METRO INC. increased net earnings in the third quarter of 2008 and launches the METRO banner in Ontario



    
    -------------------------------------------------------------------------
    2008 THIRD QUARTER HIGHLIGHTS

    - Sales of $3,370.0 million, up 0.9%
    - Net earnings of $92.6 million, up 3.7%
    - Fully diluted net earnings per share of $0.82, up 6.5%
    - Declared dividend of $0.125 per share, up 8.7%
    - Investment of $200 million to launch the Metro banner in Ontario
    -------------------------------------------------------------------------
    

    MONTREAL, Aug. 7 /CNW Telbec/ - METRO INC. realized net earnings of
$92.6 million in the third quarter of 2008, compared with $89.3 million for
the corresponding period of the previous fiscal year, an increase of 3.7%, and
fully diluted net earnings per share of $0.82 compared with $0.77 last year,
an increase of 6.5%.
    The Company's 2008 third quarter sales of $3,370.0 million were up 0.9%
over the $3,341.0 million for the corresponding quarter last year. Excluding
decreased sales of tobacco products, sales were up 1.5% over last year.
    "We are pleased to have resumed net earnings growth in the third quarter
of 2008. We resolved the issues associated with our new information systems in
Ontario and achieved good performance in our Québec operations. We are also
very excited to announce that we will invest $200 million to launch the Metro
name in Ontario creating the largest grocery banner in the province. Starting
next September, we will convert our five conventional banners over a 15-month
period to the Metro name. Following this conversion, the Metro banner will be
a 376-store strong national network that will contribute to the Company's
future growth. As part of this change, we are also unveiling METRO INC's new
signature which matches the new Metro banner logo," stated Eric R. La Flèche,
President and Chief Executive Officer.

    SALES

    Third quarter sales reached $3,370.0 million, up 0.9% compared to
$3,341.0 million last year. Excluding decreased sales of tobacco products,
2008 third quarter sales were up 1.5%. Third quarter same-store sales
increased by 0.5%.
    Sales for the first 40 weeks of 2008 reached $8,249.2 million, up 0.5%
compared to sales of $8,212.2 million for the corresponding period of fiscal
2007. Excluding decreased sales of tobacco products, sales increased by 1.0%.

    EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
    (EBITDA)(1)

    Earnings before interest, taxes, depreciation and amortization(1) for the
third quarter of 2008 were $207.0 million, up 5.7% from $195.9 million for the
same quarter last year. Third quarter EBITDA(1) represented 6.1% of sales
versus 5.9% last year. Excluding A&P Canada acquisition-related integration
and rationalization costs of $5.4 million in 2007, adjusted EBITDA(1) for the
third quarter of 2007 represented 6.0% of sales.
    Our third quarter equity earnings from our investment in Alimentation
Couche-Tard were $1.7 million in 2008 compared to $3.9 million in 2007.
Alimentation Couche-Tard's 2008 fourth quarter results were affected by lower
motor fuel gross margins in the U.S., higher electronic payment mode expenses
and an economic slowdown in the U.S. South.
    Excluding non-recurring items as well as equity earnings from our
investment in Alimentation Couche-Tard, our adjusted 2008 third quarter
EBITDA(1) was $205.3 million or 6.1% of sales versus $197.4 million or 5.9% of
sales for the corresponding quarter of the previous fiscal year.
    In the third quarter of 2008, we resolved the issues associated with our
information systems in Ontario and our Québec operations continued to perform
well, allowing a return to EBITDA(1) growth.
    EBITDA(1) for the first 40 weeks of 2008 was $479.3 million or 5.8% of
sales compared to $490.6 million or 6.0% of sales for the same period last
year.
    Excluding A&P acquisition-related integration and rationalization costs
of $16.4 million, adjusted EBITDA(1) for the 2007 40-week period was 6.2% of
sales.
    Equity earnings from our investment in Alimentation Couche-Tard were
$12.6 million for the 40-week period in 2008 compared to $17.7 million in
2007. Excluding non-recurring items as well as equity earnings from our
investment in Alimentation Couche-Tard, EBITDA(1) for the first 40 weeks of
2008 was $466.7 million or 5.7% of sales versus $489.3 million or 6.0% of
sales for the corresponding period last year.
    The decrease in EBITDA(1) excluding equity earnings from our investment
in Alimentation Couche-Tard for the 40-week period is due to our results for
the first two quarters. Excluding equity earnings from our investment in
Alimentation Couche-Tard, EBITDA(1) for the first two quarters as a percentage
of sales were lower than the corresponding quarters in 2007. A more intense
competitive environment in Ontario as well as the learning and training curves
associated with our new Ontario information systems and a new Food Services
warehouse in Québec affected our gross margins and costs.

    
    EBITDA(1) Adjustments
    (Millions of dollars, unless otherwise indicated)

                                      16 weeks / Fiscal Year

                                2008                          2007
    -------------------------------------------------------------------------
                    EBITDA     Sales    EBITDA/   EBITDA     Sales    EBITDA/
                                         Sales                         Sales
                                            (%)                           (%)
    -------------------------------------------------------------------------
    EBITDA           207.0   3,370.0       6.1     195.9   3,341.0       5.9
    Integration and
     rationalization
     costs               -         -         -       5.4         -         -
    -------------------------------------------------------------------------
    Adjusted EBITDA  207.0   3,370.0       6.1     201.3   3,341.0       6.0
    Share of
     earnings from
     our investment
     in Alimentation
     Couche-Tard      (1.7)        -         -      (3.9)        -         -
    -------------------------------------------------------------------------
    Adjusted EBITDA
     excluding share
     of earnings     205.3   3,370.0       6.1     197.4   3,341.0       5.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                      40 weeks / Fiscal Year

                                2008                          2007
    -------------------------------------------------------------------------
                    EBITDA     Sales    EBITDA/   EBITDA     Sales    EBITDA/
                                         Sales                         Sales
                                            (%)                           (%)
    -------------------------------------------------------------------------
    EBITDA           479.3   8,249.2       5.8     490.6   8,212.2       6.0
    Integration and
     rationalization
     costs               -         -         -      16.4         -         -
    -------------------------------------------------------------------------
    Adjusted EBITDA  479.3   8,249.2       5.8     507.0   8,212.2       6.2
    Share of
     earnings from
     our investment
     in Alimentation
     Couche-Tard     (12.6)        -         -     (17.7)        -         -
    -------------------------------------------------------------------------
    Adjusted EBITDA
     excluding share
     of earnings     466.7   8,249.2       5.7     489.3   8,212.2       6.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    INTEREST, DEPRECIATION AND AMORTIZATION

    Total depreciation and amortization expenses for the third quarter and
first 40 weeks of fiscal 2008 amounted to $55.2 million and $134.9 million
respectively, compared with $51.1 million and $126.0 million for the same
periods last year. The 2008 third quarter interest expenses totalled
$17.5 million versus $19.2 million last year, while interest expenses for the
40-week period totalled $46.0 million versus $47.6 million last year. Interest
rates for the first 40 weeks of 2008 averaged 5.3% versus 5.4% for the
corresponding period last year.

    INCOME TAXES

    The 2008 third quarter and 40-week period income tax expenses of
$41.7 million and $79.9 million represent effective tax rates of 31.0% and
26.8% respectively. In 2007, the third quarter and 40-week period income tax
expenses were $39.2 million and $99.1 million respectively and represented
effective tax rates of 31.2% and 31.3% respectively. In the first quarter of
2008, a decrease in our income tax expense of $11.4 million was recorded after
the Canadian government completed milestones in the approval process for its
Economic Statement, reducing future general corporate income tax rates.
    In the third quarter of 2007, an approval milestone was met with regard to
the federal budget providing, among other things, for a decrease of 0.5% in
the large business tax rate effective January 1, 2011. This decrease in the
federal tax rate reduced our future tax liabilities by $1.8 million as well as
our third quarter income tax expense by the same amount. Excluding these
decreases in our 2008 and 2007 tax expenses, the effective tax rates for the
2008 40-week period, the third quarter of 2007, and the first 40 weeks of 2007
were 30.6%, 32.7% and 31.9% respectively.

    NET EARNINGS

    The 2008 third quarter net earnings were $92.6 million compared to
$89.3 million for the corresponding quarter of fiscal 2007, an increase of
3.7%. Fully diluted net earnings per share rose 6.5% to $0.82 from $0.77 last
year. In the third quarter of 2007, we had A&P Canada acquisition-related
integration and rationalization costs of $5.4 million before taxes and a
$1.8 million decrease in our income tax expense. Excluding these non-recurring
items, adjusted net earnings(1) for the third quarter of 2007 were
$91.1 million, and the adjusted fully diluted net earnings per share(1) were
$0.78. Compared to the adjusted net earnings(1) and adjusted fully diluted net
earnings per share(1) for the third quarter of 2007, 2008 third quarter net
earnings and fully diluted net earnings per share were up 1.6% and 5.1%
respectively.
    Net earnings for the first 40 weeks of 2008 reached $220.4 million versus
$219.0 million last year, up 0.6%. Excluding A&P Canada acquisition-related
integration and rationalization costs of $16.4 million before taxes in 2007 as
well as income tax expense decreases of $11.4 million in 2008 and $1.8 million
in 2007, adjusted net earnings(1) for the 2008 40-week period were
$209.0 million, down 8.4% from the $228.2 million for the corresponding period
of 2007. Adjusted fully diluted net earnings per share(1) were $1.84, down
6.1% from $1.96 last year.

    Net Earnings Adjustments
    (Millions of dollars, unless otherwise indicated)

                           16 weeks / Fiscal Year
                 -----------------------------------------
                          2008                2007               Change
                 ------------------------------------------------------------
                               Fully               Fully               Fully
                             diluted             diluted       Net   diluted
                       Net       EPS       Net       EPS  earnings       EPS
                  earnings  (Dollars) earnings  (Dollars)       (%)       (%)
    -------------------------------------------------------------------------
    Net earnings      92.6      0.82      89.3      0.77       3.7       6.5
    Integration
     and rationali-
     zation costs
     after taxes         -         -       3.6      0.03
    Decrease in tax
     expense             -         -      (1.8)    (0.02)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)      92.6      0.82      91.1      0.78       1.6       5.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           40 weeks / Fiscal Year
                 -----------------------------------------
                          2008                2007               Change
                 ------------------------------------------------------------
                               Fully               Fully               Fully
                             diluted             diluted       Net   diluted
                       Net       EPS       Net       EPS  earnings       EPS
                  earnings  (Dollars) earnings  (Dollars)       (%)       (%)
    -------------------------------------------------------------------------
    Net earnings     220.4      1.94     219.0      1.88       0.6       3.2
    Integration
     and rationali-
     zation costs
     after taxes         -         -      11.0      0.10
    Decrease in tax
     expense         (11.4)    (0.10)     (1.8)    (0.02)
    Adjusted net
     earnings(1)     209.0      1.84     228.2      1.96      (8.4)     (6.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Quarterly Highlights
    (Millions of dollars,
     unless otherwise indicated)
                                    2008        2007        2006      Change
                               (52 weeks)  (52 weeks)  (53 weeks)         (%)
    -------------------------------------------------------------------------
    Sales
      Q3                         3,370.0     3,341.0           -         0.9
      Q2                         2,372.4     2,356.2           -         0.7
      Q1                         2,506.8     2,515.0           -        (0.3)
      Q4                               -     2,432.4     2,673.5        (9.0)
    -------------------------------------------------------------------------
    Net earnings
      Q3                            92.6        89.3           -         3.7
      Q2                            58.1        61.8           -        (6.0)
      Q1                            69.7        67.9           -         2.7
      Q4                               -        57.6        78.9       (27.0)
    -------------------------------------------------------------------------
    Adjusted net earnings(1)
      Q3                            92.6        91.1           -         1.6
      Q2                            58.1        65.5           -       (11.3)
      Q1                            58.3        71.6           -       (18.6)
      Q4                               -        66.8        71.0        (5.9)
    -------------------------------------------------------------------------
    Fully diluted net earnings
     per share (Dollars)
      Q3                            0.82        0.77           -         6.5
      Q2                            0.51        0.53           -        (3.8)
      Q1                            0.61        0.58           -         5.2
      Q4                               -        0.49        0.68       (27.9)
    -------------------------------------------------------------------------
    Adjusted fully diluted net
     earnings per share(1)
     (Dollars)
      Q3                            0.82        0.78           -         5.1
      Q2                            0.51        0.56           -        (8.9)
      Q1                            0.51        0.62           -       (17.7)
      Q4                               -        0.57        0.61        (6.6)
    -------------------------------------------------------------------------

    Sales for the first three quarters of 2008 versus those for 2007 were
affected by strong competition in Ontario. Excluding decreased sales of
tobacco products, 2008 first quarter sales were up 0.3%, second quarter sales
were up 1.2%, and third quarter sales were up 1.5%.
    Sales in the fourth quarter of 2007 versus those for the corresponding
quarter of 2006 were affected by decreased sales of tobacco products, lost
sales due to the disposal, in the fourth quarter of 2006, of our interest in a
grocery wholesaler, and the impact of the 53rd week in 2006. Excluding these
items, 2007 fourth quarter sales were up 0.7% over 2006.
    First quarter net earnings and fully diluted net earnings per share for
2008 were up 2.7% and 5.2% respectively over those for 2007. Excluding the
income tax expense decrease of $11.4 million in 2008 and A&P Canada
acquisition-related integration and rationalization costs of $5.6 million
before taxes in 2007, adjusted net earnings(1) and adjusted fully diluted net
earnings per share(1) of 2008 were down 18.6% and 17.7% respectively.
    Second quarter net earnings and fully diluted net earnings per share were
down 6.0% and 3.8% respectively from 2007. Excluding A&P acquisition-related
integration and rationalization costs before taxes of $5.4 million in the
second quarter of 2007, net earnings and fully diluted net earnings per share
for the second quarter of 2008 were down 11.3% and 8.9% respectively compared
to the adjusted net earnings(1) and adjusted fully diluted net earnings
per share(1) for the second quarter of 2007.
    The drop in profitability in the first two quarters of 2008 compared with
the same quarters of 2007 stems from a more intensely competitive environment
in Ontario and the issues associated with our new Ontario information systems
and Québec Food Services warehouse.
    Third quarter net earnings and fully diluted net earnings per share were
up 3.7% and 6.5% respectively from 2007. Excluding A&P acquisition-related
integration and rationalization costs before taxes of $5.4 million and income
tax expense reduction of $1.8 million resulting from reduction in tax rates
applicable to large corporation announced by federal government in the third
quarter of 2007, net earnings and fully diluted net earnings per share for the
third quarter of 2008 were up 1.6% and 5.1% respectively compared to the
adjusted net earnings(1) and adjusted fully diluted net earnings per share(1)
for the third quarter of 2007. The successful resolution of the issues
associated with our new information systems in Ontario and the good
performance of our Québec operations contributed to this earnings growth.
    Fourth quarter net earnings and fully diluted net earnings per share in
2007 and 2006 were impacted by, among other things, A&P acquisition-related
integration and rationalization costs, a gain on disposal of an investment,
and income tax expense variations resulting from fluctuations in tax rates
applicable to large corporations announced by both governments.
    Excluding these non-recurring items and the impact of the 53rd week in
2006, adjusted net earnings(1) and adjusted fully diluted net earnings per
share(1) for the fourth quarter of 2007 were up 3.4% and 3.6% respectively
over those for the corresponding period of 2006.

                               2008                     2007            2006
    -------------------------------------------------------------------------
    (Millions of
     dollars)            Q1     Q2     Q3     Q1     Q2     Q3     Q4     Q4
    -------------------------------------------------------------------------
    Net earnings       69.7   58.1   92.6   67.9   61.8   89.3   57.6   78.9

    Integration and
     rationalization
     costs after taxes    -      -      -    3.7    3.7    3.6    9.2    2.1

    Gain on disposal
     of investment
     after taxes          -      -      -      -      -      -      -   (8.6)

    Decrease in tax
     expense          (11.4)     -      -      -      -   (1.8)     -   (1.4)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)       58.3   58.1   92.6   71.6   65.5   91.1   66.8   71.0

    53rd week             -      -      -      -      -      -      -   (6.4)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)
     excluding
     53rd week         58.3   58.1   92.6   71.6   65.5   91.1   66.8   64.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                               2008                     2007            2006
    -------------------------------------------------------------------------
    (Dollars and per
     share)              Q1     Q2     Q3     Q1     Q2     Q3     Q4     Q4
    -------------------------------------------------------------------------
    Fully diluted net
     earnings          0.61   0.51   0.82   0.58   0.53   0.77   0.49   0.68

    Integration and
     rationalization
     costs after taxes    -      -      -   0.04   0.03   0.03   0.08   0.02

    Gain on disposal
     of investment
     after taxes          -      -      -      -      -      -      -  (0.07)

    Decrease in tax
     expense          (0.10)     -      -      -      -  (0.02)     -  (0.02)
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings(1)       0.51   0.51   0.82   0.62   0.56   0.78   0.57   0.61

    53rd week             -      -      -      -      -      -      -  (0.06)
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings(1)
     excluding
     53rd week         0.51   0.51   0.82   0.62   0.56   0.78   0.57   0.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Position

    OPERATING ACTIVITIES

    Operating activities generated cash flows of $134.4 million in the
third quarter and $264.7 million over the first 40 weeks of 2008, compared to
$152.5 million and $318.5 million respectively in the corresponding periods of
fiscal 2007. The decrease in third quarter cash flows in 2008 compared to 2007
is due mainly to a net change in non-cash items. The decrease in 40-week
period cash flows compared to those for 2007 is due mainly to a change in
future income taxes and a net change in non-cash items.

    INVESTING ACTIVITIES

    Investing activities required outflows of $39.6 million in the third
quarter and $115.9 million in the first 40 weeks of 2008 versus $67.3 million
in the third quarter of 2007 and $188.3 million in the first 40 weeks of 2007.
These decreases are due primarily to reduced acquisition of fixed assets.
    During the first 40 weeks of 2008, the Company and the retailers invested
$164.8 million in our retail network, for a gross expansion of 292,000 square
feet or 1.6%, and a net expansion of 163,000 square feet or 0.9%. Major
renovations and expansions of 20 stores were completed, and 7 new stores were
opened.

    FINANCING ACTIVITIES

    Financing activities required outflows of $35.9 million and $124.6 million
in the third quarter and 40-week period of 2008 versus 2007 third quarter and
40-week outflows of $20.1 million and $48.9 million. The increase in outflows
between the 2008 periods and the 2007 periods is attributable mainly to the
redemption of Class A Subordinate Shares in the amounts of $29.0 million and
$80.3 million in the third quarter and 40-week period of 2008, versus
redemption in the amount of $0.5 million for the third quarter and 40-week
period of 2007.

    FINANCIAL POSITION

    Our financial position at the end of the third quarter of 2008 was very
solid. We had an unused approved $400.0 million line of credit. Our long-term
debt corresponded to 33.8% of the combined total of long-term debt and
shareholders' equity (long-term debt/total capital).

    In the third quarter, the main elements of our long-term debt were as
follows:

                         Interest Rate           Balance            Maturity
                                               (Millions
                                              of dollars)
    -------------------------------------------------------------------------
    Credit Facility A    Rates fluctuate with
                         changes in bankers'
                         acceptance rates          394.5     August 15, 2012

    Medium-term
     Series A notes      4.98% fixed rate          200.0    October 15, 2015

    Medium-term
     Series B notes      5.97% fixed rate          400.0    October 15, 2035
    -------------------------------------------------------------------------

    At the end of the quarter, interest rate swap agreements in the notional
amount of $150.0 million were outstanding under Credit Facility A. These
agreements provide for the exchange of variable interest payments for fixed
interest payments according to the following terms:

    Fixed Rate                 Notional Amount                      Maturity
                          (Millions of dollars)
    -------------------------------------------------------------------------
    3.9480%                               50.0             November 23, 2008
    3.9820%                               50.0             December 16, 2009
    4.0425%                               50.0             December 16, 2010
    -------------------------------------------------------------------------

    Giving effect to these swap agreements, at the end of the quarter,
long-term indebtedness comprised $750.0 million at fixed rates ranging from
4.3980% to 5.97% and $244.5 million at variable rates which fluctuate with
changes in bankers' acceptance rates.

    FINANCIAL RATIOS

                                                         As at         As at
                                                        July 5, September 29,
                                                          2008          2007
    -------------------------------------------------------------------------
    Financial structure
      Long-term debt (Millions of $)                   1,038.3       1,038.9
      Shareholders' equity (Millions of $)             2,034.4       1,932.3
      Long-term debt/total capital (%)                    33.8          35.0

                                                   Fiscal 2008   Fiscal 2007
                                                     (40 weeks)    (40 weeks)
                                              -------------------------------
    Results
      EBITDA(1)/Interest (times)                          10.4          10.3
    -------------------------------------------------------------------------

    CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

                                                         As at         As at
                                                        July 5, September 29,
                                                          2008          2007
    -------------------------------------------------------------------------
    Number of Class A Subordinate Shares
     outstanding (Thousands)                           110,876       113,683
    Number of Class B Shares outstanding
     (Thousands)                                           750           804
    Stock options:
      Number outstanding (Thousands)                     3,787         3,738
      Exercise price                                 $15.50 to     $11.80 to
                                                        $39.17        $39.17
      Weighted average exercise price                   $23.19        $22.40
    Number of performance share units:
      Number outstanding (Thousands)                       210           124
      Weighted average maturity                      20 months     22 months
    -------------------------------------------------------------------------

    NORMAL COURSE ISSUER BID PROGRAM

    The Company decided to renew the issuer bid program as an additional
option for using excess funds. Thus, we will be able to decide, in the
shareholders' best interest, to reimburse debt or to repurchase Company
shares. Subject to regulatory approval, the Board of Directors authorized the
Company to repurchase, in the normal course of business, between September 5,
2008 and September 4, 2009, up to 6,000,000 of its Class A Subordinate Shares
representing approximately 5.4% of its issued and outstanding shares at the
close of the Toronto Stock Exchange on August 6, 2008. Repurchases will be
made through the stock exchange at market price and in accordance with its
policies and regulations. The Class A Subordinate Shares so repurchased will
be cancelled. Under the existing normal course issuer bid program covering the
period from September 5, 2007 to July 30, 2008, the Company repurchased
4,000,000 Class A Subordinate shares at an average price of $26.55 per share
for a total of $106.2 million, including, in the first quarter of 2008,
1,500,000 shares repurchased from A&P US at $27.25 per share for a total of
$40.9 million, exercising the option granted the Company by A&P US.

    DIVIDENDS

    On August 6, 2008, the Company's Board of Directors declared a quarterly
dividend of $0.125 per Class A Subordinate Share and Class B Share payable
September 3, 2008, an increase of 8.7% over the dividend for the same quarter
last year. On an annualized basis, this dividend represents more than 20% of
2007 net earnings.

    SHARE TRADING

    METRO INC. share price remained in the range of $21.00 to $35.85 over the
first three quarters of fiscal 2008. During this period, a total of
65.1 million shares were traded on the Toronto Stock Exchange. The closing
price on Friday, July 25, 2008 was $26.78, compared with $35.00 at the end of
fiscal 2007.

    NEW ACCOUNTING POLICIES

    ADOPTED IN 2008

    Capital and Financial Instruments

    In the first quarter of 2008, we adopted three new Handbook sections
issued by the Canadian Institute of Chartered Accountants (CICA):

    Section 1535 "Capital Disclosures" establishes standards for disclosing
information about an entity's capital and how it is managed. These standards
require an entity to disclose the following:

    - its objectives, policies and processes for managing capital;
    - summary quantitative data about what it manages as capital;
    - whether during the period it complied with any externally imposed
      capital requirements to which it is subject;
    - when the entity has not complied with such requirements, the
      consequences of such non-compliance.

    Section 3862 "Financial Instruments - Disclosures" modifies the disclosure
requirements for financial instruments that were included in Section 3861
"Financial Instruments - Disclosure and Presentation". The new standards
require entities to provide disclosures in their financial statements that
enable users to evaluate:

    - the significance of financial instruments for the entity's financial
      position and performance;
    - the nature and extent of risks arising from financial instruments to
      which the entity is exposed during the period and at the balance sheet
      date, and how the entity manages those risks.

    Section 3863 "Financial Instruments - Presentation" carries forward
unchanged the presentation requirements of the old Section 3861 "Financial
Instruments - Disclosure and Presentation".
    The adoption of these guidelines did not have any material effect on our
results, financial position or cash flows.

    RECENTLY ISSUED

    Inventories

    In March 2007, CICA issued the new Section 3031 "Inventories" which will
replace Section 3030 "Inventories". The new Section prescribes measurement of
inventories at the lower of cost and net realizable value. It provides
guidance on the determination of cost, allows the use of the retail method,
prohibits use in the future of the last-in, first-out (LIFO) method, and
requires reversal of previous write-downs when there is a subsequent increase
in the value of inventories. It also requires greater disclosure regarding
inventories and the cost of sales. The new standard will be effective for
interim and annual financial statements relating to fiscal years beginning on
or after January 1, 2008. We do not foresee that this new section's adoption
in our 2009 first quarter will have a significant impact on our results,
financial position or cash flows.

    Goodwill and Intangible Assets

    In February 2008, the CICA issued a new Section 3064 "Goodwill and
Intangible Assets" replacing Section 3062 "Goodwill and Other Intangible
Assets" as well as Section 3450 "Research and Development Costs".
    The new Section 3064 states that upon their initial identification,
intangible assets are to be recognized as assets only if they meet the
definition of an intangible asset and the recognition criteria. Section 3064
also provides further information on the recognition of internally generated
intangible assets (including research and development costs).
    As for subsequent measurement of intangible assets, goodwill, and
disclosure, Section 3064 carries forward the requirements of the old Section
3062.
    The new Section applies to annual and interim financial statements
relating to fiscal years beginning on or after October 1, 2008. We are
currently evaluating the effect of these new standards on our results,
financial position and cash flows.

    International Financial Reporting Standards

    On February 13, 2008, the Accounting Standards Board confirmed the date of
changeover from Canadian generally accepted accounting principles (GAAP) to
International Financial Reporting Standards (IFRS). Canadian publicly
accountable enterprises must adopt IFRS for their interim and annual financial
statements relating to fiscal years beginning on or after January 1, 2011. We
are currently developing our IFRS conversion plan and evaluating the effect of
the new standards on our consolidated financial statements.

    Press Release

    This press release sets out the financial position and consolidated
results of METRO INC. on July 5, 2008. It should be read in conjunction with
the unaudited interim consolidated financial statements and accompanying notes
in this press release along with the consolidated financial statements for the
fiscal year ended September 29, 2007 and related notes and Management's
Discussion and Analysis presented in the Company's 2007 Annual Report. This
press release is based upon information as of July 25, 2008 unless otherwise
stated.

    Forward-looking Statements

    Any statement contained in this press release which does not constitute an
historic fact, may be deemed a projection. Verbs such as "believe", "foresee",
"estimate", "expect" and other similar expressions appearing in this press
release generally indicate projections. These projections do not provide
guarantees as to the future performance of METRO INC. and are subject to
risks, both known and unknown, as well as uncertainties which may cause the
outlook, profitability and actual results of METRO INC. to differ
significantly from the profitability or future results stated or implied in
these projections. The risks identified by METRO INC. are described in the
2007 Annual Report under Risk Management. The forward-looking statements
formulated in this press release are based on a certain number of assumptions
regarding the economy, the market, and the Company's operations and financial
position. One of these assumptions is that current trends in these areas will
persist into the future. These assumptions are reasonable and applicable at
this press release's date of issue only and represent our expectations at said
time. METRO INC. does not intend to update the forward-looking statements that
may be contained herein, except as required by law.

    Non-GAAP Measurements

    In addition to the Canadian generally accepted accounting principles
(GAAP) earnings measurements provided, we have included certain non-GAAP
earnings measurements. These measurements are presented for information
purposes only. They do not have a standardized meaning prescribed by GAAP and
therefore may not be comparable to similar measurements presented by other
public companies.

    Earnings before interest, taxes, depreciation and amortization (EBITDA)

    EBITDA is a measurement of earnings that excludes interest, taxes,
depreciation and amortization. We believe that EBITDA is a measurement
commonly used by readers of financial statements to evaluate a company's
operational cash-generating capacity and ability to discharge its financial
expenses.

    Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net
    earnings per share

    Adjusted EBITDA, adjusted net earnings and adjusted fully diluted net
earnings per share are earnings measurements that exclude non-recurring items.
We believe that presenting earnings without non-recurring items leaves readers
of financial statements better informed as to the current period and
corresponding period's earnings, thus enabling them to better evaluate the
Company's performance and judge its future outlook.

    Press Release on Ontario Supermarket Banner Conversion

    A press release on the banner change in Ontario was issued along with this
press release.

    Conference Call

    Financial analysts and investors are invited to participate in a
conference call on the 2008 third quarter results at 10:00 a.m. EDT on
Thursday, August 7, 2008. To access the conference call, please dial
(416) 644-3414 or (514) 807-8791. The media and public are invited to listen
to the call in real time or delayed time on the METRO INC. Web site at
www.metro.ca.

    -----------------------
    (1) See section "Non-GAAP Measurements".


    Consolidated Statements of Earnings
    Periods ended July 5, 2008 and July 7, 2007
    (Unaudited) (Millions of dollars, except for earnings per share)


                                       16 weeks                 40 weeks
                                      Fiscal Year              Fiscal Year
                              -----------             -----------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales                      $ 3,370.0   $ 3,341.0   $ 8,249.2   $ 8,212.2
    Cost of sales and
     operating expenses          3,164.7     3,143.6     7,782.5     7,722.9
    Share of earnings in a
     public company subject
     to significant influence       (1.7)       (3.9)      (12.6)      (17.7)
    Integration and
     rationalization costs
     (note 3)                          -         5.4           -        16.4
    -------------------------------------------------------------------------
    Earnings before interest,
     taxes, depreciation and
     amortization                  207.0       195.9       479.3       490.6
    Depreciation and
     amortization                   55.2        51.1       134.9       126.0
    -------------------------------------------------------------------------
    Operating income               151.8       144.8       344.4       364.6
    Interest, net
      Short term                       -        (0.7)        0.1        (2.0)
      Long term                     17.5        19.9        45.9        49.6
    -------------------------------------------------------------------------
                                    17.5        19.2        46.0        47.6
    -------------------------------------------------------------------------
    Earnings before income taxes   134.3       125.6       298.4       317.0
    Income taxes (note 5)           41.7        39.2        79.9        99.1
    -------------------------------------------------------------------------
    Earnings before minority
     interest                       92.6        86.4       218.5       217.9
    Minority interest                  -        (2.9)       (1.9)       (1.1)
    -------------------------------------------------------------------------
    Net earnings               $    92.6   $    89.3   $   220.4   $   219.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     (note 6)
    Basic                      $    0.82   $    0.77   $    1.95   $    1.90
    Fully diluted              $    0.82   $    0.77   $    1.94   $    1.88
    -------------------------------------------------------------------------
    See accompanying notes
                              -----------             -----------

    Consolidated Balance Sheets
    (Unaudited) (Millions of dollars)
                                                      -----------
                                                           As at       As at
                                                            July   September
                                                         5, 2008    29, 2007
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash and cash equivalents                          $   124.7   $   100.5
    Accounts receivable                                    320.2       327.8
    Inventories                                            578.9       588.2
    Prepaid expenses                                        22.5        12.1
    Future income taxes                                     19.1        26.1
    -------------------------------------------------------------------------
                                                         1,065.4     1,054.7
    Investments and other assets                           162.6       151.0
    Fixed assets                                         1,182.2     1,202.8
    Intangible assets                                      340.3       342.1
    Goodwill                                             1,491.0     1,490.1
    Accrued benefit assets                                  33.2        33.2
    -------------------------------------------------------------------------
                                                       $ 4,274.7   $ 4,273.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank loans                                         $     0.6   $     0.1
    Accounts payable                                       981.9     1,043.6
    Income taxes payable                                     3.0        20.3
    Current portion of long-term debt                        3.9         5.1
    -------------------------------------------------------------------------
                                                           989.4     1,069.1
    Long-term debt                                       1,038.3     1,038.9
    Accrued benefit obligations                             55.8        54.9
    Future income taxes                                    126.4       139.0
    Other long-term liabilities                             27.5        33.7
    Minority interest                                        2.9         6.0
    -------------------------------------------------------------------------
                                                         2,240.3     2,341.6
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 7)                                 698.8       714.8
    Contributed surplus                                      3.9         2.0
    Retained earnings                                    1,332.5     1,214.3
    Accumulated other comprehensive income
     (notes 2 and 8)                                        (0.8)        1.2
    -------------------------------------------------------------------------
                                                         2,034.4     1,932.3
    -------------------------------------------------------------------------
                                                       $ 4,274.7   $ 4,273.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes
                                                      -----------


    Consolidated Statements of Cash Flows
    Periods ended July 5, 2008 and July 7, 2007
    (Unaudited) (Millions of dollars)

                                        16 weeks               40 weeks
                                       Fiscal Year            Fiscal Year
                              -----------             -----------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating activities
    Net earnings               $    92.6   $    89.3   $   220.4   $   219.0
    Non-cash items
      Integration and
       rationalization costs
       (note 3)                        -        (1.7)          -         2.5
      Share of earnings in a
       public company subject
       to significant influence     (1.7)       (3.9)      (12.6)      (17.7)
      Depreciation and
       amortization                 55.2        51.1       134.9       126.0
      Amortization of deferred
       financing costs               0.6         0.6         1.6         1.6
      (Gain) Loss on disposal
       and write-off of fixed
       and intangible assets        (0.4)        2.5        (1.6)        2.8
      Gain on disposal of
       investments                     -           -        (0.6)          -
      Future income taxes            3.4         5.2        (4.6)       11.7
      Stock-based compensation
       cost                          1.2         1.6         2.7         2.8
      Difference between amounts
       paid for employee future
       benefits and current
       period cost                   5.1        (1.5)        0.9        (1.9)
      Minority interest                -        (2.9)       (1.9)       (1.1)
    -------------------------------------------------------------------------
                                   156.0       140.3       339.2       345.7
    Net change in non-cash
     working capital related to
     operations                    (21.6)       12.2       (74.5)      (27.2)
    -------------------------------------------------------------------------
                                   134.4       152.5       264.7       318.5
    -------------------------------------------------------------------------
    Investing activities
    Net change in investments
     and other assets               (7.0)        2.7        (6.0)        1.6
    Dividends of a public
     company subject to
     significant influence           0.7           -         2.2         1.2
    Acquisition of fixed assets    (35.3)      (64.3)      (99.2)     (169.4)
    Disposal of fixed assets         9.4         6.0        15.8         8.5
    Acquisition of intangible
     assets                         (7.4)      (11.7)      (28.7)      (30.2)
    -------------------------------------------------------------------------
                                   (39.6)      (67.3)     (115.9)     (188.3)
    -------------------------------------------------------------------------
    Financing activities
    Net change in bank loans         0.4         0.1         0.5         0.2
    Issuance of shares (note 7)      1.7         1.3         3.6        11.0
    Redemption of shares (note 7)  (29.0)       (0.5)      (80.3)       (0.5)
    Acquisition of treasury
     shares (note 7)                   -        (0.7)       (0.9)       (3.2)
    Increase of long-term debt       0.5         1.0         1.6         2.8
    Repayment of long-term debt     (1.7)       (3.4)       (4.7)       (8.2)
    Net change in other long-term
     liabilities                     7.5        (4.4)       (1.8)      (12.2)
    Dividends paid                 (14.1)      (13.3)      (41.4)      (38.6)
    Distribution to minority
     interest                       (1.2)       (0.2)       (1.2)       (0.2)
    -------------------------------------------------------------------------
                                   (35.9)      (20.1)     (124.6)      (48.9)
    -------------------------------------------------------------------------
    Net change in cash and cash
     equivalents                    58.9        65.1        24.2        81.3
    Cash and cash equivalents -
     beginning of period            65.8       181.9       100.5       165.7
    -------------------------------------------------------------------------
    Cash and cash equivalents -
     end of period             $   124.7   $   247.0   $   124.7   $   247.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other information
    Interest paid              $    22.0   $    27.1   $    50.0   $    57.6
    Income taxes paid          $    38.8   $    31.7   $   101.8   $   103.1
    -------------------------------------------------------------------------
    See accompanying notes
                              -----------             -----------


    Consolidated Statements of Retained Earnings
    40-week periods ended July 5, 2008 and July 7, 2007
    (Unaudited) (Millions of dollars)

                                                               Fiscal Year
                                                      -----------
                                                            2008        2007
    -------------------------------------------------------------------------
    Balance - beginning of period                      $ 1,214.3   $ 1,013.2
    Net earnings                                           220.4       219.0
    Dividends                                              (41.4)      (38.6)
    Share redemption premiums                              (60.8)       (0.4)
    -------------------------------------------------------------------------
    Balance - end of period                            $ 1,332.5   $ 1,193.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes
                                                      -----------


    Consolidated Statements of Comprehensive Income
    Periods ended July 5, 2008 and July 7, 2007
    (Unaudited) (Millions of dollars) (notes 2 and 8)

                                         16 weeks               40 weeks
                                       Fiscal Year            Fiscal Year
                              -----------             -----------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net earnings               $    92.6   $    89.3   $   220.4   $   219.0
    Other comprehensive income
    Change in fair value of
     derivatives designated as
     cash flow hedges                0.6         3.1        (3.0)        3.0
    Corresponding income taxes      (0.2)       (1.0)        1.0        (1.0)
    -------------------------------------------------------------------------
    Comprehensive income       $    93.0   $    91.4   $   218.4   $   221.0
    -------------------------------------------------------------------------
    See accompanying notes
                              -----------             -----------


    Notes to Interim Consolidated Financial Statements
    Periods ended July 5, 2008 and July 7, 2007
    (Unaudited) (Millions of dollars, except for data per share)

    1. Statement Presentation

    The unaudited interim consolidated financial statements were prepared by
management in accordance with Canadian generally accepted accounting
principles (GAAP). The accounting policies and procedures used in preparing
these interim consolidated financial statements are the same as those used in
preparing the audited annual consolidated financial statements for the year
ended September 29, 2007, except for the new accounting policies described in
note 2. The unaudited interim consolidated financial statements should be read
along with the audited annual consolidated financial statements and notes to
the statements in the Company's 2007 Annual Report. The operating results for
the interim period covered do not necessarily reflect overall results for the
fiscal year. Certain comparative figures have been reclassified to conform to
the presentation being used in the current fiscal year.

    2. New Accounting Policies

    ADOPTED IN 2008

    Capital and Financial Instruments

    In the first quarter of 2008, the Company adopted three new Handbook
sections issued by the Canadian Institute of Chartered Accountants (CICA):
    Section 1535 "Capital Disclosures" establishes standards for disclosing
information about an entity's capital and how it is managed. These standards
require an entity to disclose the following:

    - its objectives, policies and processes for managing capital;
    - summary quantitative data about what it manages as capital;
    - whether during the period it complied with any imposed capital
      requirements to which it is subject;
    - when the entity has not complied with such requirements, the
      consequences of such non-compliance.

    Section 3862 "Financial Instruments - Disclosures" modifies the disclosure
requirements for financial instruments that were included in Section 3861
"Financial Instruments - Disclosure and Presentation". The new standards
require entities to provide disclosures in their financial statements that
enable users to evaluate:

    - the significance of financial instruments for the entity's financial
      position and performance;
    - the nature and extent of risks arising from financial instruments to
      which the entity is exposed during the period and at the balance sheet
      date, and how the entity manages those risks.

    Section 3863 "Financial Instruments - Presentation" carries forward
unchanged the presentation requirements of the old Section 3861 "Financial
Instruments - Disclosure and Presentation".
    The adoption of these guidelines did not have any material effect on the
Company's results, financial position or cash flows.

    ADOPTED IN 2007

    Comprehensive Income, Financial Instruments and Hedges

    In the first quarter of 2007, the Company adopted the following new
Handbook sections issued by the CICA:
    Section 1530 "Comprehensive Income" introduces a new financial statement
which shows the change in equity of an enterprise from transactions and other
events and circumstances from non-owner sources.
    Section 3855 "Financial Instruments - Recognition and Measurement"
establishes standards for recognizing and measuring financial instruments,
namely financial assets, financial liabilities and derivatives.
    The new standard lays out how financial instruments are to be recognized
depending on their classification. Depending on financial instruments'
classification, changes in subsequent measurements are recognized in net
income or comprehensive income.

    The Company has implemented the following classification:

    - Cash and cash equivalents are classified as "Financial Assets Held for
      Trading". These financial assets are marked-to-market through net
      income at each period end.
    - Accounts receivable and loans to certain customers are classified as
      "Loans and Receivables". After their initial fair value measurement,
      they are measured at amortized cost using the effective interest rate
      method. For the Company, the measured amount generally corresponds to
      cost.
    - Investments in companies are classified as "Available-for-sale
      Securities". These financial assets are marked-to-market through
      comprehensive income at each period end.
    - Bank loans, accounts payable, credit facilities, notes, loans payable,
      and obligations under capital leases are classified as "Other Financial
      Liabilities". After their initial fair value measurement, they are
      measured at amortized cost using the effective interest rate method.
      For the Company, the measured amount generally corresponds to cost.

    Section 3865 "Hedges" whose application is optional, establishes how hedge
accounting may be applied. The Company, in accordance with its risk management
strategy, has decided to apply hedge accounting to its interest rate swaps and
treat them as cash flow hedges. These derivatives are marked-to-market at each
period end and resulting gains/losses are recognized in comprehensive income
to the extent the hedging relationship is effective.
    These new standards have to be applied without restatement of prior period
amounts. Upon initial application all adjustments to the carrying amount of
financial assets and liabilities shall be recognized as an adjustment to the
opening balance of retained earnings or accumulated other comprehensive
income, depending on the classification of existing assets or liabilities. The
Company has recognized a $0.4 adjustment to the opening balance of accumulated
other comprehensive income with respect to the interest rate swaps designated
as cash flow hedges. No adjustment has been recognized to the opening balance
of retained earnings.

    RECENTLY ISSUED

    Inventories

    In March 2007, the CICA issued the new Section 3031 "Inventories", which
will replace Section 3030 "Inventories". The new Section prescribes
measurement of inventories at the lower of cost and net realizable value. It
provides guidance on the determination of cost, allows the use of the retail
method, prohibits use in the future of the last-in, first-out (LIFO) method,
and requires reversal of previous write-downs when there is a subsequent
increase in the value of inventories. It also requires greater disclosure
regarding inventories and the cost of sales. The new standard will be
effective for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2008. The Company does not foresee that this
new section's adoption in its 2009 first quarter will have a material effect
on its results, financial position or cash flows.

    Goodwill and Intangible Assets

    In February 2008, the CICA issued a new Section 3064 "Goodwill and
Intangible Assets" replacing Section 3062 "Goodwill and Other Intangible
Assets" as well as Section 3450 "Research and Development Costs".
    The new Section 3064 states that upon their initial identification,
intangible assets are to be recognized as assets only if they meet the
definition of an intangible asset and the recognition criteria. Section 3064
also provides further information on the recognition of internally generated
intangible assets (including research and development costs).
    As for subsequent measurement of intangible assets, goodwill, and
disclosure, Section 3064 carries forward the requirements of the old
Section 3062.
    The new Section applies to annual and interim financial statements
relating to fiscal years beginning on or after October 1, 2008. The Company is
currently evaluating the effect of these new standards on its results,
financial position and cash flows.

    International Financial Reporting Standards

    On February 13, 2008, the Accounting Standards Board confirmed the date of
changeover from GAAP to International Financial Reporting Standards (IFRS).
Canadian publicly accountable enterprises must adopt IFRS for their interim
and annual financial statements relating to fiscal years beginning on or after
January 1, 2011. The Company is currently developing its IFRS conversion plan
and evaluating the effect of the new standards on its consolidated financial
statements.

    3. Integration and Rationalization Costs

    Over fiscal 2007, the Company completed its plan for the integration and
rationalization of its operations following the acquisition of A&P Canada.
This three-part plan dealt with the store network, the integration of overall
operations, and the implementation of information systems at A&P Canada.
    During the period ended July 7, 2007, integration and rationalization plan
costs were as follows:

    By Nature of Project

                                                          Fiscal Year 2007
                                                        16 weeks    40 weeks
    -------------------------------------------------------------------------
    Stores                                             $       -   $     2.2
    Integration of operations                                0.5         5.0
    Implementation of information systems                    4.9         9.2
    -------------------------------------------------------------------------
                                                       $     5.4   $    16.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    By Nature of Costs

                                                          Fiscal Year 2007
                                                        16 weeks    40 weeks
    -------------------------------------------------------------------------
    Retention bonuses, termination benefits
     and others                                        $     0.1   $     4.3
    Training and IT implementation                           4.9         9.2
    Vacant premises                                            -         2.3
    -------------------------------------------------------------------------
                                                       $     5.0   $    15.8
    Assets write-off                                         0.4         0.6
    -------------------------------------------------------------------------
                                                       $     5.4   $    16.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4. Employee Future Benefits

    The Company offers several defined benefit and defined contribution plans
that provide most participants with pension, other retirement and other
post-employment benefits. The Company's defined benefit and defined
contribution plan expenses were as follows:

                                 16 weeks                  40 weeks
                               Fiscal Year               Fiscal Year

                      -------------               -------------
                           2008          2007         2008          2007

                     Pen-           Pen-           Pen-           Pen-
                    sion  Other    sion  Other    sion  Other    sion  Other
                   plans  plans   plans  plans   plans  plans   plans  plans
    -------------------------------------------------------------------------
    Defined
     contribution
     plans         $ 7.9  $ 0.2   $ 8.4  $ 0.1  $ 19.9  $ 0.4  $ 20.0  $ 0.2
    -------------------------------------------------------------------------
    Defined
     benefit plans
    Current service
     cost            7.9    0.4     7.4    0.4    18.4    1.1    18.8    0.9
    Interest cost    9.4    0.6     8.5    0.4    23.5    1.5    21.1    1.0
    Projected
     return on
     plan assets   (13.1)     -   (11.6)     -   (32.6)     -   (29.2)     -
    Amortization
     of actuarial
     losses and
     past service
     cost            0.8      -     0.7      -     1.5      -     1.3      -
    -------------------------------------------------------------------------
                     5.0    1.0     5.0    0.8    10.8    2.6    12.0    1.9
    -------------------------------------------------------------------------
                  $ 12.9  $ 1.2  $ 13.4  $ 0.9  $ 30.7  $ 3.0  $ 32.0  $ 2.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                  -------------                 -------------

    5. Income Taxes

    The effective income tax rates were as follows:

                                         16 weeks               40 weeks
                                       Fiscal Year            Fiscal Year
                              -----------             -----------
                                    2008        2007        2008        2007
                                       %           %           %           %
    -------------------------------------------------------------------------
    Combined statutory
     income tax rate                31.1        32.8        31.2        32.4

    Changes
      Impact of federal tax
       rate decrease of 3.5%,
       spread until 2012, on
       future taxes ($11.4
       in 2008)                        -        (1.5)       (3.8)       (0.6)

      Share of earnings in a
       public company subject
       to significant influence     (0.2)       (0.5)       (0.7)       (0.8)

      Other                          0.1         0.4         0.1         0.3
    -------------------------------------------------------------------------
                                    31.0        31.2        26.8        31.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              -----------             -----------

    6. Earnings per Share

    Basic net earnings per share and fully diluted net earnings per share were
calculated based on the following number of shares:

                                         16 weeks               40 weeks
                                       Fiscal Year            Fiscal Year
                              -----------             -----------
    (Millions)                      2008        2007        2008        2007
    -------------------------------------------------------------------------
    Weighted average number
     of shares outstanding -
     Basic                         112.3       115.3       113.0       115.1
    Dilutive effect under
     stock option plan and
     performance share units         0.6         1.5         0.8         1.6
    -------------------------------------------------------------------------
    Weighted average number of
     shares outstanding -
     Diluted                       112.9       116.8       113.8       116.7
    -------------------------------------------------------------------------
                              -----------             -----------

    7. Capital Stock

    Outstanding

                                    Class A              Class B       Total
                              Subordinate Shares          Shares
                           ----------------------  ----------------
                              Number              Number
                          (Thousands)         (Thousands)
    -------------------------------------------------------------------------
    Balance as at
     September 29, 2007      113,683   $ 713.2       804   $   1.6   $ 714.8

    Share issued for
     cash                        281       3.6         -         -       3.6

    Transfer from
     contributed surplus -
     options exercised             -       0.1         -         -       0.1

    Shares redeemed for
     cash, excluding
     premium of $60.8         (3,102)    (19.5)        -         -     (19.5)

    Conversion of shares          54       0.1       (54)     (0.1)        -

    Acquisition of
     treasury shares             (40)     (0.2)        -         -      (0.2)
    -------------------------------------------------------------------------
    Balance as at
     July 5, 2008            110,876   $ 697.3       750   $   1.5   $ 698.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On November 29, 2007, the Company took advantage of an option to purchase
shares that had been granted by The Great Atlantic & Pacific Tea Company (A&P
US), purchasing 1.5 million Class A Subordinate Shares sold by A&P US for a
total amount of $40.9. The shares purchased were cancelled and recorded as
part of the Company's share buyback program.

    Stock Option Plan

    As at July 5, 2008, 3,786,890 stock options were outstanding at exercise
prices varying from $15.50 to $39.17, with expiry dates up to 2015. Of these
stock options, 2,604,270 could be exercised for a weighted average exercise
price of $21.41.

    Granted stock options were as follows:

                                         16 weeks               40 weeks
                                       Fiscal Year            Fiscal Year
                              -----------             -----------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Granted stock options
     during the period           377,200     131,100     431,000     135,600
    Weighted average
     exercise price            $   24.73   $   37.81   $   25.15   $   37.74
    Weighted average fair
     value                     $    5.83   $   10.46   $    6.04   $   10.48
    -------------------------------------------------------------------------
                              -----------             -----------

    During the 40-week period of 2008, the weighted average fair value of
stock options was established at the time of grant using the Black & Scholes
model and based on the following weighted average assumptions: risk-free
interest rate of 3.3% (2007 - 4.2%), expected six-year term (2007 - six-year
term), anticipated volatility of 22.4% (2007 - 25.2%) and an anticipated 1.4%
dividend yield (2007 - 1.5%).
    The compensation expense for these stock options amounted to $0.7 for the
third quarter of 2008 (2007 - $1.0) and to $1.4 for the 40-week period of 2008
(2007 - $1.7).

    Performance Share Unit Plan

    As at July 5, 2008, 209,880 performance share units (PSUs) were
outstanding. During the 40-week period of 2008, 114,091 PSUs were granted
(2007 - 81,211) and 28,030 PSUs were cancelled (2007 - nil). In the third
quarter, 5,650 PSUs were granted (2007 - 1,377) and 21,118 PSUs were cancelled
(2007 - nil).
    At the end of the third quarter, 194,000 shares were held in trust for
participants until the PSUs shall have vested or been cancelled (2007 -
154,000). During this quarter, none of these shares have been acquired
(2007 - 18,500).
    A compensation expense of $1.3 pertaining to PSUs was recorded in the
40-week period of 2008 (2007 - $1.1), $0.5 of which was recorded in the third
quarter (2007 - $0.6).

    8. Accumulated Other Comprehensive Income

    Derivatives designated as cash flow hedges constitute the sole item in
Accumulated Other Comprehensive Income. The changes that occurred during the
40-week period were as follows:

                                                              Fiscal Year
                                                      -----------
                                                            2008        2007
    -------------------------------------------------------------------------
    Opening balance (net of income taxes of
     $0.6 in 2008, $0.2 in 2007)                       $     1.2   $     0.4
    Change in fair value during the period
     (net of income taxes of $(1.0) in 2008,
     $1.0 in 2007)                                          (2.0)        2.0
    -------------------------------------------------------------------------
    Balance - end of period                            $    (0.8)  $     2.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9. Contingency

    In January 2007, the Company was named in a suit brought by beneficiaries
of a multiemployer pension plan. They claim that plan assets were mismanaged
and are seeking, among others, damages of $1 billion from the trustees and the
employers. The Company was one of the 443 employers affected by the suit and
did not participate in managing the plan. On April 4, 2008 with the consent of
the parties involved, the Court rendered an order dismissing the suit against
the employers. The trustees were notified that the beneficiaries who brought
suit would like to waive the claim against the trustees, which would put end
to the case.

    10. Related Party Transaction

    In the third quarter, the Company purchased for exchange amount a
supermarket in which a member of the Board of Directors, Ms. Maryse Labonté,
held an interest. In view of this transaction, Ms. Labonté resigned on June 2,
2008.

    11. Management of Capital

    The Company aims to maintain a capital level that enables it to meet
several objectives, namely:

    - striving for a low percentage of long-term debt to total combined long-
      term debt and shareholders' equity (long-term debt/total capital
      ratio);
    - maintaining an investment grade credit rating for its term notes;
    - giving shareholders sustained growth of shareholder value by providing
      a return on shareholders' equity greater than 15%, increasing fully
      diluted net earnings per share, and paying total annual dividends
      representing approximately 20% of net earnings for the previous fiscal
      year before extraordinary items.

    In its capital structure, the Company considers its stock option and
performance share unit plans for key employees and officers. The Company's
stock redemption plan is one of the tools the Company uses to achieve its
objectives.
    The Company is not subject to any capital requirements imposed by a
regulator.
    The Company's fiscal 2008 third quarter results regarding its capital
management objectives were as follows:

    - a long-term debt/total capital ratio of 33.8% (35% as at September 29,
      2007);
    - a BBB credit rating confirmed by S&P and DBRS during the first quarter
      of 2008 (same rating during fiscal year 2007);
    - a return on shareholders' equity of 14.1% over the last 12 months
      (16.7% for the 12 previous months);
    - a decrease in fully diluted net earnings per share of 5.1% over the
      last 12 months (29.3% increase for the 12 previous months);
    - an annualized dividend representing 20.1% of net earnings for the
      previous fiscal year (20.5% in 2007).

    The capital management objectives remain the same as for the previous
fiscal year. Return on shareholders' equity and fully diluted net earnings per
share for the last 12 months were down compared to the previous 12 months
mainly due to a 1.9% drop in sales owing to a more intense competitive
environment as well as a training and learning curve associated with new
information systems and a new warehouse.

    12. Financial Instruments

    Interest Rate Risk

    In the normal course of business, the Company is exposed primarily to
interest rate fluctuation risks as a result of loans and receivables as well
as of borrowing at variable interest rates.
    In accordance with its risk management policy, the Company uses derivative
financial instruments, such as interest rate swaps, to lock in a portion of
its debt cost and reduce its interest rate risk, swapping its Credit Facility
A variable interest rate payments for fixed interest rate payments. The
Company has decided to designate its interest rate swaps as a cash flow hedge.
Policy guidelines prohibit the Company from entering into derivative financial
instruments for speculative purposes.
    At the end of every quarter, the Company provides the Audit Committee with
a detailed report on all of its derivative financial instruments along with
their respective fair value. The report as at July 5, 2008 presented the
following information:

    -------------------------------------------------------------------------
                          Fixed    Notional       Maturity          Fair
                           rate      amount                        value
                                                            --------
                                                               2008     2007
    -------------------------------------------------------------------------
    Interest rate
     swap contract       3.9480%     $ 50.0       November   $ (0.1)   $ 0.7
                                                  23, 2008
    Interest rate
     swap contract       3.9820%     $ 50.0       December   $ (0.5)   $ 1.2
                                                  16, 2009
    Interest rate
     swap contract       4.0425%     $ 50.0       December   $ (0.6)   $ 1.7
                                                  16, 2010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                            --------

    A fluctuation in interest rates would have an impact on the Company's net
earnings and other comprehensive income items. Based on the previous fiscal
year's rate changes, a 0.5% interest rate change would reasonably be
considered possible. The changes would have had the following impact:


                                                     16 weeks
                                                    Fiscal Year
                              -----------------------
                                        2008                    2007
                              -----------------------------------------------
                                     0.5%        0.5%        0.5%        0.5%
                                increase    decrease    increase    decrease
    -------------------------------------------------------------------------
    Impact on net earnings
     of interest rate
     changes for loans and
     receivables as well
     as for other variable
     rate liabilities          $    (0.2)  $     0.2   $    (0.2)  $     0.2
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     items due to changes
     in fair value of
     derivatives designated
     as cash flow hedges       $     0.7   $    (0.7)  $     1.2   $    (1.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              -----------------------

                                                     40 weeks
                                                    Fiscal Year
                              -----------------------
                                        2008                    2007
                              -----------------------------------------------
                                     0.5%        0.5%        0.5%        0.5%
                                increase    decrease    increase    decrease
                              -----------------------------------------------
    Impact on net earnings
     of interest rate
     changes for loans and
     receivables as well
     as for other variable
     rate liabilities          $    (0.7)  $     0.7   $    (0.7)  $     0.7
    -------------------------------------------------------------------------
    Impact on other
     comprehensive income
     items due to changes
     in fair value of
     derivatives designated
     as cash flow hedges       $     0.7   $    (0.7)  $     1.2   $    (1.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              -----------------------

    Credit Risk

    Loans and receivables/endorsements

    The Company sells products to consumers and merchants in Canada. When it
sells products, it gives merchants credit. As well, to help certain merchants
with business acquisitions, the Company grants them long-term loans or
endorses loans granted to them by financial institutions. Hence, the Company
is subject to credit risk.
    To mitigate such risk, the Company performs ongoing credit evaluations of
its customers and has adopted a credit policy that defines the credit
conditions to meet and required guarantees. No customer accounted for over 10%
of total loans and receivables.
    To cover its credit risk, the Company holds guarantees from its clients
assets in the form of deposits, movable hypothec on the Company stock and/or
second hypothecs on their inventories, movable goods, intangible assets and
receivables.
    Over the past years, the Company has not suffered any material losses
related to credit risk.
    As at July 5, 2008, not taking into account the guarantees held, the
maximum credit risk exposure for loans and receivables corresponded to their
carrying amount. Also as of that date, the maximum potential liability under
the endorsements was $8.1 ($23.7 in 2007) and no liability had been
recognized.

    Derivatives designated as cash-flow hedges

    With regard to its derivative financial instruments, i.e., the interest
rate swaps, the Company is also subject to credit risk when these swaps result
in receivables from financial institutions. In accordance with its risk
management policy, the Company has entered into these swaps with major
financial institutions to reduce its credit risk.
    As at July 5, 2008, the maximum credit risk exposure for derivatives
designated as cash-flow hedges corresponded to their carrying amount.
    
    %SEDAR: 00001783EF




For further information:

For further information: Richard Dufresne, Senior Vice-President and
Chief Financial Officer, (514) 643-1003; Investor relations Department: (514)
643-1055, finance@metro.ca; METRO INC.'s corporate information and press
releases are available on the Internet at: www.metro.ca; Source: METRO INC.


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890