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MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS

For the year ended September 25, 2021

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TABLE OF CONTENTS
	Page
Overview ............................................................................................................................................................................	13
Purpose, mission and strategy ......................................................................................................................................	13
Key performance indicators ............................................................................................................................................	14
Key achievements ............................................................................................................................................................	14
Event after the reporting period .....................................................................................................................................	15
Selected annual information ...........................................................................................................................................	16
Outlook ..............................................................................................................................................................................	16
Operating results ..............................................................................................................................................................	17
Quarterly highlights ..........................................................................................................................................................	19
Cash position ....................................................................................................................................................................	21
Financial position .............................................................................................................................................................	22
Sources of financing ........................................................................................................................................................	25
Contractual obligations ....................................................................................................................................................	26
Related party transactions ..............................................................................................................................................	26
Fourth quarter ...................................................................................................................................................................	27
Derivative financial instruments .....................................................................................................................................	29
Forward-looking information ...........................................................................................................................................	29
Non-IFRS measurements ...............................................................................................................................................	29
Controls and procedures ................................................................................................................................................	30
Significant judgments and estimates ............................................................................................................................	30
Risk management ............................................................................................................................................................	32
Management's responsibility for financial reporting ...................................................................................................	36
Independent auditors' report ..........................................................................................................................................	37
Annual consolidated financial statements ....................................................................................................................	41
.

The following Management's Discussion and Analysis sets out the financial position and consolidated results of METRO INC. for the fiscal year ended September 25, 2021, and should be read in conjunction with the annual consolidated financial statements and the accompanying notes as at September 25, 2021. This report is based upon information as at November 16, 2021 unless otherwise indicated. Additional information, including the Annual Information Form and Certification Letters for fiscal 2021, is available on the SEDAR website at www.sedar.com.

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OVERVIEW

The Corporation is a leader in food and pharmaceutical industry in Québec and Ontario.

The Corporation, as a retailer, franchisor or distributor, operates under different grocery banners in the conventional supermarket and discount segments. For consumers seeking a higher level of service and a greater variety of products, we operate 328 supermarkets under the Metro and Metro Plus banners. The 237 discount stores operating under the Super C and Food Basics banners offer products at low prices to consumers who are both cost and qualityconscious. The Adonis banner, which currently has 15 stores, is specialized in fresh products as well as Mediterranean and Middle-Eastern products. The Corporation also operates Première Moisson, a banner specialized in premium quality artisan bakery, pastry, and deli products. Première Moisson sells its products to the Corporation’s stores, to restaurants and other chains as well as directly to consumers in its 23 stores. The majority of the stores are owned by the Corporation or by structured entities and their financial statements are consolidated with those of the Corporation. Independent owners bound to the Corporation by leases or affiliation agreements operate a large number of Metro and Metro Plus stores. The corporation supplies these stores and their purchases are included in our sales. The Corporation also acts as a distributor for independent neighborhood grocery stores. Their purchases are included in the Corporation's sales.

The Corporation also acts as franchisor and distributor for 418 PJC Jean Coutu, PJC Health and PJC Health & Beauty drugstores as well as 157 Brunet Plus, Brunet, Brunet Clinique, and Clini Plus drugstores, held by pharmacist owners. The Corporation operates 74 drugstores in Ontario under Metro Pharmacy and Food Basics Pharmacy banners and their sales are included in the Corporation's sales. Sales also include the supply of non-franchised drugstores and various health centres. The Corporation is also active in generic drug manufacturing through its subsidiary Pro Doc Ltée.

PURPOSE, MISSION AND STRATEGY

For nearly 75 years, METRO has made its mark, first in Quebec and then in Ontario and New Brunswick, by meeting the nutrition and health needs of the communities it serves. Its organic and acquisition-led growth has positioned it today as a leader in the food and pharmacy sectors in Eastern Canada.

The 2018 acquisition of The Jean Coutu Group strengthens METRO's position in the health sector. The combination of these two leading companies creates a $18 billion retail leader to meet the growing needs of consumers in food, pharma, health and beauty.

METRO's purpose is a reflection of its increased presence in health and represents its current reality and aspirations. For METRO, nourishing the health and well-being of our communities is the work our employees undertake with excellence, day after day, to feed and serve the people of the communities where we operate.

Our purpose is based on four pillars, which are anchored in our daily practices and ways. These guide our actions and decisions, allowing us to fulfill our mission of exceeding our customers' expectations every day to earn their longterm loyalty.

Customer focus

We put the customer at the center of all our decisions in each of our banners. Offering them the best experience as well as quality products at competitive prices and professional health services to help them live healthier lives are at the heart of our actions.

Best team

We strive to attract and retain the best talent by offering them opportunities for development and advancement in a collaborative, healthy and safe environment where they can achieve their full potential. In addition, we are committed to ensure that our employees make a difference at work and in the communities where we live and work.

Operational Excellence

We set high operating standards and are results-oriented. We measure our performance systematically to be agile to our customers' needs and the competition.

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Financial Discipline

We deliver the expected results and achieve our objectives by managing our resources optimally and by exercising strict financial control.

The foundation of our business strategy remains corporate responsibility and the continued integration of ESG factors into our business model. We aim[(3)] to ensure that our actions bring value to METRO, and to our stakeholders - customers, employees, suppliers, shareholders and community partners.

KEY PERFORMANCE INDICATORS

We evaluate the Corporation's overall performance using the following principal indicators:

sales:

◦same-store sales growth;

◦average customer transaction size and number of transactions;
◦average weekly sales;
◦average weekly sales per square foot;
◦sales per hour worked by store to assess productivity;
◦percentage of sales represented by customers who are loyalty program members; ◦market share;
◦customer satisfaction;
gross margin percentage;
operating income before depreciation and amortization as a percentage of sales;
net earnings as a percentage of sales;
net earnings per share growth;
return on equity;
retail network investments: ◦dollar value and nature of store investments; ◦number of stores; ◦store square footage growth.

KEY ACHIEVEMENTS

Sales for Fiscal 2021 totalled $18,283.0 million, up 1.6% compared to $17,997.5 million for Fiscal 2020 as we cycled exceptionally strong sales last year due to the pandemic but up 9.0% over two years. Net earnings for Fiscal 2021 were $825.7 million compared with $796.4 million for Fiscal 2020, while fully diluted net earnings per share were $3.33 compared with $3.14 in 2020, up 3.7% and 6.1% respectively, and up 15.6% and 19.8% respectively on a twoyear basis. Adjusted net earnings[(1)] for Fiscal 2021 totalled $854.2 million compared with $829.1 million for Fiscal 2020, and adjusted fully diluted net earnings per share[(1)] amounted to $3.44 versus $3.27, up 3.0% and 5.2% respectively, and up 16.8% and 21.1% respectively over two years.

We realized several projects over the fiscal year, including the following major ones:

The crisis related to COVID-19 continued to test our resilience and adaptability throughout the year and all of our employees, our retailers, and pharmacist owners, as well as our supplier partners, worked together to provide our customers the essential services of food and pharmacy while never compromising on safety.
METRO, through the commitment of its affiliated pharmacists and their presence in the community, as well as through its participation in the establishment of four corporate vaccination clinics, has actively contributed to the campaign to immunize the population against COVID-19. To date, more than 540,000 vaccinations have been administered through our diverse initiatives.
In March 2020, METRO announced a $420 million investment over five years for the construction of a new, automated distribution centre for fresh and frozen products in Terrebonne, just north of Montréal, and the expansion of its produce and dairy products distribution centre in Laval. These investments will enable METRO

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to better meet the expectations of its current and future customers and to continue its growth. The new Terrebonne distribution centre is expected[(3)] to open in 2023, while the expansion of the Laval distribution centre is expected[(3) ] to be completed in 2024. We have invested almost $137 million in this project so far.

In October 2017, we announced a $400 million investment over six years in our Ontario distribution network. Phase 1 of the project, our new fresh distribution centre, was commissioned during the year and is now fully operational. The start-up of Phase 2, the frozen distribution facility, is expected[(3)] to occur in January 2022. Equipped with state-of-the-art technology, these facilities will help us improve service to our store network and offer greater product freshness and variety. METRO will be able to better meet the constantly evolving customer preferences and position itself as the retailer providing the best customer experience in each of its banners.
We have accelerated our plans to increase capacity of our online grocery service. During the year, we executed on the next phase of our omnichannel strategy with the opening of a dedicated store for online grocery serving Montréal. We also expanded our click-and-collect service, which is now available in 196 stores, and is expected[(3)] to exceed 200 by the end of fiscal 2022.
We completed the combination of pharmacy activities and best practices between METRO and the Jean Coutu Group with the integration of our McMahon distribution center into the modern Jean Coutu Group facility in Varennes.
We continued to invest in our retail network. In Québec, we opened two Metro Plus stores and one Adonis store, we also relocated a Metro Plus store, and we carried out major renovations and expansions at four other stores. In Ontario, we opened a Food Basics store, and carried out major renovations and expansions at five other stores.
In 2021, we invested a record level of capital expenditures of nearly $600 million related to the Company's major projects including supply chain modernization, store network and omnichannel strategy.
In 2021, we focused our efforts on key Corporate Responsibility programs that will continue with a long-term vision. The health and safety of our colleagues and customers remained the number one priority throughout this pandemic year. We have multiplied our initiatives in support of local purchasing at a time when our customers are looking more than ever for these products, structured our approach to deploy our packaging and printing materials optimization actions and continued our efforts to reduce our greenhouse gas emissions more efficiently. Our One More Bite Food Donation Program continued in a context where the demand for food aid has exploded.

Together with the management team, we worked to develop our Corporate Responsibility 2022-2026 Plan. We paid particular attention to identifying our priorities, goals and targets, as well as solidifying our disclosure practices and tools.

EVENT AFTER THE REPORTING PERIOD

On November 30, 2021, the Corporation issued through a private placement Series J unsecured senior notes in the aggregate principal amount of $300.0 million, bearing interest at a fixed nominal rate of 1.92%, maturing on December 2, 2024. In conjunction with this offering, Metro entered into a $300.0 million interest rate swap effectively locking in a floating rate of interest of 11 basis points (0.11%) over the 3-month bankers' acceptance rate (CDOR) over the life of the Series J Notes. On December 1, 2021, the Corporation redeemed all of the Series C notes, bearing interest at a fixed nominal rate of 3.2%, in the amount of $300.0 million that matured on the same day.

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SELECTED ANNUAL INFORMATION

	2021	2020	Change	2019	Change	Change 2021 vs 2019
(Millions of dollars, unless otherwise indicated)			%		%	%
Sales	18,283.0	17,997.5	1.6	16,767.5	7.3	9.0
Net earnings attributable to equity holders
of the parent	823.0	795.2	3.5	711.6	11.7	15.7
Net earnings attributable to non-controlling
interests	2.7	1.2	125.0	2.8	(57.1)	(3.6)
Net earnings	825.7	796.4	3.7	714.4	11.5	15.6
Basic net earnings per share	3.34	3.15	6.0	2.79	12.9	19.7
Fully diluted net earnings per share	3.33	3.14	6.1	2.78	12.9	19.8
Adjusted net earnings(1)	854.2	829.1	3.0	731.6	13.3	16.8
Adjusted fully diluted net earnings per share(1)	3.44	3.27	5.2	2.84	15.1	21.1
Return on equity_(%)_	13.1	13.1	—	12.3	—	—
Dividends per share_(Dollars)_	0.9750	0.8750	11.4	0.7800	12.2	25.0
Total assets	13,592.1	13,423.9	1.3	11,073.9	21.2	22.7
Current and non-currentportions of debt	2,636.7	2,632.6	0.2	2,657.6	(0.9)	(0.8)

Sales for Fiscal 2021 totalled $18,283.0 million, up 1.6% compared to $17,997.5 million for Fiscal 2020 as we cycled exceptionally strong sales last year due to the pandemic but up 9.0% over two years. Sales for fiscal 2020 totalled $17,997.5 million versus $16,767.5 million for fiscal 2019, an increase of 7.3%. Excluding the impact of IFRS 16 Leases adopted in the first quarter of fiscal 2020, sales were up 7.7%.

Net earnings for fiscal 2021, 2020 and 2019 totalled $825.7 million, $796.4 million and $714.4 million, respectively, while fully diluted net earnings per share amounted to $3.33, $3.14 and $2.78. Taking into account the items relating to fiscal 2021 and fiscal 2020 shown in the “Net earnings adjustments” table in the “Operating results” section, as well as for fiscal 2019, the retail network restructuring expenses and a net gain on the divestiture of pharmacies, adjusted net earnings[(1)] for fiscal 2021 stood at $854.2 million compared with $829.1 million for fiscal 2020 and $731.6 million for fiscal 2019, while adjusted fully diluted net earnings per share[(1)] was $3.44 for 2021 compared with $3.27 for 2020 and $2.84 for 2019, up 5.2% and 15.1% respectively.

Total assets reached $13,592.1 million in 2021, $13,423.9 in 2020 compared with $11,073.9 million in 2019, an increase of 21.2% in 2020 mainly attributable to the recognition in 2020 of right-of-use assets totalling $1,150.5 million and current and non-current accounts receivable on subleases totalling $684.3 million following the adoption of IFRS 16.

Return on equity in 2021 and 2020 was 13.1% compared with 12.3% in 2019 due to the strong increase in net earnings in the fiscals 2021 and 2020 and to the share buybacks carried out during those fiscal years.

OUTLOOK[(3)]

While it is difficult to predict how our customers’ habits, the labour market and food basket inflation will evolve over the short term, the fundamentals of our business remain strong, and our sales continue to compare favourably to prepandemic levels. Our industry is experiencing cost inflation pressures, mostly with respect to cost of goods sold, however we will strive to continue to offer the best value possible to our customers. Our investments in our supply chain modernization projects remain on track with only minor delays due to the pandemic, and our ecommerce footprint continues to grow at a measured pace. As we begin a new fiscal year, our steadfast focus is on exceeding our customers’ expectations every day while delivering on our strategic priorities.

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OPERATING RESULTS

SALES

Sales for Fiscal 2021 totalled $18,283.0 million, up 1.6% compared to $17,997.5 million for Fiscal 2020 as we cycled exceptionally strong sales last year due to the pandemic but up 9.0% over two years. Food same-store sales were up 1.5% (up 9.7% in 2020) and increased 11.3% compared to 2019. Online food sales in 2021 increased by 60% versus last year while online sales nearly tripled in 2020. Pharmacy same-store sales were up 3.4% (4.3% in 2020), with a 6.3% increase in prescription drugs and a 2.5% decrease in front-store sales.

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

This earnings measurement excludes financial costs, taxes, depreciation and amortization.

Operating income before depreciation and amortization for Fiscal 2021 totalled $1,732.5 million or 9.5% of sales, up 2.9% versus last year. During Fiscal 2020, we recognized a loss of $7.5 million on the disposal of our meal-kit subsidiary. Excluding this item, adjusted operating income before depreciation and amortization[(2)] for Fiscal 2021 increased by 2.4% versus last year.

Operating income before depreciation and amortization adjustments (OI)[(2)]

(Millions of dollars, unless otherwise indicated)	2021 2020 OI Sales *(%)* OI Sales (%) 1,732.5 18,283.0 9.5 1,683.6 17,997.5 9.4 — 7.5
Operating income before depreciation and amortization Loss on disposal of a subsidiary
Adjusted operating income before depreciation and amortization(2)	1,732.5 18,283.0 9.5 1,691.1 17,997.5 9.4

Gross margin on sales for Fiscal 2021 was 20.0% versus 19.9% for Fiscal 2020.

Operating expenses as a percentage of sales for Fiscal 2021 were 10.5%, flat versus Fiscal 2020. The costs related to COVID-19 for Fiscal 2021 were approximately $104 million, including $24 million of gift cards to front-line employees, compared to $137 million in 2020. This decrease of $33 million was offset by an increase in other operating expenses, mainly related to activities and services that have been reinstated after initially being halted at the start of the pandemic, and non-recurring costs of approximately $10 million related to the transition to our new fresh distribution center in Ontario.

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

Total depreciation and amortization expense for Fiscal 2021 was $478.3 million versus $462.5 million for Fiscal 2020. This increase reflects the additional investments in supply chain and logistics as well as in-store technology.

Net financial costs for Fiscal 2021 were $133.5 million compared with $136.8 million for 2020.

INCOME TAXES

The income tax expense of $295.0 million for Fiscal 2021 represented an effective tax rate of 26.3% compared with an income tax expense of $287.9 million for Fiscal 2020 which represented an effective tax rate of 26.6%.

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NET EARNINGS AND ADJUSTED NET EARNINGS[(1)]

Net earnings for Fiscal 2021 were $825.7 million compared with $796.4 million for Fiscal 2020, while fully diluted net earnings per share were $3.33 compared with $3.14 in 2020, up 3.7% and 6.1% respectively, and up 15.6% and 19.8% respectively on a two-year basis. Excluding the specific items shown in the table below, adjusted net earnings[(1)] for Fiscal 2021 totalled $854.2 million compared with $829.1 million for Fiscal 2020, and adjusted fully diluted net earnings per share[(1)] amounted to $3.44 versus $3.27, up 3.0% and 5.2% respectively, and up 16.8% and 21.1% respectively over two years. The impact of the labour conflict at the Jean Coutu distribution center in the first quarter of Fiscal 2021, was approximately $0.05 per share.

Net earnings adjustments[(1)]

	2021 (Millions of dollars) Fully diluted EPS (Dollars) 825.7 3.33 — 28.5	2020 Change(%) (Millions of dollars) Fully diluted EPS (Dollars) Net earnings Fully diluted EPS 796.4 3.14 3.7 6.1 4.2 28.5
Net earnings Loss on disposal of a subsidiary, after taxes Amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition,after taxes
Adjusted net earnings(1)	854.2 3.44	829.1 3.27 3.0 5.2

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QUARTERLY HIGHLIGHTS

(Millions of dollars, unless otherwise indicated)	2021	2020	Change (%)
Sales
Q1(4)	4,278.2	4,029.8	6.2
Q2(4)	4,193.0	3,988.9	5.1
Q3(5)	5,719.8	5,835.2	(2.0)
Q4(4)	4,092.0	4,143.6	(1.2)
Fiscal	18,283.0	17,997.5	1.6
Net earnings
Q1(4)	191.2	170.2	12.3
Q2(4)	188.1	176.2	6.8
Q3(5)	252.4	263.5	(4.2)
Q4(4)	194.0	186.5	4.0
Fiscal	825.7	796.4	3.7
Adjusted net earnings(1)
Q1(4)	197.7	180.9	9.3
Q2(4)	194.7	182.8	6.5
Q3(5)	261.2	272.3	(4.1)
Q4(4)	200.6	193.1	3.9
Fiscal	854.2	829.1	3.0
*Fully diluted net earnings per share(Dollars)***
Q1(4)	0.76	0.67	13.4
Q2(4)	0.75	0.69	8.7
Q3(5)	1.03	1.04	(1.0)
Q4(4)	0.79	0.74	6.8
Fiscal	3.33	3.14	6.1
Adjusted fully diluted net earnings per share(1) *(Dollars)*
Q1(4)	0.79	0.71	11.3
Q2(4)	0.78	0.72	8.3
Q3(5)	1.06	1.08	(1.9)
Q4(4)	0.81	0.77	5.2
Fiscal	3.44	3.27	5.2

(4) 12 weeks

(5) 16 weeks

Sales in the first quarter of Fiscal 2021 reached $4,278.2 million, up 6.2% compared to $4,029.8 million in the first quarter of Fiscal 2020. Food same-store sales were up 10.0% (1.4% in 2020). Online food sales increased by about 170% versus last year. Our food basket inflation was approximately 2.5% (2.0% in 2020). Pharmacy same-store sales were up 1.3% (3.6% in 2020), with a 4.0% increase in prescription drugs and a 3.8% decrease in front-store sales, mainly due to lower traffic, the milder cold and flu season, and reduced promotional activity during the labour conflict. Our warehouse sales to franchisees were impacted by the labour conflict at our Jean Coutu distribution center which had a dampening effect on the total sales increase of the Corporation.

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Sales in the second quarter of Fiscal 2021 reached $4,193.0 million, up 5.1% compared to $3,988.9 million in the second quarter of 2020. Food same-store sales were up 5.5% (9.7% in 2020) and were up 10.1% for the first 10 weeks of the quarter as we experienced an unprecedented surge in sales in the last two weeks of the second quarter last year due to the pandemic. Online food sales increased by about 240% versus last year. Our food basket inflation was approximately 2.0% (2.0% in 2020). Pharmacy same-store sales were down 0.8% (up 7.9% in 2020), with a 4.2% increase in prescription drugs and a 10.5% decrease in front-store sales. This decrease is mainly due to restrictions on sales of non-essential products in Quebec for a period of six weeks during the quarter, the milder cold and flu season, and the pandemic-related increase in sales experienced at the end of the second quarter last year.

Sales in the third quarter of Fiscal 2021 remained strong, reaching $5,719.8 million, down 2.0% compared to $5,835.2 million in the third quarter of 2020 as we cycled the peak sales experienced at the start of the pandemic but up 9.4% over two years. Food same-store sales were down 3.6% versus the same quarter last year (up 15.6% in 2020) but increased 11.4% compared to the third quarter of 2019. Online food sales increased by 19% versus last year (about 300% in 2020). Our food basket inflation was approximately 1.0% (3.0% in 2020). Pharmacy same-store sales were up 7.6% (1.0% in 2020), with a 9.3% increase in prescription drugs and a 3.8% increase in front-store sales.

Sales in the fourth quarter of Fiscal 2021 remained strong, reaching $4,092.0 million, down 1.2% compared to $4,143.6 million in the fourth quarter of 2020 as we cycled exceptionally strong sales last year due to the pandemic but up 6.0% over two years. Food same-store sales were down 2.9% versus the same quarter last year (up 10.0% in 2020) but increased 6.8% compared to the fourth quarter of 2019. Online food sales were flat versus last year (up about 160% in 2020). Our food basket inflation was approximately 2.0% (1.0% in the third quarter of 2021). Pharmacy same-store sales were up 4.1% (5.5% in 2020), with a 6.7% increase in prescription drugs and a 1.1% decrease in front-store sales as the prior year included a significant uplift in sales of COVID-19 related products such as masks and sanitizers.

Net earnings for the first quarter of Fiscal 2021 were $191.2 million compared with $170.2 million for the first quarter of Fiscal 2020, while fully diluted net earnings per share were $0.76 compared with $0.67 in 2020, up 12.3% and 13.4%, respectively. Excluding from the first quarter of Fiscals 2021 and 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $8.9 million and from the first quarter of Fiscal 2020 the $7.5 million loss on disposal of a subsidiary as well as income taxes relating to these items, adjusted net earnings[(1)] for the first quarter of Fiscal 2021 totalled $197.7 million compared with $180.9 million for the corresponding quarter of 2020 and adjusted fully diluted net earnings per share[(1)] amounted to $0.79 compared with $0.71, up 9.3% and 11.3%, respectively. The impact of the labour conflict at the Jean Coutu distribution center was approximately $0.05 per share resulting from lower revenues and additional costs incurred to implement our contingency plan.

Net earnings for the second quarter of Fiscal 2021 were $188.1 million compared with $176.2 million for the second quarter of 2020, while fully diluted net earnings per share were $0.75 compared with $0.69 in 2020, up 6.8% and 8.7%, respectively. Excluding from the second quarter of Fiscals 2021 and 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $8.9 million as well as income taxes relating to these items, adjusted net earnings[(1)] for the second quarter of Fiscal 2021 totalled $194.7 million compared with $182.8 million for the corresponding quarter of 2020 and adjusted fully diluted net earnings per share[(1)] amounted to $0.78 compared with $0.72, up 6.5% and 8.3%, respectively.

Net earnings for the third quarter of Fiscal 2021 were $252.4 million compared with $263.5 million for the third quarter of 2020, while fully diluted net earnings per share were $1.03 compared with $1.04 in 2020, down 4.2% and 1.0%, respectively but up 13.5% and 19.8% respectively on a two-year basis. Excluding from the third quarter of Fiscals 2021 and 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $11.9 million as well as income taxes relating to these items, adjusted net earnings[(1)] for the third quarter of Fiscal 2021 totalled $261.2 million compared with $272.3 million for the corresponding quarter of 2020 and adjusted fully diluted net earnings per share[(1)] amounted to $1.06 compared with $1.08, down 4.1% and 1.9%, respectively but up 13.4% and 17.8% respectively over two years.

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Net earnings for the fourth quarter of Fiscal 2021 were $194.0 million compared with $186.5 million for the fourth quarter of 2020, while fully diluted net earnings per share were $0.79 compared with $0.74 in 2020, up 4.0% and 6.8%, respectively and up 15.9% and 19.7% respectively on a two-year basis. Excluding from the fourth quarter of Fiscals 2021 and 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $9.0 million as well as income taxes relating to these items, adjusted net earnings[(1)] for the fourth quarter of Fiscal 2021 totalled $200.6 million compared with $193.1 million for the corresponding quarter of 2020 and adjusted fully diluted net earnings per share[(1)] amounted to $0.81 compared with $0.77, up 3.9% and 5.2% respectively, and up 15.3% and 19.1% respectively over two years.

(Millions of dollars)	2021 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 191.2 188.1 252.4 194.0 170.2 176.2 263.5 186.5 — — — — 4.2 — — — 6.5 6.6 8.8 6.6 6.5 6.6 8.8 6.6
Net earnings Loss on disposal of a subsidiary, after taxes Amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition,after taxes
Adjusted net earnings(1)	197.7 194.7 261.2 200.6 180.9 182.8 272.3 193.1

(Dollars)	2021 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 0.76 0.75 1.03 0.79 0.67 0.69 1.04 0.74 0.03 0.03 0.03 0.02 0.04 0.03 0.04 0.03
Fully diluted net earnings per share Adjustments impact
Adjusted fully diluted net earnings per share(1)	0.79 0.78 1.06 0.81 0.71 0.72 1.08 0.77

CASH POSITION

OPERATING ACTIVITIES

Operating activities generated cash inflows of $1,583.3 million in Fiscal 2021 compared with $1,474.1 million in Fiscal 2020. This difference resulted primarily from the increase in earnings and the change in non-cash working capital items that generated cash inflows of $162.2 million in 2021 compared with cash outflows of $34.5 million in 2020, partly offset by the increase in taxes paid in 2021.

INVESTING ACTIVITIES

In Fiscal 2021, investing activities required cash outflows of $471.6 million compared with $444.1 million for Fiscal 2020. This difference stemmed mainly from higher investments in tangible and intangible assets and investment properties of $88.6 million in 2021, partly offset by the buyout of minority interests in Groupe Première Moisson Inc. in the amount of $51.6 million in the first quarter of 2020.

During Fiscal 2021, we and our retailers opened 4 stores, carried out major expansions and renovations of 9 stores and relocated 1 store for a net increase of 260,000 square feet or 1.3% of our food retail network.

FINANCING ACTIVITIES

Financing activities required cash outflows of $1,107.4 million in Fiscal 2021 compared with $861.9 million in Fiscal 2020. This difference resulted also from higher share repurchases of $239.1 million in 2021.

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FINANCIAL POSITION

We do not anticipate[(3)] any liquidity risk and consider our financial position at the end of Fiscal 2021 as very solid. We had an unused authorized revolving credit facility of $600.0 million. Our non-current debt and lease liabilities represented 40.0% of the combined total of non-current debt, lease liabilities and equity (non-current debt and lease liabilities/total capital).

At the end of Fiscal 2021, the main elements of our non-current debt were as follows:

			Balance
	Interest Rate	Maturity	(Millions of dollars)
Revolving Credit Facility	Rates fluctuate with changes in bankers'
	acceptance rates	September 3, 2026	—
Series C Notes	3.20% fixed rate	December 1, 2021	300.0
Series F Notes	2.68% fixed rate	December 5, 2022	300.0
Series G Notes	3.39% fixed rate	December 6, 2027	450.0
Series B Notes	5.97% fixed rate	October 15, 2035	400.0
Series D Notes	5.03% fixed rate	December 1, 2044	300.0
Series H Notes	4.27% fixed rate	December 4, 2047	450.0
Series I Notes	3.41% fixed rate	February28,2050	400.0

The Corporation reclassified the Series C Notes of $300.0 million to current liabilities as it matures on December 1, 2021. On November 30, 2021, the Corporation issued through a private placement Series J unsecured senior notes in the aggregate principal amount of $300.0 million and redeemed the Series C notes, in the amount of $300.0 million that matured on the same day. For more details, see the Event after the reporting period section.

Our main financial ratios were as follows:

	As at	As at
	September 25, 2021	September 26, 2020
Financial structure
Non-current debt_(Millions of dollars)_	2,618.2	2,612.0
Non-current lease liabilities_(Millions of dollars)_	1,657.5	1,811.4
	4,275.7	4,423.4
Equity (Millions of dollars)	6,412.8	6,155.4
Non-current debt and lease liabilities/total capital (%)	40.0	41.8

Since the Corporation refinanced the Series C Notes presented under current debt, the amount of $300.0 million was added to non-current debt when calculating the ratio of non-current debt and lease liabilities/total capital. For more details, see the Event after the reporting period section.

	2021	2020
Interest Coverage Ratio
Operatingincome before depreciation and amortization/Financial costs_(Times)_	13.0	12.3

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CAPITAL STOCK

CAPITAL STOCK
(Thousands)	Common Shares issued 2021 2020
Balance – beginning of year Share redemption Stock options exercised	250,795 254,440 (7,850) (3,910) 446 265
Balance – end ofyear	243,391 250,795
Balance as at December 1,2021 and November 27,2020	241,560 249,746
(Thousands)	Treasuryshares
	2021 2020
Balance – beginning of year Acquisition Release	552 577 — 112 (110) (137)
Balance – end ofyear	442 552
Balance as at December 1,2021 and November 27,2020	442 552

STOCK OPTIONS PLAN

STOCK OPTIONS PLAN
	As at	As at	As at
	December 1, 2021	September 25, 2021	September 26,2020
Stock options_(Thousands)_	2,300	2,318	2,322
Exercise prices (Dollars)	35.42 to 57.81	35.42 to 57.81	21.90 to 56.92
Weighted average exerciseprice_(Dollars)_	46.78	46.69	41.27
PERFORMANCE SHARE UNIT PLAN
	As at	As at	As at
	December 1, 2021	September 25, 2021	September 26,2020
Performance share units_(Thousands)_	615	615	618

NORMAL COURSE ISSUER BID PROGRAM

Under the normal course issuer bid program covering the period between November 25, 2020 and November 24, 2021, the Corporation repurchased 8,500,000 Common Shares at an average price of $58.55, for a total consideration of $497.7 million.

The Corporation decided to renew the issuer bid program as an additional option for using excess funds. Thus, the Corporation will be able to repurchase, in the normal course of business, between November 25, 2021 and November 24, 2022, up to 7,000,000 of its Common Shares representing approximately 2.9% of its issued and outstanding shares on November 11, 2021. Repurchases will be made through the facilities of the Toronto Stock Exchange at market price, in accordance with its policies and regulations, or through the facilities of alternative trading systems as well as by other means as may be permitted by a securities regulatory authority, including by private agreements. Between November 25, 2021 and December 1, 2021, the Corporation has repurchased 400,000 Common Shares at an average price of $62.14 for a total consideration of $24.9 million.

DIVIDEND

For the 27[th] consecutive year, the Corporation paid quarterly dividends to its shareholders. The annual dividend increased by 11.4%, to $0.9750 per share compared to $0.8750 in 2020, for total dividends of $240.1 million in 2021 compared to $220.7 million in 2020.

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SHARE TRADING

The value of METRO shares remained in the $52.63 to $66.25 range throughout fiscal 2021 ($49.03 to $64.61 in 2020). A total of 141.6 million shares traded on the TSX during this fiscal year (156.7 million in 2020). The closing price on Friday, September 24, 2021 was $60.18, compared to $64.02 at the end of fiscal 2020. Since fiscal year-end, the value of METRO shares has remained in the $59.14 to $66.36 range. The closing price on December 1, 2021 was $60.68. METRO shares have maintained sustained growth over the last 10 years.

COMPARATIVE SHARE PERFORMANCE (10 YEARS)*

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CONTINGENCIES

In the normal course of business, various proceedings and claims are instituted against the Corporation. The Corporation contests the validity of these claims and proceedings and at this stage, the Corporation does not believe that these matters will have a material effect on the Corporation's financial position or on consolidated earnings. However, since any litigation involves uncertainty, it is not possible to predict the outcome of these litigations or the amount of potential losses. No accruals or provisions for contingent losses have been recognized in the Corporation’s annual consolidated financial statements.

In May 2019, two proposed class actions relating to opioids were filed in Ontario and in Québec by opioid end users against a large group of defendants including, in Québec, a subsidiary of the Corporation, Pro Doc Ltée and, in Ontario, Pro Doc Ltée and The Jean Coutu Group (PJC) Inc. In February 2020, a proposed class action relating to opioids was filed in British Columbia by opioid end users against a large group of defendants including subsidiaries of the Corporation, Pro Doc Ltée. and The Jean Coutu Group (PJC) Inc. In April 2021, multiple defendants, including Pro Doc Ltée and The Jean Coutu Group (PJC) Inc., were served with a proposed class action relating to opioids and filed by the City of Grande Prairie, in Alberta. In September 2021, multiple defendants, including Pro Doc Ltée and The Jean Coutu Group (PJC) Inc., were served with a proposed class action relating to opioids and filed by the Peter Ballantyne Cree Nation and the Lac La Ronge Indian Band, in Saskatchewan. The allegations in these proposed class actions are similar to the allegations contained in the proposed class action filed by the Province of British Columbia in August 2018 against numerous manufacturers and distributors of opioids, including subsidiaries of the Corporation, Pro Doc Ltée and The Jean Coutu Group (PJC) Inc. All these proposed class actions contain allegations of breach of the Competition Act , of fraudulent misrepresentation and deceit, and negligence. The Province of British Columbia seeks damages (unquantified) on behalf of all federal, provincial and territorial governments and agencies for expenses allegedly incurred in paying for opioid prescriptions and other healthcare costs that would be related to

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opioid addiction and abuse while the Ontario, Québec and British Columbia proposed claims filed by opioid end users seek recovery of damages on behalf of opioid end users in general. The City of Grande Prairie, on its behalf and on behalf of all Canadian municipalities and local governments, seeks damages which are unquantified in relation to public safety, social service, and criminal justice costs allegedly incurred due to the opioid crisis. The Peter Ballantyne Cree Nation and the Lac La Ronge Indian Band are attempting a similar recourse, claiming unquantified damages from multiple defendants on their own behalf and on behalf of all Indigenous, Metis, First Nations and Inuit communities and governments in Canada. The Corporation believes these proceedings are without merits and that, in certain cases, there is no jurisdiction. No provision for contingent losses has been recognized in the Corporation’s annual consolidated financial statements.

In October 2017, the Canadian Competition Bureau began an investigation into the supply and sale of commercial bread which involves certain Canadian suppliers and retailers, including the Corporation. Based on the information available to date, the Corporation does not believe that it or any of its employees have violated the Competition Act . Proposed class-action lawsuits have also been filed against the Corporation, suppliers and other retailers. On December 19, 2019, the Québec Superior Court granted the application for authorization to institute one of these class actions, the authorization process being merely a procedural step and the judgment in no way decides the case on the merits. The Corporation is contesting all these actions at the certification stage and on the merits. No provision for contingent losses has been recognized in the Corporation’s annual consolidated financial statements.

During the 2016 fiscal year, an application for authorization to institute a class action was served on The Jean Coutu Group (PJC) Inc. by Sopropharm, an association incorporated under the Professional Syndicates Act of which certain franchised drugstore owners of the Jean Coutu Group are members. The application seeks to have the class action authorized in the form of a declaratory action seeking amongst others (i) to set aside certain contractual provisions of the Jean Coutu Group’s standard franchise agreements, including the clause providing for the payment of royalties on sales of medication by franchised establishments; (ii) to restore certain benefits; and (iii) to reduce certain contractual obligations. On November 1, 2018, the Court granted the application for authorization to institute a class action, the authorization process being merely a procedural step and the judgment in no way decides the case on the merits. The Corporation contests this action on the merits. No provision for contingent losses has been recognized in the Corporation's annual consolidated financial statements.

SOURCES OF FINANCING

Our operating activities generated in 2021 cash flows in the amount of $1,583.3 million. These cash flows were used to finance our investing activities, including $599.3 million in fixed asset and intangible asset acquisitions, to redeem shares for an amount of $456.3 million, to pay dividends of $240.1 million, to reimburse interest on debt of $109.1 million and to pay lease liabilities (principal and interest), nets of payments and interest received from subleases totalling $204.8 million, as well as to carry out other investing and financing activities.

At the end of fiscal 2021, our financial position mainly consisted of cash and cash equivalents in the amount of $445.8 million, an unused authorized Revolving Credit Facility of $600.0 million maturing in 2026, Series C Notes in the amount of $300.0 million maturing in 2021, Series F Notes in the amount of $300.0 million maturing in 2022, Series G Notes in the amount of $450.0 million maturing in 2027, Series B Notes in the amount of $400.0 million maturing in 2035, Series D Notes in the amount of $300.0 million maturing in 2044, Series H Notes in the amount of $450.0 million maturing in 2047 and Series I Notes in the amount of $400.0 million maturing in 2050.

We believe[(3)] that cash flows from next year's operating activities will be sufficient to finance the Corporation's current investing activities.

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CONTRACTUAL OBLIGATIONS

Payment commitments by fiscal year (capital and interest)

				Service
			Lease	contract
(Millions of dollars)	Loans	Notes	liabilities	commitments	Total
2022	20.4	396.7	313.5	149.0	879.6
2023	3.5	388.4	309.2	129.5	830.6
2024	1.8	87.1	287.3	45.6	421.8
2025	1.4	87.1	252.0	29.9	370.4
2026	1.2	87.1	214.9	16.7	319.9
2027 and thereafter	29.2	3,234.2	795.7	3.9	4,063.0
	57.5	4,280.6	2,172.6	374.6	6,885.3

RELATED PARTY TRANSACTIONS

During fiscal 2021, we supplied drugstores held by a member of the Board of Directors. These transactions were carried out in the normal course of business and recorded at exchange value. They are itemized in note 23 to the consolidated financial statements.

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FOURTH QUARTER

(Millions of dollars, except for net earnings per share)	2021	2020	Change(%)
Sales	4,092.0	4,143.6	(1.2)
Operating income before depreciation and amortization	403.6	403.5	—
Adjusted operating income before depreciation and amortization(1)	403.6	403.5	—
Net earnings	194.0	186.5	4.0
Adjusted net earnings(1)	200.6	193.1	3.9
Fully diluted net earnings per share	0.79	0.74	6.8
Adjusted fully diluted net earnings per share(1)	0.81	0.77	5.2
Cash flows from:
Operating activities	415.3	415.8	—
Investing activities	(187.3)	(181.9)	—
Financingactivities	(193.2)	(159.0)	—

OPERATING RESULTS

SALES

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

This earnings measurement excludes financial costs, taxes, depreciation and amortization.

Operating income before depreciation and amortization for the fourth quarter of Fiscal 2021 totalled $403.6 million, or 9.9% of sales and remained stable versus the corresponding quarter of Fiscal 2020.

Gross margin on sales for the fourth quarter of Fiscal 2021 was 20.4% versus 20.2% for the corresponding quarter of 2020.

Operating expenses as a percentage of sales for the fourth quarter of Fiscal 2021 were 10.5% versus 10.4% for the corresponding quarter of 2020. COVID-19 related expenses for the fourth quarter of Fiscal 2021 were approximately $9 million versus approximately $27 million in the same quarter last year. This decrease was offset by an increase in costs related to activities and services that were reinstated after initially being halted at the start of the pandemic.

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

Total depreciation and amortization expense for the fourth quarter of Fiscal 2021 was $110.8 million versus $118.5 million for the corresponding quarter of 2020. In the fourth quarter of 2020, we recorded accelerated amortization totalling $10.7 million related to the opening of our new fresh products distribution centre in Ontario.

Net financial costs for the fourth quarter of Fiscal 2021 were $28.7 million compared with $30.8 million for the corresponding quarter of 2020.

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INCOME TAXES

The income tax expense of $70.1 million for the fourth quarter of Fiscal 2021 represented an effective tax rate of 26.5% compared with an income tax expense of $67.7 million in the fourth quarter of Fiscal 2020 which represented an effective tax rate of 26.6%.

NET EARNINGS AND ADJUSTED NET EARNINGS[(1)]

Net earnings for the fourth quarter of Fiscal 2021 were $194.0 million compared with $186.5 million for the corresponding quarter of 2020, while fully diluted net earnings per share were $0.79 compared with $0.74 in 2020, up 4.0% and 6.8% respectively, and up 15.9% and 19.7% respectively on a two-year basis. Excluding the specific items shown in the table below, adjusted net earnings[(1)] for the fourth quarter of Fiscal 2021 totalled $200.6 million compared with $193.1 million for the corresponding quarter of 2020, and adjusted fully diluted net earnings per share[(1)] amounted to $0.81 versus $0.77, up 3.9% and 5.2% respectively, and up 15.3% and 19.1% respectively over two years.

Net earnings adjustments[(1)]

	12 weeks / Fiscal Year 2021 2020 Change(%) (Millions of dollars) Fully diluted EPS (Dollars) (Millions of dollars) Fully diluted EPS (Dollars) Net earnings Fully diluted EPS 194.0 0.79 186.5 0.74 4.0 6.8 6.6 6.6	12 weeks / Fiscal Year 2021 2020 Change(%) (Millions of dollars) Fully diluted EPS (Dollars) (Millions of dollars) Fully diluted EPS (Dollars) Net earnings Fully diluted EPS 194.0 0.79 186.5 0.74 4.0 6.8 6.6 6.6
Net earnings Amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition,after taxes
Adjusted net earnings(1)	200.6 0.81	193.1 0.77 3.9 5.2

CASH POSITION

Operating activities

Operating activities generated cash inflows of $415.3 million in the fourth quarter of fiscal 2021 compared with $415.8 million for the corresponding quarter of fiscal 2020. Higher benefits in the fourth quarter of 2021 offset higher taxes paid in the quarter.

Investing activities

Investing activities required cash outflows of $187.3 million in the fourth quarter of fiscal 2021 compared with $181.9 million for the corresponding quarter of fiscal 2020. This difference stemmed mainly from higher investments in tangible and intangible assets and investment properties of $12.5 million in 2021.

Financing activities

In the fourth quarter of 2021, financing activities required cash outflows of $193.2 million compared with $159.0 million in the corresponding quarter of 2020. This difference resulted mainly from higher share repurchases of $40.8 million in 2021.

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DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation adopted a financial risk management policy, approved by the Board of Directors in April 2010 and amended in 2019, setting forth guidelines relating to its use of derivative financial instruments. These guidelines prohibit the use of derivatives for speculative purposes. During fiscal 2021, the Corporation used derivative financial instruments as described in notes 2 and 25 to the consolidated financial statements.

FORWARD-LOOKING INFORMATION

We have used, throughout this annual report, different statements that could, within the context of regulations issued by the Canadian Securities Administrators, be construed as being forward-looking information. In general, any statement contained in this report that does not constitute a historical fact may be deemed a forward-looking statement. Expressions such as "continue", “anticipate”, "believe", "aim", "expect", "estimate" "predict" and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements contained in this report are based upon certain assumptions regarding the Canadian food industry, the general economy, our annual budget, as well as our 2022 action plan.

These forward-looking statements do not provide any guarantees as to the future performance of the Corporation and are subject to potential risks, known and unknown, as well as uncertainties that could cause the outcome to differ significantly. The arrival of a new competitor is an example of the risks described under the “Risk Management” section of this annual report that could have an impact on these statements. As with the preceding risks, the COVID-19 pandemic constitutes a risk that could have an impact on the business, operations, projects and performance of the Corporation as well as on the realization of forward-looking statements contained in this document.

We believe these statements to be reasonable and relevant as at the date of publication of this report and represent our expectations. The Corporation does not intend to update any forward-looking statement contained herein, except as required by applicable law.

NON-IFRS MEASUREMENTS

In addition to the International Financial Reporting Standards (IFRS) earnings measurements provided, we have included certain non-IFRS earnings measurements. These measurements are presented for information purposes only. They do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measurements presented by other public companies.

ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE

Adjusted operating income before depreciation and amortization, adjusted net earnings and adjusted fully diluted net earnings per share are earnings measurements that exclude some items that must be recognized under IFRS. They are non-IFRS measurements. We believe[(3)] that presenting earnings without these items, which are not necessarily reflective of the Corporation's performance, leaves readers of financial statements better informed as to the current period and corresponding prior year's period's operating earnings, thus enabling them to better perform trend analysis, evaluate the Corporation's financial performance and judge its future outlook. The exclusion of these items does not imply that they are non-recurring.

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CONTROLS AND PROCEDURES

The President and Chief Executive Officer, and the Executive Vice President, Chief Financial Officer and Treasurer of the Corporation, are responsible for the implementation and maintenance of disclosure controls and procedures (DC&P), and of the internal control over financial reporting (ICFR), as provided for in National Instrument 52-109 regarding the Certification of Disclosure in Issuers' Annual and Interim Filings. They are assisted in this task by the Disclosure Committee, which is comprised of members of the Corporation's senior management.

An evaluation was completed under their supervision in order to measure the effectiveness of DC&P and ICFR. Based on this evaluation, the President and Chief Executive Officer and the Executive Vice President, Chief Financial Officer and Treasurer of the Corporation concluded that the DC&P and the ICFR were effective as at the end of the fiscal year ended September 25, 2021.

Therefore, the design of the DC&P provides reasonable assurance that material information relating to the Corporation is made known to it by others, particularly during the period in which the annual filings are being prepared, and that the information required to be disclosed by the Corporation in its annual filings, interim filings and other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

Furthermore, the design of the ICFR provides reasonable assurance regarding the reliability of the Corporation's financial reporting and the preparation of its financial statements for external purposes in accordance with IFRS.

SIGNIFICANT JUDGMENTS AND ESTIMATES

Our Management's Discussion and Analysis is based upon our annual consolidated financial statements, prepared in accordance with IFRS, and it is presented in Canadian dollars, our unit of measure. The preparation of the consolidated financial statements and other financial information contained in this Management's Discussion and Analysis requires management to make judgments, estimates and assumptions that affect the recognition and valuation of assets, liabilities, sales, other income and expenses. These estimates and assumptions are based on historical experience and other factors deemed relevant and reasonable and are reviewed at every closing date. The use of different estimates could produce different amounts in the consolidated financial statements. Actual results may differ from these estimates.

JUDGMENTS

In applying the Corporation's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the consolidated financial statements:

Consolidation of structured entities

The Corporation has no voting rights in certain food stores. However, the franchise contract gives it the ability to control these stores' main activities. Its decisions are not limited to protecting its trademarks. The Corporation retains the majority of stores' profits and losses. For these reasons, the Corporation consolidates these food stores in its financial statements.

The Corporation has no voting rights in the trust created for performance share unit plan participants. However, under the trust agreement, it instructs the trustee as to the sale and purchase of Corporation shares and payments to beneficiaries, gives the trustee money to buy Corporation shares, assumes vesting variability, and ensures that the trust holds a sufficient number of shares to meet its obligations to the beneficiaries. For these reasons, the Corporation consolidates this trust in its financial statements.

The Corporation also has an agreement with a third party that operates a plant exclusively for the needs and according to the specifications of the Corporation, which assumes all costs and control the plant's main activities. For these reasons, the Corporation consolidates it in the Corporation's financial statements.

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Determination of the aggregation of operating segments

The Corporation uses judgment in determining the aggregation of business segments. The reportable operating segment comprises the food operations segment and the pharmaceutical operations segment. The Corporation has aggregated these two business segments due to the similar nature of their goods and services and similar economic characteristics: operations are carried on primarily in Québec and Ontario and are therefore subject to the same regulatory environment and competitive and economic market pressures, use the same product distribution methods and serve the same customers.

ESTIMATES

The assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the value of assets and liabilities within the next period, are discussed below:

Impairment of assets

In testing for impairment of intangible assets with indefinite useful lives and goodwill, value in use and fair value less costs of disposal are estimated using the discounted future cash flows model, the capitalized excess earnings before financial costs and taxes (EBIT) and royalty-free license methods. These methods are based on various assumptions, such as the future cash flows estimate, excess EBIT, royalty rates, discount rate, earnings multiples and growth rates. The key assumptions are disclosed in notes 11 and 12 to the annual consolidated financial statements.

Pension plans and other plans

Defined pension plans, ancillary retirements and other long-term benefits obligations and costs associated to these obligations are determined from actuarial calculations according to the projected credit unit method. These calculations are based on management's best assumptions relating to salary escalation, retirement age of participants, inflation rate and expected health care costs. The key assumptions are disclosed in note 20 to the annual consolidated financial statements.

Leases

The application of IFRS 16 requires the use of estimates that affect the measurement of right-of-use-assets and lease liabilities, including the appropriate discount rate used to measure lease liabilities. The Corporation discounts lease payments at its incremental borrowing rate, which is based on estimates of the risk-free interest rate, credit spreads and lease terms. In addition, it assesses the duration of the lease based on the terms of the contract and the renewal options it has reasonable certainty to exercise. A change in these assumptions could affect the amounts recorded. The key assumptions are disclosed in note 10.

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RISK MANAGEMENT

Management identifies the main risks to which the Corporation is exposed as well as the appropriate measures for proactively managing these risks and presents both the risks and risk reduction measures to the Audit Committee and the Board of Directors on an ongoing basis. Internal Audit and its assurance partners have the mandate to audit all business risks triennially. Hence, each segment is audited every three years to ensure that controls have been implemented to deal with the business risks related to its business area.

In the normal course of business, we are exposed to various risks, which are described below, that could have a material impact on our earnings, financial position and cash flows. In order to counteract the principal risk factors, we have implemented strategies specifically adapted to them.

CRISIS MANAGEMENT

The Corporation may be subject to events beyond its control including the risks of natural disasters, such as severe and more frequent weather events related to climate change, pandemics, and epidemic outbreaks, that could seriously affect the continuity of our operations. We have set up business continuity plans for all our operations. These plans provide for some disaster alternative physical sites, generators in case of power outages and back-up computers as powerful as the Corporation's existing computers.

Amid the current pandemic environment, we have created a strategic committee responsible for overseeing the management and coordination of the actions required to protect the Corporation's employees, customers, and partners from the effects of COVID-19. This committee is composed of executives from the Corporation's various business units.

BRAND, REPUTATION, AND TRUST

Product safety

We are exposed to potential liability and costs regarding food and pharmaceutical safety, product contamination, handling, and defective products. Such liability may arise from product manufacturing, packaging, and labelling, design, preparation, warehousing, distribution, and presentation. Food products represent the greater part of our sales and we could be at risk in the event of a major outbreak of a food-borne illness or an increase in public health concerns regarding certain food products.

To counter these risks, we apply very strict food safety procedures and controls throughout the whole distribution chain. Employees receive continuous training in this area from Metro's L'École des professionnels . Our main meat distribution facilities are Hazard Analysis and Critical Control Point (HACCP) accredited, the industry's highest international standard. Our systems also enable us to trace every meat product distributed from any of our main distribution centres to its consumer point of sale.

We are also exposed to product safety issues regarding the sale of pharmaceutical products. Our distribution activities are subject to regulatory oversight by Health Canada and our pharmacists must meet professional standards as they carry out their work across the pharmacy network.

Brand reputation

The Corporation benefits from well-recognized brands. Failure to act with integrity or to maintain ethical and socially responsible activities could damage our reputation and have a material impact on our financial position. To mitigate these risks, we have implemented internal policies, controls and governance processes including a code of conduct, a confidential whistle blower program and a Corporate Responsibility approach.

TECHNOLOGY RISKS

Cybersecurity and data protection

We rely on various computer systems that are necessary for our business activities and we could have to deal with certain security risks, notably cyberattacks, which could harm the availability and integrity of the systems or compromise data privacy.

In the normal course of business, we gather information that is confidential in nature concerning our customers, suppliers, employees, partners, and loyalty program participants. Personal and confidential data is also gathered from customers who do business with the drugstores affiliated with our banners. Furthermore, the online shopping sites

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represent an additional risk with respect to the security of our systems. As a result, we are even more exposed to the risk of cyberattacks aimed at stealing information or interrupting our computer systems.

A cyberattack or an intrusion into our systems could result in unauthorized persons altering our systems or gaining access to sensitive and confidential information and then using or damaging it. Such situations could also affect third parties who provide essential services to our operations or who store confidential information. These events could have a negative impact on our customers and partners that could result in financial losses, reducing our competitive advantage or tarnishing our reputation.

In order to respond to these risks, a committee comprised of executives from the Corporation oversees cybersecurity activities, including Information Security Service activities. Meetings are held regularly to monitor the progress of various cybersecurity projects, review significant incidents and review various security-related performance indicators. This committee reports on its work to the members of the Board of Directors on a biannual basis.The Information Security Service sets up and coordinates prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among others, setting up strong controls with respect to systems access and hiring a specialized firm to carry out occasional intrusion tests. We have also implemented an information security awareness and training program for our employees.

Technology systems

We depend on extensive information technology systems to manage virtually all aspects of our business. A system breakdown or any disruption to these systems or the data collected by them could have a significant adverse impact on our operations and our financial results.

In order to mitigate these risks, management has deployed various technological security measures, which include a high availability environment for all of its critical systems, and has set up processes, procedures and controls related to the various systems concerned.

No significant incident attributable to the Corporation's technology occurred over the past fiscal year. Considering the rapid evolution of risks with respect to cybersecurity as well as the complexity of threats, we cannot guarantee that the measures taken, by the Corporation and third parties it deals with, will be sufficient to prevent or detect a cyberattack. In that regard, we stay current with the latest information security trends and practices in order to take proactive action.

HUMAN RESOURCE RISKS

Labour relations

The majority of our store and distribution centre employees are unionized. Collective bargaining may give rise to work stoppages or slowdowns that could negatively impact the Corporation. We negotiate collective agreements with different maturity dates and conditions that ensure our competitiveness, and terms that promote a positive work environment in all our business segments. We develop contingency plans to minimize the impact of possible labour conflicts. We have experienced some labour conflicts over the last few years, and we expect[(3)] to maintain good labour relations in the future.

Occupational health and safety

Workplace accidents may occur at any of our sites. To minimize this risk, we have developed a worked-related accident prevention policy. Furthermore, at all of our sites, we have workplace health and safety committees responsible for setting-up action and accident prevention plans.

Hiring, employee retention and organization structure

Our recruitment program, salary structure, performance evaluation programs, succession plan and training plan all entail risks which could negatively impact our capacity to execute our strategic plan as well as our ability to attract and retain necessary qualified resources to sustain the Corporation's growth and success. We have proven practices to attract the professionals necessary for our operations. Our performance evaluation practices are supervised by our human resources department. Our compensation structure is regularly reviewed in order to ensure that we remain competitive on the market. We have a succession plan in place to ensure we have well-identified resources for the Corporation's key positions.

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LEGAL, REGULATORY AND CORPORATE RESPONSIBILITY RISKS

Legal Proceedings

In the normal course of business, various proceedings and claims are instituted against the Corporation. The Corporation contests the validity of these claims and proceedings and at this stage, the Corporation does not believe that these matters will have a material effect on the Corporation's financial position or on consolidated earnings. However, since any litigation involves uncertainty, it is not possible to predict the outcome of these litigations or the amount of potential losses. A more detailed description of certain proceedings affecting the Company or its subsidiaries can be found in the “Contingencies” Section of this Management Discussion & Analysis.

Regulatory environment

Changes are regularly made to accounting policies, laws, regulations, rules or policies impacting our operations. We monitor these changes closely.

The Corporation relies on prescription drug sales for a significant portion of its sales and operating income. The pharmacy activities are exposed to risks related to the regulated nature of some of our activities and the activities of our pharmacist/owner franchisees.

Any changes to laws and regulations or policies regarding the Corporation's activities could have a material adverse effect on its performance and on the sales growth. Processes are in place to ensure our compliance as well as to monitor any and all changes to the laws and regulations in effect and any new laws and regulations.

Corporate responsibility

In 2010, the Company adopted a Corporate Responsibility approach. Over the past decade, we have implemented structuring programs and we disclose our progress and challenges in a report published annually. To anticipate and manage risks related to environmental, social and governance issues, we stay abreast of emerging issues and new practices and work to continuously improve our processes.

We aim[(3)] to ensure that our actions bring value to METRO, and to our stakeholders - customers, employees, suppliers, shareholders and community partners. ESG issues are central to our corporate responsibility approach and allow us to assume our position as a leader in the food and pharmaceutical industry in a responsible manner. For more information, visit metro.ca/corporateresponsibility .

MARKET RISKS

Competition and prices

Intensifying competition, the possible arrival of new competitors and changing consumer needs are constant concerns for us.

To cope with competition and maintain our leadership position in the Québec and Ontario markets, we are on the alert for new ways of doing things and new sites. We have an ongoing investment program for all our stores to ensure that our retail network remains one of the most modern in Canada.

Increased competition could lead to pressure on retail prices and margins. As a result, we adopt innovative marketing strategies to better meet the evolving needs of consumers and protect our market shares.

We have also developed a successful market segmentation strategy. Our grocery banners: the conventional Metro supermarkets, Super C and Food Basics discount banners, and Adonis international food stores, target three different market segments. The Première Moisson banner is specialized in bakery, pastry, deli products and other food offerings prepared on an artisanal basis and respectful of great traditions.

In the pharmacy market, we have large, medium, and small drugstores under the Jean Coutu, Brunet, Metro Pharmacy, and Food Basics Pharmacy banners. We acquired in 2018 the Jean Coutu Group which operates a network of 418 franchised drugstores in Québec, New Brunswick and Ontario under the PJC Jean Coutu, PJC Santé and PJC Santé Beauté banners.

With the metro&moi and Air Miles ® loyalty programs in our Metro and Metro Plus supermarkets and our Jean Coutu drugstore network, we are able to know the buying habits of loyal customers, offer them personalized promotions so as to increase their purchases at our stores.

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Consumer behaviour and digital shift

Consumer buying habits are evolving and if we are unable to adapt our offering it could have a negative impact on our financial results.

Our online grocery service, websites and various mobile applications are part of the Corporation's overall digital strategy, which aims to position METRO as the retailer that offers the food experience most suited to the needs and behaviors of consumers.

SUPPLY CHAIN

Suppliers

Negative events such as disruptions related to climate change or other catastrophic or public health events or labour disputes could affect a supplier and lead to service breakdowns and store delivery delays. To remediate this situation, we deal with several suppliers. In the event of a supplier's service breakdown, we can turn to another supplier reasonably quickly.

Distribution center business interruption

A prolonged interruption at one of our distribution centers could impact our ability to supply our stores and have an unfavorable impact on our financial results. We have measures in place to prevent business disruptions and have developed contingency plans to respond in the event an interruption occurs.

Modernization of our distribution facilities

Investments in the modernization of our distribution centres in Québec and Ontario translate into large-scale projects. Poor management of human, material and financial resources could turn into significant costs and not meet our objective. Efficient project management and adequate change management of these new technologies, including automation, will allow us to achieve the expected results according to our business plan.

FINANCIAL RISKS

Exchange rates and financial instruments

We make some foreign-denominated purchases of goods and services and we have, depending on market conditions, US borrowings, exposing ourselves to exchange rate risks. According to our financial risk management policy, we may use derivative financial instruments, such as foreign exchange forward contracts and cross currency interest rate swaps. The policy's guidelines prohibit us from using derivative financial instruments for speculative purposes, but they do not guarantee that we will not sustain losses as a result of our derivative financial instruments.

Credit

We hold receivables generated mainly from sales to customers. To guard against credit losses, we have adopted a credit policy that defines mandatory credit requirements to be maintained and guarantees to be provided. Affiliate customer assets guarantee the majority of our receivables.

Liquidity

We are also exposed to liquidity risk mainly through our non-current debt and creditors. We evaluate our cash position regularly and estimate[(3)] that cash flows generated by our operating activities will be sufficient to provide for all outflows required by our financing activities.

Price of fuel, energy and utilities

We are a big consumer of utilities, electricity, natural gas, and fuel. Increases in the price of these items may affect us.

Montréal, Canada, December 10, 2021

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AI assistant

Metro inc. — Annual Report 2021

42697_rns_2021-12-20_ccc86bac-9045-475c-bb75-c63df5dfab04.pdf

MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

OVERVIEW

PURPOSE, MISSION AND STRATEGY

Customer focus

Best team

Operational Excellence

Financial Discipline

KEY PERFORMANCE INDICATORS

KEY ACHIEVEMENTS

EVENT AFTER THE REPORTING PERIOD

SELECTED ANNUAL INFORMATION

OUTLOOK[(3)]

OPERATING RESULTS

SALES

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

Operating income before depreciation and amortization adjustments (OI)[(2)]

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

INCOME TAXES

NET EARNINGS AND ADJUSTED NET EARNINGS[(1)]

Net earnings adjustments[(1)]

QUARTERLY HIGHLIGHTS

CASH POSITION

OPERATING ACTIVITIES

INVESTING ACTIVITIES

FINANCING ACTIVITIES

FINANCIAL POSITION

CAPITAL STOCK

STOCK OPTIONS PLAN

NORMAL COURSE ISSUER BID PROGRAM

DIVIDEND

SHARE TRADING

COMPARATIVE SHARE PERFORMANCE (10 YEARS)*

CONTINGENCIES

SOURCES OF FINANCING

CONTRACTUAL OBLIGATIONS

RELATED PARTY TRANSACTIONS

FOURTH QUARTER

OPERATING RESULTS

SALES

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

INCOME TAXES

NET EARNINGS AND ADJUSTED NET EARNINGS[(1)]

Net earnings adjustments[(1)]

CASH POSITION

Operating activities

Investing activities

Financing activities

DERIVATIVE FINANCIAL INSTRUMENTS

FORWARD-LOOKING INFORMATION

NON-IFRS MEASUREMENTS

ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION, ADJUSTED NET EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE

CONTROLS AND PROCEDURES

SIGNIFICANT JUDGMENTS AND ESTIMATES

JUDGMENTS

Consolidation of structured entities

Determination of the aggregation of operating segments

ESTIMATES

Impairment of assets

Pension plans and other plans

Leases

RISK MANAGEMENT

CRISIS MANAGEMENT

BRAND, REPUTATION, AND TRUST

Product safety

Brand reputation

TECHNOLOGY RISKS

Cybersecurity and data protection

Technology systems

HUMAN RESOURCE RISKS

Labour relations

Occupational health and safety

Hiring, employee retention and organization structure

LEGAL, REGULATORY AND CORPORATE RESPONSIBILITY RISKS

Legal Proceedings

Regulatory environment

Metro inc. Annual Report 2021