to highlight two transactions that were completed in the quarter.

First, we divested five pharmacies out of total of 10 as far as the agreement reached with the competition bureau following the Jean Coutu acquisition. The sale resulted in the gain of 7.4 million which is included in our operating income.

Secondly, we sold our investments in Quality an operator of datacenters in Canada for total cash consideration of 58 million and a pretax gain of 35.4 million that gain is included in the separate line in our P&L below financial cost. The investment included there was held by Jean Coutu.

We exclude both these gain in calculating adjusted earnings. As for Jean Coutu, we realized in the quarter, synergies of 10.7 million representing an annual run rate of 28 million.

I will now turn to our quarterly results. Total sales for the quarter reached a little under 4 billion versus 3.1 billion last year, an increase of 27.8%.

Excluding 757.1 million of sales from Jean Coutu in this quarter sales were up 3.5%. Food same-store sales were up 3.2% and inflationary food basket was about 1.8%, and pharmacy same-store sales were up 1.5%.

Gross margins stood at 19.4% of sales in the first quarter compared to 19.5% through the same period last year, excluding Jean Coutu gross margin stands at 19.8%. Operating expenses as a percentage of sales came in at 11.2% versus 12.5% last year.

On a net adjusted basis, the ratio this quarter was 11.5% versus 12.1% last year. The lower ratio is due in part to the inclusion of the Jean Coutu, which is partly offset by increasing costs namely the minimum wage on material, as well as transportation costs.

Also know that the expense ratio last year was reduced by about 20 basis points due to real estate gains net of IFRS impairment. Adjusted EBITDA stood at 313.2 million up 82 million or 35.5% and represented 7.9% of sales.

Excluding Jean Coutu's EBITDA of 86.9 million, adjusted EBITDA amounted to 226.2 million a 2.1% decrease versus last year's quarter. However, if we are factoring the impact of the minimum wage increase in Ontario, as well as the net gains of real estate last year the EBITDA excluding Jean Coutu is higher by about 10 million on a year-over-year basis.

We are pleased with the performance of our legacy food business. The income tax expense for the quarter was 66.7 million, representing an effective tax rate of 24.7%.

Last year's effective tax rate of 14.7%, as a result of the gains on the disposal and reevaluation of our investment in Couche-Tard. Net earnings and net earnings per share for the quarter totaled 203.1 million and $0.39 respectively versus 1.3 billion and $5.67 per share in Q1 last year where we record large gains on the total of our investment in Couche-Tard.

On an adjusted basis, net earnings were 172.2 million, compared with 126.7 last year that's up 35.9%. Adjusted EPS were $0.67 versus $0.55 last year an increase of 21.8%.

You will notice on the cash flow statement of the cash generated by operating activities was negative. This is due to a one-time payment of about 200 million in income taxes due on the gain on sale or share in Couche-Tard.

Finally, yesterday, the Board of Directors approved a quarterly dividend of $0.20 per share, representing an increase of 11.1% versus last year's quarterly dividend of $0.18. This represents the 25th consecutive year where we raise our dividend.

That's it for me, I will now turn over to Eric.

Thank you, François, and good afternoon everyone. We are very pleased with our first quarter results building on the good momentum we saw at the end of fiscal '18, with strong same-store sales, and adjusted earnings growth.

Food same-store sales grew by 3.2%, fueled by higher customer counts, and basket size growth. Our food basket inflation rose to 1.8% from 0.8% in the previous quarter, driven mostly by produce.

Effective merchandising and good store execution allowed us to perform well across all the banners. The Competitive environment was very similar to previous quarters with no significant change in consumer behavior.

We are also pleased with our pharmacy same-store sales showing prescription count growth of 2.2% and front of store sales growth of 2%, driven by increases in all core categories. So I would say, overall, a strong sales performance, especially considering that the quarter ended on December 22 this year versus December 23 last year shifting a busy shopping day to the second quarter.

For the quarter CapEx totaled 58 million as we expanded, renovated or remodeled the 10 stores and closed two small stores for a net decrease of 30,000 square feet. We are also investing in technology and automation to improve both productivity and customer experience.

Turning to the Jean Coutu Group, the integration is progressing well. As François said, we achieved 10.7 million of synergies during the quarter, bringing the annual run rate to 28 million.

Private label cross-selling between food and pharmacy has started. Procurement synergies will be finalized in this first year, and we are actively planning the conversion of the retail systems that are doing there and the eventual transfer of operations from the McMahon warehouse to the Coutu warehouse next year.

So we have a lot of work ahead of us and we are confident that we will reach our target of $75 million of synergies after three years. The Ontario DC modernization project is also advancing on schedule.

We are in the final stages of the site plan approval process in Toronto and we will start building this spring. On the e-commerce front, after two years we're pleased with our progress in Québec, although still modest sales are growing and our operating model is getting better every month, we will be launching our model in the GTA in late spring, as planned.

For fiscal 2019, is off to a strong start and our outlook for the rest of the year is positive. We have now cycled the significant labor cost headwinds of the last year we're experiencing more and more, a more normal level of food inflation and our pharmacy integration plan is on track.

We are confident in our strategy and our execution to continue to grow our business and create value for our shareholders. So those are my remarks and will now be happy to take your questions.

I just wanted to ask about the gross margin percentage, and I wanted to specifically focus on the food business. And could you comment to sort of directionally about how that performed and where the pressure is there more of inability or not wanting to pass cost increases to customers or a reflection of sort of increase in promotional activity?

So I'll just take the first part. The gross margin and then legacy food business is up versus last year as François said in his opening statement.

I think from 19.5% to 19.8% this year that's the gross margin excluding Couche. So we feel good about that, and it includes the better synergies, but overall we're pleased with our gross margin.

Okay, and for the food same store sales growth even in the context of higher inflation obviously very great number. Can you just give some color there in terms of the drivers be it channels or regions or were you generally satisfied with how you sort of balanced the tonnage and the gross margin?

We're quite satisfied with the performance of all of our banners across all regions. We don’t give you specifics, but it was broad-based and a very good performance all across.

And then I guess just one last one. No NCIB activity in the quarter but a $0.02 dividend increase.

Can you just give us some background on the criteria for that decision and sort of expectations for how the NCIB plays out going forward?

Well, the dividend increase is nothing new. We have increased our dividend for 25 straight years now.

So we are at the upper limit of our range, but within that limit pro forma basis with the Jean Coutu earnings, feeling good about the dividend increase and I think it reflects our financial picture pretty well. The NCIB was authorized in November.

We had a large tax related payments to make at that time. And the stock was performing pretty nicely in late in the year.

So we didn’t start using it but we will start eventually to use the NCIB. So we are going to continue our mix of returning capital to our shareholders via the NCIB and the dividend.

That's been a model that has worked well for us for a long time and we see no change.

Eric just on the Ontario DC and you said that you expect it to slight plan approval process is still undergoing expected to be complete recently. So can you give us a sense of when you expect that?

And then can you just refresh for me just how big this warehouse is going to be or the DC rather?

Yes, so the FPA process is live as we speak so we are in the final stages with the municipal officials. So I hope to have a positive outcome to do that pretty soon.

It's literally day by day and we are still planning to start as I said in my opening remarks this spring. So that’s still the plan and I'm confident we will be able to respect that plan.

I don’t have the specific size the increases in front of me, Patricia, I'm sorry, but it's too -- we are doing two major projects on-site. So on the east side of the 437 in Dundas, we have our fresh produce center so that’s being expanded to have a larger fresh center for both produce, meat, dairy and deli so that’s going to take place.

And on the west side at the west mall we are going to build a new freezer. So both of these facilities will be fully or partially automated, so it’s a large project as that will take us to 2023 but we anticipate good benefits, more product assortment and certainly more efficiencies, more productivity to better service our stores.

So it’s a large commitment, a large project, a lot of work for our teams. It's going well so far.

And just want to come back to the drug store or the Jean Coutu piece. And if I recall correctly on the last conference call for the last quarter you had indicated that some of the Brunei you know franchises were starting to buy from a product has that picked-has that increased has there been an increased pace of purchase there or more people joining on to the product program.

The answer is yes. So it's progressing gradually store-by-store, pharmacy by pharmacy and pretty much as planned.

So the product team is trying to convince Brunei franchisees to buy from product so, there's been growth in that number as per the plan.

You noted in the opening remarks that the 1.8% inflation was mostly in produce. Can you talk a little bit about what you are seeing in the center of store and whether you are starting to see any pressure there?

We're seeing a bit of inflation in center store, so it varies by category, but overall the center store there is just a bit of inflation it's below the 1.8 that we're reporting for the whole basket. But there's a bit of movement to center store also.

There's a bit of deflation in meat certainly the promotional activity in meat's still very aggressive. Produce as I said is the main driver.

We are now seeing increases like we saw two years ago it's manageable, a lot of it is FX related, some of that is lettuce with an issue in the fall, so shortages that kind of stuff but manageable inflation. So I alluded in my remarks to more normal levels, so in the 2% range for us is the more historical normal number and that's where we are and I think that's positive for the business.

And you noted also you are seeing across all regions across all banners I think last quarter you noted or in last couple of quarters that with the strength of the economy in Quebec you were seeing a bit of a return of traffic to the I guess the conventional would you still say that's the case?

As I said all banners are a good performance, so we are pleased with that. The economy remains strong, our Metro banner in both markets is doing well I'm pleased with that and the discount per customer is there.

So our multi-format, multivendor approach we think serves us well in this market and we did appeal to a broad base of customers and very happy to report that we're pleased with the performance across banners, across divisions.

Thank you. And then just one final if I may.

You also noted that you are starting to see some cross migration of private label and kind of wondering what the consumer reaction has been, what the uptake has been and also what reactions has been on part of the PJC or pharmacist or the in pharmacy associate?

It is still very early days not all categories are done so we're introducing it gradually category-by-category within the Jean Coutu stores were talking about your selection and it just the goals products examples cookies are done and some layouts like that are done, so I wouldn’t say that it had a material effect on their sales, but it's I think a positive sign of the cross selling opportunities that we will have over the next little while. So that's one outcome and then personnel is Coutu's private label brand for HABA and OTC that's gradually coming into the natural ingredient networks as we take out the selection wide into those categories.

So it’s a gradual process and that’s being done in orderly way with no really significant noticeable change in our sales so far.

Thanks for that color on the gross margin on the food side, but when I do the quick math assuming haven't done it too quickly, it seems like SG&A was up at least 8% in the food business on a year-over-year basis. Can you explain some of the key drivers of that?

I'll let François take that.

Yes, so Mike its basically minimum wage is a key driver. And last year as we said we had a real estate gain net of our first impairment about 5.5.

So when you take minimum wage and that gain is about 50 million swing from one quarter to the other that explains most of the variance in SG&A.

And I guess, going forward the minimum wage impact is back to normal.

That's right. So this is we're comping by now so that’s why I say we are pleased with the core legacy performance of the business because those are one timers if you will that we are cycling the minimum wage and that real estate gain was, we don’t adjust for real estate gains in IFRS because we typically have some throughout the year but it was an amount that was worth pointing it out.

So that’s to your point that’s exactly it.

Even if I take those out it's still about 4% growth rate remaining.

That's right. It's about 4.2% increase in EBITDA.

[Technical Difficulty] so it still seems to be growing at a deepened pace even if you back out that 15 million.

Yes, but we have the consumer business that’s incorporated as well even though there SG&A as a percentage is lower than the dollars increase.

Yes, well I excluded that but -- maybe I can follow up offline to see if I'm doing…

No, I'll give you -- that’s before excluding you are talking about let's say a 50 million swing from one year to the other just for those two items. And of course the transportation cost which we absorb and that’s fine that’s part of our numbers.

But these are two main ones.

Are you able to quantify all the impact of pulling romaine and other lettuce from the shelves? Is that something that has a meaningful impact?

Or is the people just buy other product other vegetables?

Well, we can measure the impact on the shrink and on the losses of the romaine lettuce that we had to throw out. So that was about a million bucks all in for the company.

What are the lost sales and lost margins that’s a number I can't really give, I don’t have it and it's hard to know. They switch to other lettuces and those few weeks lettuce consumption was down generally because they switch to other vegetables and stuff maybe it's hard to measure.

And just to follow up on the DC question. 2023 are they both opening in 2023?

One starts at the end of 2020 the first stage of the first one, and then we go back to other building in 2022 and then back phase two of the -- the other one is in 2023 so its staggered over a period starting in late 2020.

And how do you describe like the returns you are expecting on this? I know the other DCs are all there and they were kind of hidden capacity from whatever call.

Is this more -- is this a project to expand the capacity versus to drive better margins and better cost performance?

It's both, our business is growing we want to keep growing and to do so we need more capacity in some of our centers. So that's a key driver think that's a key driver and also as I said earlier, productivity is also a key driver.

Therefore, that's why we took on the automation project it's a pretty sizable investment that in our analysis shows that we're going to get decent returns above at or above hurdle rates that we're used to have so truly we look for return on our investment and at the same time, we are needing to add some capacity. So it's both, as we build our business cases over a long period you look at you do it as conventional, you do it automated and you look at the benefits versus the investments and that's how you -- that's how we make sure that we earn that return.

This is last question, another not as big but. Can you kind of compare and contrast the performance of both the primary mass on and mix trash as you've added them into your stores.

So forgetting about the standalone businesses how are they performing in your stores?

So for competitive reasons we don’t want to give too much color on that but you know the reasons we made those deals their acquisitions was to for the most part, improve our Metro stores, our food stores on the fresh side, and we're happy with those results so far and we see more opportunity going forward. So it's a work in progress, but clearly our bakeries have stepped-up in the province of Québec, especially we have strong group in Ontario already, even with Outaouais and Moisson.

But it was a good step for us on the bakery side. The meal kit business is quite small, it works on its own subscription-based as you know and we were introducing it more and more into our Metro stores, and the sales are modest and for sure, it's something that you have to invest in we get the customer to buy in so we're on that and will have to stay tuned.

Just wanted to go back to the RX contract sales number of 0.8%, would that number have been consistent with what you saw, since you acquired the Jean Coutu business and I assume that's both Brunei and Jean Coutu merged number?

Yes, it is a merge it's a combination of the drugstore business. I would say the numbers are consistent with the performance Coutu has been seen for a while.

The timing of our quarter end is different from what they were used to so our script count to the first of the month is an important date. This quarter ended on 22 December as I said earlier, so there is a bit as the timing on that.

But overall over a longer period the script count growth has been pretty steady and consistent with our expectations.

And what's the outlook for patented drug conversion in your fiscal year?

I'm sorry I didn’t get that?

The outlook for patent to drug conversion to generics. Is there any significant tonnage transitioning from that from branded to generic this year or is it fairly normal year?

I don’t have a specific answer but to my knowledge there is no big drug coming off patent in the short-term, I would have remembered from the business plan but I don't think there are. We can get back to you on this one.

On e-commerce. You talked about the fact the business is small at this juncture obviously but have you seen any ramp-up in consumer interest in transacting that way?

Or is it now generally evolving as you would have expected?

It's ramping up nicely. We are getting good growth.

I don’t want to say much more than that. The service is getting word of mouth and trucks are on the road and we are active on the web, so yes, the business is growing nicely we are happy with the sales growth.

That’s all I mean to say.

Can you comment it all about the competitive environment in terms of the pass through the consumer of shipping and handling like I know Walmart has changed its stance on that recently and of course of with the Instacart offering there is different mechanic definition there in terms of annualized versus per occasion? Does that feel steady state?

Or do you see that evolving over the course of time?

Well, as I said earlier, we think our model is well understood by the consumers. We charge a fixed fee for assembling the order and fixed fee for delivery, which is clearly below cost.

So we are comfortable with our model, our pricing model and our fee model. And again as I said sales are growing nicely so I think customers are okay with it, are agree with the model.

And we are monitoring that closely. We monitor competition all the time everywhere so we are very aware of what's being done out there, but we're comfortable with our model.

Eric I'm just looking on the pharmacy side of the business the front of store comp of 2%. I'm just looking back right now through Jean Coutu and there have been quarters where they comp less than that but certainly a large number of quarters with they comp stronger than that.

I'm just wondering how you felt about the front store sales? Were you satisfied and was that consistent with your plan?

We are okay with the number, and it's pretty much on plan again, the quarter end date of December 22 had a pretty big impact on the drugstore side December 23 on front end is a big day. So that shifted -- we are not making excuses I'll just tell you that we are comfortable with the number and if you consider that day the front end same store sales would be clearly higher and we are comfortable with the number.

And that’s just the other thing I wanted to ask you about this sale of your interest in Colby. Could you -- just give some backdrop to that business of how you acquired it and why you're selling your interest?

François will take that.

So it was already a part of the Jean Coutu Group. This was an investment they have made.

This is a high end operator of data centers. They had minority position in that business and the business decide to divest.

And we basically followed so it was not noncore. It was a nice cash inflow and nice gain.

But…the origin of that investment was that the old Coutu warehouse was sold to Colo-D as a data center. And Colo-D was a small business at that time, two years ago not that long ago.

So it was a great investment. And again we are happy with the outcome.

And just on the gross margin I just want to validate my math here. If you take the 30 bps increase in the Metro legacy gross margin year-over-year does that mean that the PJC gross margin was down about 230 bps-ish I know it's not perfect but we try to prorate as best as possible?

Well the Coutu business was our lower 18% gross margin that's why the blend has give the number we are getting now. But if Metro was up legacy you are seeing in PJC was down versus preternatural.

So my answer is to that is I don't think so, although we can do the math off-line. But no.

Okay, thanks for that. When you acquired PJC when you acquired pre I guess your time management was talking about efficiencies and in the Reliance facility.

Just wondering if those efficiencies you are starting to see them come through and you are starting to see some benefits there just relate to how that DC is operating?

Yes there are efficiency gains and productivity improvements are steady ongoing at Coutu since we close the transaction. So I think they had basically corrected the ship before and before closing even before the announcement they had wrapped-up productivity pretty nicely and it still and it is still improving albeit at a slower pace than it did they had caught up already.

So yes we're this thing is natural were always looking for improved productivity and in our DC than in our stores so Coutu makes no exception and we will see some more and we are seeing a bit more and we anticipated and more going forward.

As part of our due diligence there was a plan to increase productivity no cost per case etcetera and it's something that we have been tracking it's been trucking well and plan.

So most of that benefit has been captured I mean a little bit less than in the next leg comes when you transfer McMahon over this is that the way to think about it?

Yes, most of it has been captured as you say, but that doesn't mean there is not room for improvement and with the McMahon transfer eventual transfer that facility will be become an even more productive.

And just changing as the topic here on as this is a longer-term question it might be a little bit tricky to answer but as Metro increase in the economy it's ecommerce in digital you know a bit it's smaller yet but it's growing rapidly, so as it accommodates in a bigger way and conceivably pressures margins for the entity should we expect that to weigh on EBITDA margin over the longer term, or does management have plans in place when that business gets bigger to offset the pressure perhaps less store retrofits or proceed adjustments occur?

We are in the investment mode and the test and learn mode now. So yes it's diluted a bit to our legacy margins but as the business grows and as the operating model becomes more efficient our plan is to have a profitable business but we'll just have to see how it evolves what size it gets and how -- what's the operating model so again very much early days and learning and improving every month.

So our plan is to grow the business not shrink the business. And we still think brick and mortar will be the vast majority of our business and that we can achieve the margins that we are known for on that side.

On the e-com side we will try to manage as best we can to respect our profitability model. We have to look at it all in the whole company who funds the e-com bricks and mortar and I think we can continue all in to deliver growth to our shareholders.

And just on the testing phase. Are you content with the way you're testing right now having your own delivery network to deliver the food or could you investigate a third party as well?

Well, again without getting into everything we own a fleet of trucks that delivers e-commerce but we deal with the third party company that does the driving. E-commerce is a new business and it's attracting new customers.

So it's not necessarily -- you are not just losing your existing customers from your stores to the transfer to e-commerce some are but as we develop e-commerce business we are getting new customers. So that's why we think that we can maintain our profitability all in overall.

I was wondering if you could speak to the network development within the pharmacy stores in the quarter. And what your plans are for the year?

So the CapEx or the network development on pharmacy has been mostly renovations in the last quarter. So we are really looking at optimizing the Brunei and Coutu networks.

So our real estate team is actively looking at that. We are not looking to add that many stores and certainly not in the short-term, but optimizing the networks.

So the investments at retail and pharmacy have been mostly just renovations. I would say there were about 10 renovations done over the course of the -- more major renovations done in the quarter a lot of smaller projects to incorporate new layouts and categories and cosmetics and 30 or 40 of those but significant renovations about 10 in the quarter.

And the plan is to do between 30 and 40 renovations a year.

I'm sorry I might have missed it, did you speak to traffic and basket and food and pharmacy?

I did allude to traffic higher customer accounts and higher basket growth in our stores and higher prescription count growth in our drugstores. So, yes, we got tonnage growth for sure.

And then just in terms of asset sales I know Jean Coutu has some minority positions in a number of other sort of affiliated businesses I guess. Are you looking at any other assets sales over the next year?

Or is that be pretty much concluded with the next five pharmacies that sell?

So the next five pharmacies are basically sold, we will report that with our second quarter. Four of them have transferred to the buyer the last one will transfer shortly.

So those are done and then other assets sales are not that many other assets in the Coutu business there is mid-SKUs that I can think of off hand and we have no plans to divest those, that through. So we're pretty much done.

Yes, thanks, Jessa. Thank you for joining us today.

And our next call for the second quarter will be held on April 16, 2019. Thank you.