August 3, 2004

August 3, 2004 - METRO INC. Posted Net Earnings of $50.8 million in the Third Quarter of Fiscal 2004

Third Quarter Highlights

4.2% sales growth
Net earnings of $50.8 million
Fully diluted net earnings per share of $0.51

(Montréal, August 3, 2004) – METRO INC. announced today that company sales grew 4.2% in the third quarter ended July 3, 2004 and 3.9% in the first 40 weeks of fiscal 2004 to $1,814.1 million and $4,433.3 million respectively.

The food sector's sales increased 3.6% in the third quarter and 3.5% over the 40-week period. These increases can be attributed to the expansion of the total retail network floor space as a result of our ongoing investment program, as well as to the acquisition at the end of last year's third quarter of a grocery distributor serving small surface stores and to the implementation of new merchandising strategies in the second quarter. Same store sales rose slightly by 0.2% in the third quarter despite deflation of food prices.

The pharmaceutical sector's sales for the third quarter and first 40 weeks of 2004 increased by 11.4% and 8.5% respectively. These increases are the result of the continued development of Brunet drugstores and Clini-Plus pharmacies now totalling 176 at the end of the third quarter up from 171 in the same quarter last year.

During the first 40 weeks of the fiscal year, the Company and the retailers invested $121.8 million in the retail network for a net expansion of 404,000 square feet. Major renovations and expansions of 22 stores were completed and 16 new stores were opened.

Third quarter operating income (before interest and taxes)1 was $75.1 million versus $78 million for the same quarter of 2003, and represented 4.1% of sales versus 4.5% in 2003. Operating income for the first 40 weeks of the fiscal year was $183.4 million or 4.1% of sales compared to $187.9 million or 4.4% of sales for the corresponding period of the previous fiscal year. These decreases are due to the deflation of food prices and the implementation of new merchandising strategies in the second quarter.

Financial expenses totalled $1 million for the third quarter and $3.1 million for the first 40 weeks compared to $0.4 million and $1.9 million for the corresponding periods of the previous fiscal year. Financing costs averaged 3.3% in the third quarter and 3.4% in the first 40 weeks compared to 4.8% and 3.8% for the corresponding periods last year. These increases in interest expenses are due to greater use of short-term bank loans.

With a long-term debt of $10.2 million and a debt to equity ratio of 0.01:1, the Company's financial position is very solid.

Third quarter income taxes represent an actual tax rate of 31.4% versus 32.5% for the same quarter of the previous fiscal year. The tax rate for the first 40 weeks was 31.4% versus 32.8% 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 third quarter decreased by 3.1% to $50.8 million compared to $52.4 million for the same quarter of the previous fiscal year. Fully diluted net earnings per share stood at $0.51 compared to $0.53 last year.

Net earnings for the first 40 weeks of fiscal 2004 decreased 1.1% to $123.6 million from $125 million last year. Fully diluted net earnings per share for the 40-week period stood at $1.25, the same as last year.

Cash flows from operating activities for the third quarter totalled $96.2 million compared to $52.2 million for the same quarter last year. Cash flows for the 40-week period rose from $166 million in 2003 to $205.5 million in 2004. These changes are due mainly to the modification of certain fiscal rules effective in 2004.

Investing activities required $35.4 million in the third quarter of the current fiscal year as opposed to $46.3 million for the corresponding quarter of fiscal 2003. This decrease is due mainly to a drop in asset purchases. Over the first 40 weeks, cash flows from investing activities totalled $99.4 million versus $97.4 million for the corresponding period last year.

During the 40-week period, the Company has purchased in the normal course of its activities 839,300 of its Class A Subordinate Shares at an average price of $18.23 per share. The Company is authorized to purchase up to 4,000,000 of its Class A Subordinate Shares.

On August 3, 2004, the Company's Board of Directors declared a quarterly dividend of $0.085 per Class A Subordinate Share and Class B Share, payable August 31, 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, we will maintain our competitive position and achieve satisfactory results for the fiscal year,” 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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