METRO posted net earnings of $69.7 million in the first quarter of fiscal 2008



    
    -------------------------------------------------------------------------
    2008 FIRST QUARTER HIGHLIGHTS

    - Sales of $2,506.8 million
    - Net earnings up 2.7% to $69.7 million
    - Fully diluted net earnings per share up 5.2% to $0.61
    - Declared dividend of $0.125 per share, up 8.7%
    -------------------------------------------------------------------------
    

    MONTREAL, Jan. 29 /CNW Telbec/ - METRO INC. realized net earnings of
$69.7 million in the first quarter of 2008, up 2.7% from $67.9 million in the
same quarter last year, and fully diluted net earnings per share of $0.61, up
5.2% from $0.58 last year.
    In the first quarter, we benefited from a tax expense decrease of $11.4
million due to a net reduction of our future income tax assets and liabilities
as a result of future federal income tax rate decreases totalling 3.5%. In the
first quarter last year, we had A&P Canada acquisition-related integration and
rationalization costs before taxes of $5.6 million. Excluding these
non-recurring items, our first quarter adjusted net earnings(1) would have
been $58.3 million and our adjusted fully diluted net earnings per share(1)
$0.51 versus $71.6 million and $0.62 respectively for the same quarter last
year.
    First quarter sales reached $2,506.8 million, down 0.3% compared to
fiscal 2007 first quarter sales of $2,515 million. Excluding decreased sales
of tobacco products, 2008 first quarter sales would have been up 0.3%. Same
store sales were flat.
    "A more intense competitive environment as well as the training and
learning curve associated with our new information systems in Ontario and our
new Food Services warehouse weakened our results. We expect that the issues
related to our information systems in Ontario and our Food Services warehouse
will be behind us in the next few months, and are confident that our results
will improve," stated Pierre H. Lessard, President and Chief Executive
Officer.

    SALES

    First quarter sales reached $2,506.8 million, down 0.3% compared to
fiscal 2007 first quarter sales of $2,515 million. Excluding decreased sales
of tobacco products, 2008 first quarter sales would have been up 0.3%. Same
store sales were flat.

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

    Earnings before interest, taxes, depreciation and amortization for the
first quarter were $136.5 million, down 11.7% from $154.6 million for the same
quarter last year. First quarter EBITDA represented 5.4% of sales versus 6.1%
last year. Excluding A&P Canada acquisition-related integration and
rationalization costs of $5.6 million in 2007, EBITDA as a percentage of sales
would have been 6.4%.
    A more intense competitive environment as well as the training and
learning curve associated with our new information systems in Ontario and our
new Food Services warehouse affected our gross profits and expenditures.
    Our equity earnings from our investment in Alimentation Couche-Tard were
$5.7 million versus $8.6 million in 2007. Excluding non-recurring items as
well as equity earnings from our investment in Alimentation Couche-Tard, our
2008 first quarter EBITDA would have been $130.8 million or 5.2% of sales
versus $151,6 million or 6% of sales for the corresponding quarter of the
previous fiscal year.

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

                                              12 weeks
                                             Fiscal Year
                                 2008                           2007
    -------------------------------------------------------------------------
                    EBITDA     Sales    EBITDA/   EBITDA     Sales    EBITDA/
                                       Sales (%)                    Sales (%)
    -------------------------------------------------------------------------
    EBITDA           136.5   2,506.8       5.4     154.6   2,515.0       6.1
    Integration
     and rationali-
     zation costs        -         -                 5.6         -
    -------------------------------------------------------------------------
    Adjusted EBITDA  136.5   2,506.8       5.4     160.2   2,515.0       6.4
    Share of
     earnings from
     our investment
     in Alimentation
     Couche-Tard      (5.7)        -                (8.6)        -
    -------------------------------------------------------------------------
    Adjusted EBITDA
     excluding share
     of earnings     130.8   2,506.8       5.2     151.6   2,515.0       6.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INTEREST, DEPRECIATION AND AMORTIZATION

    The total first quarter depreciation and amortization expense was
$40.1 million compared with $37 million last year. First quarter interest
expenses totalled $14 million versus $14.3 million last year. First quarter
interest rate averaged 5.5% compared with 5.4% for the corresponding quarter
of the previous fiscal year.

    INCOME TAXES

    The income tax expense of $14.1 million for the first quarter of 2008
represents an effective tax rate of 17.1% compared with $32.3 million and an
effective tax rate of 31.3% last year. In the first quarter of 2008, the
Canadian government completed milestones in the approval process for its
Economic Statement of October 30, 2007. It approved general federal corporate
income tax rate reductions of 1% on January 1, 2008 increasing to 3.5% by
January 1, 2012. These rate reductions brought about a net decrease in our
future income tax assets and liabilities as well as a corresponding
$11.4 million decrease in our income tax expense. Excluding this decrease in
income tax expense, the effective tax rate for the first quarter of 2008 would
have been 30.9%.

    NET EARNINGS

    First quarter net earnings were $69.7 million compared to $67.9 million
for the corresponding quarter last year, an increase of 2.7%. Fully diluted
net earnings per share were $0.61, up 5.2% from $0.58 last year. 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) for the first quarter of 2008
would have been $58.3 million, down 18.6% from the same quarter last year.
Adjusted net earnings(1) as a percentage of sales would have been 2.3%
compared with 2.8% last year. Adjusted fully diluted net earnings per share(1)
would have been $0.51, for a decrease of 17.7% compared with last year.

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

                                 12 weeks
                                Fiscal Year
                  ---------------------------------------
                          2008                2007               Change
                  -----------------------------------------------------------
                       Net     Fully       Net     Fully       Net     Fully
                  earnings   diluted  earnings   diluted  earnings   diluted
                                 EPS                 EPS        (%)      EPS
                            (Dollars)           (Dollars)                 (%)
    -------------------------------------------------------------------------
    Net earnings      69.7      0.61      67.9      0.58       2.7       5.2
    Integration
     and rationali-
     zation costs
     after taxes         -         -       3.7      0.04
    Decrease in tax
     expense         (11.4)    (0.10)        -         -
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)      58.3      0.51      71.6      0.62     (18.6)    (17.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Quarterly Highlights
    (Millions of dollars, unless otherwise indicated)

                                    2008        2007        2006      Change
                               (52 weeks)  (52 weeks)  (53 weeks)         (%)
    -------------------------------------------------------------------------
    Sales
      Q1                         2,506.8     2,515.0           -        (0.3)
      Q4                               -     2,432.4     2,673.5        (9.0)
      Q3                               -     3,341.0     3,336.7         0.1
      Q2                               -     2,356.2     2,412.1        (2.3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings
      Q1                            69.7        67.9           -         2.7
      Q4                               -        57.6        78.9       (27.0)
      Q3                               -        89.3        85.1         4.9
      Q2                               -        61.8        57.0         8.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted net earnings(1)
      Q1                            58.3        71.6           -       (18.6)
      Q4                               -        66.8        71.0        (5.9)
      Q3                               -        91.1        78.3        16.3
      Q2                               -        65.5        58.7        11.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Fully diluted net earnings
     per share (Dollars)
      Q1                             0.61       0.58           -         5.2
      Q4                               -        0.49        0.68       (27.9)
      Q3                               -        0.77        0.73         5.5
      Q2                               -        0.53        0.49         8.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted fully diluted net
     earnings per share(1)
     (Dollars)
      Q1                            0.51        0.62           -       (17.7)
      Q4                               -        0.57        0.61        (6.6)
      Q3                               -        0.78        0.68        14.7
      Q2                               -        0.56        0.50        12.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    First quarter sales were down 0.3% in 2008 compared to 2007 due to strong
competition. Excluding decreased sales of tobacco products, 2008 first quarter
sales would have been up 0.3%.
    Sales in the second, third and fourth quarters of 2007 versus those for
the corresponding quarters 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, the fact that Christmas fell in the
first quarter of 2007 rather than the second as in 2006, and the impact of the
53rd week in 2006. Excluding these items, 2007 second, third and fourth
quarters sales would have been up 3%, 3.2% and 0.7% respectively 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) would have been down 18.6% and 17.7% respectively. This
drop in profitability stems a more intense competitive environment and the
training and learning curve associated with our new information systems in
Ontario and our new Food Services warehouse.
    Second, third and fourth quarters net earnings and fully diluted net
earnings per share in 2007 and 2006 were impacted by, among other things,
integration and rationalization costs related to the acquisition of A&P
Canada, 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, increases in fiscal 2007 second and
third quarters adjusted net earnings(1) and adjusted fully diluted net
earnings per share(1), compared with those for fiscal 2006, are due primarily
to more effective merchandising programs and additional synergies.
    Excluding 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
2007 were up 3.4% and 3.6% respectively over those for the corresponding
period of 2006.

                       2008              2007                 2006
    -------------------------------------------------------------------------
    (Millions of
     dollars)            Q1     Q1     Q2     Q3     Q4     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Net earnings       69.7   67.9   61.8   89.3   57.6   57.0   85.1   78.9
    Integration and
     rationalization
     costs after taxes    -    3.7    3.7    3.6    9.2    1.7    2.6    2.1
    Gain on disposal
     of investment
     after taxes          -      -      -      -      -      -      -   (8.6)
    Decrease in tax
     expense          (11.4)     -      -   (1.8)     -      -   (9.4)  (1.4)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)       58.3   71.6   65.5   91.1   66.8   58.7   78.3   71.0
    53rd week             -      -      -      -      -      -      -   (6.4)
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)
     excluding
     53rd week         58.3   71.6   65.5   91.1   66.8   58.7   78.3   64.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                       2008              2007                 2006
    -------------------------------------------------------------------------
    (Dollars and per
     share)              Q1     Q1     Q2     Q3     Q4     Q2     Q3     Q4
    -------------------------------------------------------------------------
    Fully diluted net
     earnings          0.61   0.58   0.53   0.77   0.49   0.49   0.73   0.68
    Integration and
     rationalization
     costs after taxes    -   0.04   0.03   0.03   0.08   0.01   0.03   0.02
    Gain on disposal
     of investment
     after taxes          -      -      -      -      -      -      -  (0.07)
    Decrease in tax
     expense          (0.10)     -      -  (0.02)     -      -  (0.08) (0.02)
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings(1)       0.51   0.62   0.56   0.78   0.57   0.50   0.68   0.61
    53rd week             -      -      -      -      -      -      -  (0.06)
    -------------------------------------------------------------------------
    Adjusted fully
     diluted net
     earnings(1)
     excluding
     53rd week         0.51   0.62   0.56   0.78   0.57   0.50   0.68   0.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Position

    OPERATING ACTIVITIES

    Operating activities generated cash flows of $13 million in the first
quarter of 2008 versus $49.4 million in the corresponding quarter of 2007.
This variation is due primarily to decreased first quarter adjusted net
earnings(1) for 2008 as compared to 2007 and increased use of non-cash working
capital. This increase is due in part to the fact that, at the end of the
first quarter of 2008, our level of inventories were high since Christmas was
two days after the end of the quarter this year versus only one day after in
2007.

    INVESTMENT ACTIVITIES

    Investing activities required outflows of $55 million in the first quarter
of 2008 compared to $68.3 million in 2007. This decrease is due primarily to a
lower investment in fixed assets with $44 million invested in 2008 versus
$60.2 million in 2007. Over the quarter, the Company and the retailers
invested $50.7 million in our retail network for a net expansion of 108,000
square feet or 0.6%. Major renovations and expansions of 10 stores were
completed, and 3 new stores were opened.

    FINANCING ACTIVITIES

    Financing activities required outflows of $30.9 million in the first
quarter of 2008 versus $22.7 million in 2007. The main reason is the
repurchase of 1.5 million Class A Subordinate shares held by The Great
Atlantic & Pacific Tea Company (A&P US) for the sum of $40.9 million. No
shares had been repurchased in the first quarter of 2007.

    Financial Position

    Our financial position at the end of the first quarter of 2008 was very
solid. We had an unused approved $375.2 million line of credit and a debt
ratio (long-term debt/total capital) of 34.8%.

    In the first 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 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 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
                                                   December 22, September 29,
                                                          2007          2007
    -------------------------------------------------------------------------
    Financial structure
      Long-term debt (Millions of $)                   1,038.9       1,038.9
      Shareholders' equity (Millions of $)             1,949.0       1,932.3
      Long-term debt/total capital (%)                    34.8          35.0

                                                   Fiscal 2008   Fiscal 2007
                                                     (12 weeks)    (12 weeks)
                                                -----------------------------
    Results
      EBITDA(1)/Interest (Times)                           9.8          10.8
    -------------------------------------------------------------------------


    CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

                                                         As at         As at
                                                   December 22, September 29,
                                                          2007          2007
    -------------------------------------------------------------------------
    Number of Class A Subordinate Shares
     outstanding (Thousands)                           112,297       113,683
    Number of Class B Shares
     outstanding (Thousands)                               772           804
    Stock options:
      Number outstanding (Thousands)                     3,677         3,738
      Exercise price                                 $11.80 to     $11.80 to
                                                        $39.17        $39.17
      Weighted average exercise price                   $22.61        $22.40
    Number of performance share units:
      Number outstanding (Thousands)                       146           124
      Weighted average maturity                      20 months     22 months
    -------------------------------------------------------------------------


    NORMAL COURSE ISSUER BID PROGRAM

    Under the normal course issuer bid program, the Company may repurchase up
to 4 million of its Class A Subordinate shares between September 5, 2007 and
September 4, 2008. The Company repurchased 1,743,500 shares at an average
price of $28.33 per share for a total of $49.4 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. This program offers us 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.

    DIVIDENDS

    On January 28, 2008, the Company's Board of Directors declared a quarterly
dividend of $0.125 per Class A Subordinate Share and Class B Share payable
March 10, 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

    The value of METRO INC. shares remained in the range of $25.30 to $35.85
over the first quarter of fiscal 2008. During this period, a total of
30 million shares were traded on the Toronto Stock Exchange. The closing price
on Friday, January 18, 2008 was $25.95, 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 the
Company's 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 will adopt this new section in the first quarter
of our 2009 fiscal year.

    Forward-looking Statements

    Any statement contained in the present quarterly Management's Discussion
and Analysis 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 discussion and analysis 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. 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.

    Conference Call

    Financial analysts and investors are invited to participate in a
conference call on the 2008 first quarter results at 4:00 p.m. EDT on Tuesday,
January 29, 2008. To access the conference call, please dial 416-644-3417 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 on "Non-GAAP Measurements".



    Consolidated Statements of Earnings
    12-week periods ended December 22, 2007 and December 23, 2006
    (Unaudited) (Millions of dollars, except for earnings per share)

                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
    -------------------------------------------------------------------------
    Sales                                            $ 2,506.8     $ 2,515.0
    Cost of sales and operating expenses               2,376.0       2,363.4
    Share of earnings in a public company subject
     to significant influence                             (5.7)         (8.6)
    Integration and rationalization costs (note 3)           -           5.6
    -------------------------------------------------------------------------
    Earnings before interest, taxes, depreciation
     and amortization                                    136.5         154.6
    Depreciation and amortization                         40.1          37.0
    -------------------------------------------------------------------------
    Operating income                                      96.4         117.6
    Interest, net
      Short term                                          (0.3)         (0.7)
      Long term                                           14.3          15.0
    -------------------------------------------------------------------------
                                                          14.0          14.3
    -------------------------------------------------------------------------
    Earnings before income taxes                          82.4         103.3
    Income taxes (note 5)                                 14.1          32.3
    -------------------------------------------------------------------------
    Earnings before minority interest                     68.3          71.0
    Minority interest                                     (1.4)          3.1
    -------------------------------------------------------------------------
    Net earnings                                     $    69.7     $    67.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share (note 6)
      Basic                                          $    0.61     $    0.59
      Fully diluted                                  $    0.61     $    0.58
    -------------------------------------------------------------------------
    See accompanying notes
                                                  -------------


    Consolidated Balance Sheets
    (Unaudited) (Millions of dollars)
                                                  -------------
                                                         As at         As at
                                                   December 22, September 29,
                                                          2007          2007
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash and cash equivalents                      $    27.6     $   100.5
      Accounts receivable                                345.3         327.8
      Inventories                                        662.5         588.2
      Prepaid expenses                                    15.5          12.1
      Future income taxes                                 19.1          26.1
    -------------------------------------------------------------------------
                                                       1,070.0       1,054.7
    Investments and other assets                         155.6         151.0
    Fixed assets                                       1,215.4       1,202.8
    Intangible assets                                    343.4         342.1
    Goodwill                                           1,490.1       1,490.1
    Accrued benefit assets                                33.2          33.2
    -------------------------------------------------------------------------
                                                     $ 4,307.7     $ 4,273.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
      Bank loans                                     $    24.8     $     0.1
      Accounts payable                                 1,076.8       1,043.6
      Income taxes payable                                 3.6          20.3
      Current portion of long-term debt                    4.4           5.1
    -------------------------------------------------------------------------
                                                       1,109.6       1,069.1
    Long-term debt                                     1,038.9       1,038.9
    Accrued benefit obligations                           53.4          54.9
    Future income taxes                                  120.1         139.0
    Other long-term liabilities                           32.1          33.7
    Minority interest                                      4.6           6.0
    -------------------------------------------------------------------------
                                                       2,358.7       2,341.6
    -------------------------------------------------------------------------
    Shareholders' equity
    Capital stock (note 7)                               706.4         714.8
    Contributed surplus                                    2.6           2.0
    Retained earnings                                  1,239.3       1,214.3
    Accumulated other comprehensive
     income (notes 2 and 8)                                0.7           1.2
    -------------------------------------------------------------------------
                                                       1,949.0       1,932.3
    -------------------------------------------------------------------------
                                                     $ 4,307.7     $ 4,273.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes
                                                  -------------


    Consolidated Statements of Cash Flows
    12-week periods ended December 22, 2007 and December 23, 2006
    (Unaudited) (Millions of dollars)
                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
    -------------------------------------------------------------------------
    Operating activities
    Net earnings                                     $    69.7     $    67.9
    Non-cash items
      Integration and rationalization
       costs (note 3)                                        -           1.8
      Share of earnings in a public company
       subject to significant influence                   (5.7)         (8.6)
      Depreciation and amortization                       40.1          37.0
      Amortization of deferred financing costs             0.5           0.5
      (Gain) Loss on disposal and write-off of
       fixed and intangible assets                        (0.3)          0.1
      Future income taxes                                (11.6)          3.6
      Stock-based compensation cost                        0.6           0.6
      Difference between amounts paid for employee
       future benefits and current period cost            (1.5)          0.2
      Minority interest                                   (1.4)          3.1
    -------------------------------------------------------------------------
                                                          90.4         106.2
    Net change in non-cash working capital related
     to operations                                       (77.4)        (56.8)
    -------------------------------------------------------------------------
                                                          13.0          49.4
    -------------------------------------------------------------------------
    Investing activities
    Net change in investments and other assets            (1.7)         (1.8)
    Dividends of a public company
     subject to significant influence                      0.7           0.6
    Acquisition of fixed assets                          (44.0)        (60.2)
    Disposal of fixed assets                               0.3           2.5
    Acquisition of intangible assets                     (10.3)         (9.4)
    -------------------------------------------------------------------------
                                                         (55.0)        (68.3)
    -------------------------------------------------------------------------
    Financing activities
    Net change in bank loans                              24.7           0.3
    Issuance of shares (note 7)                            1.0           1.4
    Redemption of shares (note 7)                        (40.9)            -
    Increase of long-term debt                             0.8           0.8
    Repayment of long-term debt                           (1.7)         (2.6)
    Net change in other long-term liabilities             (1.6)        (10.5)
    Dividends paid                                       (13.2)        (12.1)
    -------------------------------------------------------------------------
                                                         (30.9)        (22.7)
    -------------------------------------------------------------------------
    Net change in cash and cash equivalents              (72.9)        (41.6)
    Cash and cash equivalents - beginning of period      100.5         165.7
    -------------------------------------------------------------------------
    Cash and cash equivalents - end of period        $    27.6     $   124.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other information
    Interest paid                                    $    21.9     $    23.9
    Income taxes paid                                $    42.1     $    54.0
    -------------------------------------------------------------------------
    See accompanying notes
                                                  -------------


    Consolidated Statements of Retained Earnings
    12-week periods ended December 22, 2007 and December 23, 2006
    (Unaudited) (Millions of dollars)

                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
    -------------------------------------------------------------------------
    Balance - beginning of period                    $ 1,214.3     $ 1,013.2
    Net earnings                                          69.7          67.9
    Dividends                                            (13.2)        (12.1)
    Share redemption premiums                            (31.5)            -
    -------------------------------------------------------------------------
    Balance - end of period                          $ 1,239.3     $ 1,069.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes
                                                  -------------


    Consolidated Statements of Comprehensive Income
    12-week periods ended December 22, 2007 and December 23, 2006
    (Unaudited) (Millions of dollars) (notes 2 and 8)

                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
    -------------------------------------------------------------------------
    Net earnings                                     $    69.7     $    67.9

    Other comprehensive income
    Change in fair value of derivatives
     designated as cash flow hedges                       (0.8)         (0.1)
    Corresponding income taxes                             0.3             -
    -------------------------------------------------------------------------
    Comprehensive income                             $    69.2     $    67.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes
                                                  -------------



    Notes to Interim Consolidated Financial Statements
    12-week periods ended December 22, 2007 and December 23, 2006
    (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. 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 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 - Disclosure" 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 the
presentation requirements of the old Section 3861 "Financial Instruments -
Disclosure and Presentation", which remain unchanged.
    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 will adopt this new section
in the first quarter of its 2009 fiscal year.


    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 December 23, 2006, integration and rationalization
plan costs amounted to $5.6 and are described as follows:

    By Nature of Project
                                                                 Fiscal Year
                                                                        2007
    -------------------------------------------------------------------------
    Stores                                                            $  2.2

    Integration of operations                                            1.2

    Implementation of information systems                                2.2
    -------------------------------------------------------------------------
                                                                       $ 5.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    By Nature of Costs
                                                                 Fiscal Year
                                                                        2007
    -------------------------------------------------------------------------
    Retention bonuses, termination benefits and others                $  1.2

    Training and IT implementation                                       2.2

    Vacant premises                                                      2.2
    -------------------------------------------------------------------------
                                                                      $  5.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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:

                                                Fiscal Year
                                 --------------------
                                          2008                    2007
    -------------------------------------------------------------------------
                                 Pension       Other     Pension       Other
                                   plans       plans       plans       plans
    -------------------------------------------------------------------------
    Defined contribution plans     $ 6.1       $ 0.1       $ 6.2       $ 0.1
    -------------------------------------------------------------------------
    Defined benefit plans

    Current service cost           $ 5.3       $ 0.4       $ 5.7       $ 0.3

    Interest cost                    7.1         0.4         6.3         0.3

    Projected return on plan
     assets                         (9.8)          -        (8.8)          -

    Amortization of actuarial
     losses and past service cost    0.3           -         0.3           -
    -------------------------------------------------------------------------
                                     2.9         0.8         3.5         0.6
    -------------------------------------------------------------------------
                                   $ 9.0       $ 0.9       $ 9.7       $ 0.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                 --------------------


    5.  Income Taxes

    The effective income tax rates were as follows:

                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
                                                             %             %
    -------------------------------------------------------------------------
    Combined statutory income tax rate                    31.6          32.3

    Changes
      Impact of federal tax rate decrease of 3.5%,
       spread until 2012, on future taxes
       ($11.4 in 2008)                                   (13.8)            -

       Share of earnings in a public company subject
        to significant influence                          (1.1)         (1.2)

       Other                                               0.4           0.2
    -------------------------------------------------------------------------
                                                          17.1          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:

                                                          Fiscal Year
                                                  -------------
    (Millions)                                            2008          2007
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding -
     Basic                                               114.0         114.8

    Dilutive effect under stock option plan and
     performance share units                               1.1           1.6
    -------------------------------------------------------------------------
    Weighted average number of shares outstanding -
     Diluted                                             115.1         116.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  -------------


    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             82         1.0           -           -         1.0

    Shares redeemed
     for cash,
     excluding
     premium of
     $31.5            (1,500)       (9.4)          -           -        (9.4)
    Conversion of
     shares               32         0.1         (32)       (0.1)          -
    -------------------------------------------------------------------------
    Balance as at
     December 22,
     2007            112,297     $ 704.9         772       $ 1.5     $ 706.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 December 22, 2007, 3,676,960 stock options were outstanding at
exercise prices varying from $11.80 to $39.17, with expiry dates up to 2014.
Of these stock options, 2,558,540 could be exercised for a weighted average
exercise price of $20.54.

                                                          Fiscal Year
                                                  -------------
                                                          2008          2007
    -------------------------------------------------------------------------
    Granted stock options during the period             53,800         4,500

    Weighted average exercise price                    $ 28.09       $ 35.71

    Weighted average fair value                         $ 7.54       $ 11.07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  -------------

    During the first quarter 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 3.8% (2007 - 3.9%), expected six-year term (2007 - six-year term),
anticipated volatility of 25% (2007 - 30%) and an anticipated 1.5% dividend
yield (2007 - 1.5%).
    The compensation expense for these stock options amounted to $0.3 for the
first quarter of 2008 (2007 - $0.4).


    Performance Share Unit Plan

    As of December 22, 2007, 146,432 performance share units (PSUs) were
outstanding. During the first quarter, 27,747 PSUs were granted following the
achievement of performance indicators related to fiscal 2007 (2007 - 29,270)
and 5,134 PSUs were cancelled (2007 - nil).
    At the end of the first quarter, 154,000 shares were held in trust for
participants until the PSUs shall have vested or been cancelled (2007 -
72,000). None of these shares have been acquired during this quarter.
    A compensation expense of $0.3 pertaining to PSUs was recorded in the
first quarter of 2008 (2007 - $0.2).


    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
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 $0.3 in 2008,
     nil in 2007)                                         (0.5)         (0.1)
    -------------------------------------------------------------------------
    Balance - end of period                              $ 0.7         $ 0.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  -------------


    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 is one of the 443 employers affected by the suit and
did not participate in managing the plan. The Company forcefully contests the
suit's merits and considers that it will have no future financial obligation
relating to this recourse. The Company has received notice from counsel for
the beneficiaries who have brought this suit indicating that he has received
instructions from his client to discontinue the proceedings against the
employers including the Company. Action to finalize the discontinuance is
being pursued.


    10. Management of Capital

    The Company maintains 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 first quarter results regarding its capital
management objectives were as follows:

    - a long-term debt/total capital ratio of 34.8% (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 14.9% over the last 12 months
      (17.4% for the 12 previous months);
    - a decrease in fully diluted net earnings per share of 3.2% over the
      last 12 months (37.8% 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. 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 2.8% 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.


    11. 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 December 22, 2007 presented the
following information:

    -------------------------------------------------------------------------
                 Fixed rate    Notional       Maturity           Fair value
                                 amount                         2008    2007
    -------------------------------------------------------------------------
    Interest
     rate swap
     contract       3.9480%      $ 50.0   November 23, 2008    $ 0.2   $ 0.2

    Interest
     rate swap
     contract       3.9820%      $ 50.0   December 16, 2009    $ 0.3   $ 0.2

    Interest
     rate swap
     contract       4.0425%      $ 50.0   December 16, 2010    $ 0.5   $ 0.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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:

                                                     12 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                        $ 0.9       $(0.9)      $ 1.4       $(1.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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 in the form of a
movable hypothec on the Company stock held by these merchants 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 December 22, 2007, 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 $7.8 ($28.3 in 2007) and no liability had been
recognized.

    Derivatives designated as cash-flow hedges

    With regards 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 December 22, 2007, 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; Source: METRO INC.; METRO INC.'s corporate
information and press releases are available on the Internet at the following
address: www.metro.ca


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