April 7, 2004

April 7, 2004 - METRO INC. Posted Net Earnings of $35.2 million in the Second Quarter of Fiscal 2004

Second Quarter Highlights

4.2% sales growth
Net earnings of $35.2 million
Fully diluted net earnings per share of $0.36
21.4% increase in quarterly dividend to $0.085 per share

(Montréal, April 7, 2004) – METRO announced today that the company sales grew 4.2% in the second quarter ended March 13, 2004 and 3.6% in the first half of the fiscal year to $1,270.7 million and $2,619.2 million respectively.

The food sector's sales increased 3.9% in the second quarter and 3.4% in the first half of the fiscal year. These increases can be attributed to the expansion of the retail network total floor space as a result of our ongoing investment program, and to the acquisition at the end of last year's third quarter of a grocery distributor serving small surface stores. Same store sales remained stable despite deflation of food prices, as compared to a 0.5% decrease in the current fiscal year's first quarter. In the second quarter, the Company implemented new merchandising programs for its Metro, Metro Plus and Super C banners.

The pharmaceutical sector's sales for the second quarter and first half increased by 7.5% and 6.5% respectively. These increases are the result of the continued development of Brunet drugstores and Clini- Plus pharmacies now totalling 177 at the end of the second quarter up from 164 in the same quarter last year.

During the first half of the fiscal year, the Company and the retailers invested $65.6 million in the retail network for a net expansion of 316,200 square feet. Major renovations and expansion of 16 stores were completed and 12 stores were opened.

Second quarter operating income (before interest and taxes)1 was $52.2 million versus $56.5 million for the same quarter of 2003, and represented 4.1% of sales versus 4.6% in 2003. This decrease is due to the deflation of food prices and the implementation of new merchandising strategies in the second quarter. Operating income for the first half of the fiscal year was $108.3 million or 4.1% of sales compared to $109.9 million or 4.3% of sales for the corresponding period of the previous fiscal year.

Financial expenses totalled $0.8 million for the second quarter and $2.1 million for the first half of the fiscal year compared to $0.7 million and $1.5 million for the corresponding periods of the previous fiscal year. Financing costs averaged 3.4% in the second quarter and 3.5% in the first half of the fiscal year compared to 3.8% and 3.6% for the corresponding periods last year. These increases in interest expenses are due to greater use of short-term bank loans.

The Company's financial position remains very solid with long-term debt of $8.3 million and a debt to equity ratio of 0.01:1. In the second quarter, Standard & Poor's Rating Services maintained the Company's long-term debt Credit Rating of “A-” with a stable trend.

Second quarter income taxes represent an actual tax rate of 31.5% versus 33.2% for the same quarter of the previous fiscal year. The tax rate for the first half of the fiscal year was 31.5% versus 33% for the corresponding period in 2003. These decreases in 2004 are due mainly to the reduction in the federal income tax rate.

Net earnings for the second quarter decreased by 5.6% to $35.2 million compared to $37.3 million for the same quarter of the previous fiscal year. Fully diluted net earnings per share stood at $0.36 compared to $0.37 last year.

Net earnings for the first half of fiscal 2004 increased slightly to $72.8 million from $72.6 million. Fully diluted net earnings per share for the first half grew 2.8% to $0.74 from $0.72 for the first half of the previous fiscal year.

Cash flows from operating activities for the second quarter totalled $51.6 million compared to $51.8 million for the same quarter last year. Cash flows for the first half of the fiscal year totalled $113.8 million in 2003 and $109.3 million in 2004. This change is due mainly to a payable portion of future income taxes related to the tax planning which ended last fiscal year and to collection of input tax credit receivables connected to this planning which were higher than last year.

Cash flows from investing activities amounted to $8.5 million in the second quarter of the current fiscal year as opposed to $24.8 million for the corresponding quarter of fiscal 2003. Over the first half, cash flows from investing activities totalled $64 million versus $51.1 million for the corresponding period. These variations are due mainly to the disposal of assets totalling $10.2 million in the second quarter of fiscal 2004 and by the $23.6 million stock subscription in Alimentation Couche-Tard Inc. in the first half.

On April 7, 2004, the Company's Board of Directors declared a quarterly dividend of $0.085 per Class A Subordinate Share and Class B Share, payable May 25, 2004, an increase of 21.4% over the dividend for the same quarter last year.

“We are confident that, with our ongoing retail investment programs and new merchandising strategies implemented during the second quarter, we can maintain our competitive position in an evolving food market,” stated Mr. Pierre H. Lessard, President and Chief Executive Officer.

1 Operating income is presented for information purposes only. It does not have a standardized meaning prescribed by Canadian GAAP and therefore may not be comparable to similar measures presented by other public companies.

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SOURCE: METRO INC.

INFORMATION:
L.G. Serge Gadbois, FCA
Senior Vice-President
Finance and Treasurer
(514) 643-1003

Gilles Roberge, APR
Senior Director
Corporate Affairs
(514) 643-1079

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