Metro inc. — Interim / Quarterly Report 2021

Jan 26, 2021

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INTERIM REPORT

12-week period ended December 19, 2020

1[st ] Quarter 2021

HIGHLIGHTS

2021 FIRST QUARTER

• n Sales of $4,278.2 million, up 6.2%

• n Food same-store sales up 10.0%

• n Pharmacy same-store sales up 1.3%

• n Net earnings of $191.2 million, up 12.3% and adjusted net earnings[(1)] of $197.7 million, up 9.3%

• n Fully diluted net earnings per share of $0.76, up 13.4%, and adjusted fully diluted net earnings per share[(1)] of $0.79, up 11.3%

• n Negative impact of about $0.05 per share due to the labour conflict at our Jean Coutu distribution center

• n Expenses related to COVID-19 totalling $28 million

• n Declared dividend of $0.25 per share, up 11.1%

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REPORT TO SHAREHOLDERS

Dear Shareholders,

I am pleased to present our interim report for the first quarter of Fiscal 2021 ended December 19, 2020.

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.

First quarter net earnings were $191.2 million in Fiscal 2021 compared with $170.2 million in 2020, and fully diluted net earnings per share were $0.76 compared with $0.67 in 2020, up 12.3% and 13.4%, respectively. Taking into account adjustments for the 2021 and 2020 first quarters, the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition as well as for the first quarter of 2020 the loss on disposal of our subsidiary MissFresh, adjusted net earnings[(1)] for the first quarter of Fiscal 2021 totalled $197.7 million compared with $180.9 million in 2020, and adjusted fully diluted net earnings per share[(1)] amounted to $0.79 versus $0.71, up 9.3% and 11.3%, respectively. The labour conflict at our Jean Coutu distribution center had an unfavorable impact of approximately $0.05 on the fully diluted net earnings per share of the current quarter.

On January 25, 2021, the Board of Directors declared a quarterly dividend of $0.25 per share, an increase of 11.1% versus the same quarter last year.

We are pleased with our first quarter results, delivering continued strong food sales with good operating leverage, while working through an 8-week labour conflict at our Jean Coutu distribution center. Our contingency plan enabled us to successfully maintain the supply of medication to over 400 pharmacies. We are now back to normal operating conditions in the distribution center. I want to again sincerely thank all our front-line staff who continue to deliver the essential services of food and pharmacy to our communities during this challenging lockdown period. Our first priority remains the safety of our employees and our customers.

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Eric La Flèche President and Chief Executive Officer

January 26, 2021

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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MANAGEMENT'S DISCUSSION AND ANALYSIS

The following Management's Discussion and Analysis (MD&A) sets out the financial position and consolidated results of METRO INC. on December 19, 2020 and for the 12-week period then ended. It should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes in this interim report.

The unaudited interim condensed consolidated financial statements for the 12-week period ended December 19, 2020 have been prepared by management in accordance with IAS 34 Interim Financial Reporting . They should be read in conjunction with the audited annual consolidated financial statements and accompanying notes and the MD&A presented in the Corporation's 2020 Annual Report. Unless otherwise stated, the interim report is based on information as at January 15, 2021. Additional information, including the Certification of Interim Filings letters for quarter ended December 19, 2020 signed by the President and Chief Executive Officer and the Executive Vice-President, Chief Financial Officer and Treasurer, will also be available on the SEDAR website at: www.sedar.com.

OPERATING RESULTS

SALES

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.

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

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

Operating income before depreciation and amortization for the first quarter of Fiscal 2021 totalled $399.2 million, or 9.3% of sales, up 9.9% versus the corresponding quarter of last year. In the first quarter of Fiscal 2020 we recognized a loss of $7.5 million on disposal of our subsidiary MissFresh. Excluding this item, adjusted operating income before depreciation and amortization[(2)] for the first quarter of Fiscal 2021 increased by 7.7% versus the first quarter of last year.

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

(Millions of dollars, unless otherwise indicated)	12 weeks / Fiscal Year 2021 2020 OI Sales (%) OI Sales (%) 399.2 4,278.2 9.3 363.1 4,029.8 9.0 — 7.5
Operating income before depreciation and amortization Loss on disposal of a subsidiary
Adjusted operating income before depreciation and amortization(2)	399.2 4,278.2 9.3 370.6 4,029.8 9.2

Gross margin on sales for the first quarter of Fiscal 2021 was 19.7% versus 19.6% for the corresponding quarter of 2020.

Operating expenses as a percentage of sales for the first quarter of Fiscal 2021 were 10.4% versus 10.6% (10.4% excluding the loss on disposal of our subsidiary MissFresh) for the corresponding quarter of Fiscal 2020. The costs related to COVID-19 for the first quarter of Fiscal 2021 were approximately $28 million including $8 million of gift cards to front-line employees.

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements"

(3) See section on "Forward-looking Information"

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DEPRECIATION AND AMORTIZATION AND NET FINANCIAL COSTS

Total depreciation and amortization expense for the first quarter of Fiscal 2021 was $107.3 million, versus $101.5 million for the corresponding quarter of Fiscal 2020.

Net financial costs for the first quarter of Fiscal 2021 were $31.4 million compared with $31.1 million for the corresponding quarter of Fiscal 2020.

INCOME TAXES

The income tax expense of $69.3 million for the first quarter of Fiscal 2021 represented an effective tax rate of 26.6% compared with an income tax expense of $60.3 million in the first quarter of Fiscal 2020 which represented an effective tax rate of 26.2%.

NET EARNINGS AND ADJUSTED NET EARNINGS[(1)]

Net earnings for the first quarter of Fiscal 2021 were $191.2 million compared with $170.2 million for the corresponding 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 the specific items shown in the table below, 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 Fiscal 2020, and adjusted fully diluted net earnings per share[(1)] amounted to $0.79 versus $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 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 191.2 0.76 170.2 0.67 12.3 13.4 — 4.2 6.5 6.5	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 191.2 0.76 170.2 0.67 12.3 13.4 — 4.2 6.5 6.5
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)	197.7 0.79	180.9 0.71 9.3 11.3

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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QUARTERLY HIGHLIGHTS

(Millions of dollars, unless otherwise indicated)	2021	2020	2019	Change (%)
Sales
Q1(4)	4,278.2	4,029.8	—	6.2
Q4(4)	—	4,143.6	3,858.9	7.4
Q3(5)	—	5,835.2	5,229.3	11.6
Q2(4)	—	3,988.9	3,701.6	7.8
Net earnings
Q1(4)	191.2	170.2	—	12.3
Q4(4)	—	186.5	167.4	11.4
Q3(5)	—	263.5	222.4	18.5
Q2(4)	—	176.2	121.5	45.0
Adjusted net earnings(1)
Q1(4)	197.7	180.9	—	9.3
Q4(4)	—	193.1	174.0	11.0
Q3(5)	—	272.3	230.3	18.2
Q2(4)	—	182.8	155.1	17.9
Fully diluted net earnings per share(Dollars)
Q1(4)	0.76	0.67	—	13.4
Q4(4)	—	0.74	0.66	12.1
Q3(5)	—	1.04	0.86	20.9
Q2(4)	—	0.69	0.47	46.8
Adjusted fully diluted net earnings per share(1) (Dollars)
Q1(4)	0.79	0.71	—	11.3
Q4(4)	—	0.77	0.68	13.2
Q3(5)	—	1.08	0.90	20.0
Q2(4)	—	0.72	0.60	20.0

(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.

Sales in the fourth quarter of Fiscal 2020 reached $4,143.6 million, up 7.4% compared to $3,858.9 million in the fourth quarter of Fiscal 2019. Excluding the impact of IFRS 16 Leases adopted in the first quarter of 2020, sales reached $4,156.1 million, up 7.7%. Food same-store sales were up 10.0% (4.1% in 2019). Online food sales were up 160% versus last year. Our food basket inflation was approximately 2.8% (2.8% in 2019). Pharmacy same-store sales were up 5.5% (3.4% in 2019), with a 5.3% increase in prescription drugs and a 6.0% increase in front-store sales.

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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Sales in the third quarter of Fiscal 2020 reached $5,835.2 million, up 11.6% compared to $5,229.3 million in the third quarter of Fiscal 2019. Excluding the impact of IFRS 16 Leases adopted in the first quarter of 2020, sales reached $5,851.9 million, up 11.9%. Food same-store sales were up 15.6% (3.1% in 2019). Online food sales almost quadrupled in the quarter from a small base last year. Our food basket inflation was approximately 3.0% (2.5% in 2019). Pharmacy same-store sales were up 1.0% (3.4% in 2019), with a 2.7% increase in prescription drugs and a 2.5% decrease in front-store sales.

Sales in the second quarter of Fiscal 2020 reached $3,988.9 million, up 7.8% compared to $3,701.6 million in the second quarter of Fiscal 2019. Excluding the impact of IFRS 16 Leases adopted in the first quarter of 2020, sales reached $4,001.5 million, up 8.1%. Food same-store sales were up 9.7% (4.3% in 2019). The shift in Christmas sales represents 0.6% of the same-store sales increase. Our food basket inflation was approximately 2.0% (2.5% in 2019). Pharmacy same-store sales were up 7.9% (1.1% in 2019), with a 7.7% increase in prescription drugs (prescription count up 3.9%) and a 8.3% increase in front-store sales.

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 Fiscal 2021 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 and 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 first quarter of Fiscal 2021 totalled $197.7 million compared with $180.9 million for the corresponding quarter of Fiscal 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.

Net earnings for the fourth quarter of Fiscal 2020 were $186.5 million compared with $167.4 million for the fourth quarter of Fiscal 2019, while fully diluted net earnings per share were $0.74 compared with $0.66 in 2019, up 11.4% and 12.1%, respectively. Excluding from the fourth quarter of Fiscals 2020 and 2019 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 2020 totalled $193.1 million compared with $174.0 million for the corresponding quarter of Fiscal 2019 and adjusted fully diluted net earnings per share[(1)] amounted to $0.77 compared with $0.68, up 11.0% and 13.2%, respectively.

Net earnings for the third quarter of Fiscal 2020 were $263.5 million compared with $222.4 million for the third quarter of Fiscal 2019, while fully diluted net earnings per share were $1.04 compared with $0.86 in 2019, up 18.5% and 20.9%, respectively. Excluding from the third quarter of Fiscal 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $11.9 million, and excluding from the third quarter of Fiscal 2019 the $1.0 million gain resulting from the selling price adjustment related to the investment in associate Colo-D Inc. and $11.9 million in amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition, as well as income taxes relating to all these items, adjusted net earnings[(1)] for the third quarter of Fiscal 2020 totalled $272.3 million compared with $230.3 million for the corresponding quarter of Fiscal 2019 and adjusted fully diluted net earnings per share[(1)] amounted to $1.08 compared with $0.90, up 18.2% and 20.0%, respectively.

Net earnings for the second quarter of Fiscal 2020 were $176.2 million compared with $121.5 million for the second quarter of Fiscal 2019, while fully diluted net earnings per share were $0.69 compared with $0.47 in 2019, up 45.0% and 46.8%, respectively. Excluding from the second quarter of 2020 the amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition of $8.9 million, and from the second quarter of Fiscal 2019 the retail network restructuring expenses of $36.0 million, the $1.4 million loss on divestiture of pharmacies and $8.8 million in amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition, as well as income taxes relating to all these items, adjusted net earnings[(1)] for the second quarter of Fiscal 2020 totalled $182.8 million compared with $155.1 million for the corresponding quarter of Fiscal 2019 and adjusted fully diluted net earnings per share[(1)] amounted to $0.72 compared with $0.60, up 17.9% and 20.0%, respectively.

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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(Millions of dollars)	2021	2020 2019 Q4 Q3 Q2 Q1 Q4 Q3 Q2 186.5 263.5 176.2 170.2 167.4 222.4 121.5 — — — — — — 26.4 — — — 4.2 — — — — — — — — — 0.7 6.6 8.8 6.6 6.5 6.6 8.8 6.5 — — — — — (0.9) —
	Q1
Net earnings Retail network restructuring expenses, after taxes Loss on disposal of a subsidiary, after taxes Loss on divestiture of pharmacies, after taxes Amortization of intangible assets acquired in connection with the Jean Coutu Group acquisition, after taxes Gain on disposal of investments in associates, after taxes	191.2 — — — 6.5 —
Adjusted net earnings(1)	197.7	193.1 272.3 182.8 180.9 174.0 230.3 155.1
(Dollars)	2021	2020 2019 Q4 Q3 Q2 Q1 Q4 Q3 Q2 0.74 1.04 0.69 0.67 0.66 0.86 0.47 0.03 0.04 0.03 0.04 0.02 0.04 0.13
	Q1
Fully diluted net earnings per share Adjustments impact	0.76 0.03
Adjusted fullydiluted net earningsper share(1)	0.79	0.77 1.08 0.72 0.71 0.68 0.90 0.60

CASH POSITION

OPERATING ACTIVITIES

In the first quarter of 2021, operating activities generated cash inflows of $233.4 million compared with $79.5 million in the corresponding quarter of 2020. This difference resulted primarily from the increase in earnings and the change in non-cash working capital items that required cash outflows of $89.8 million in the first quarter of Fiscal 2021 compared with $231.1 million in the first quarter of Fiscal 2020.

INVESTING ACTIVITIES

Investing activities required cash outflows of $64.4 million for the first quarter of Fiscal 2021 compared with $98.7 million for the corresponding quarter of Fiscal 2020. This difference stemmed mainly from the buyout of minority interests in Groupe Première Moisson Inc. in the amount of $51.6 million in the first quarter of 2020.

During the first quarter of 2021, we and our retailers carried out major expansions and renovations of 4 stores and relocated 1 store for a net increase of 18,000 square feet or 0.1% of our food retail network.

FINANCING ACTIVITIES

In the first quarter of 2021, financing activities required cash outflows of $290.2 million compared with $210.7 million in the corresponding quarter of 2020. This difference resulted mainly from higher share repurchases of $72.7 million in 2021.

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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FINANCIAL POSITION

We do not anticipate[(3)] any liquidity risk and consider our financial position at the end of the first quarter 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 41.3% of the combined total of non-current debt, lease liabilities and equity (non-current debt and lease liabilities/total capital).

At the end of the first quarter 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	November 3, 2024	—
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 portion of the debt as it matures on December 1, 2021. The Corporation intends[(3)] to refinance the Series C Notes.

Our main financial ratios were as follows:

	As at	As at
	December 19, 2020	September 26, 2020
Financial structure
Non-current debt_(Millions of dollars)_	2,612.5	2,612.0
Non-current lease liabilities_(Millions of dollars)_	1,754.9	1,811.4
	4,367.4	4,423.4
Equity (Millions of dollars)	6,214.7	6,155.4
Non-current debt and lease liabilities/total capital (%)	41.3	41.8

Since the Corporation intends[(3)] to refinance the Series C Notes presented under non-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.

	12	weeks / Fiscal Year
		2021	2020
Results
Operatingincome before depreciation and amortization/Financial costs_(Times)_		12.7	11.7

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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CAPITAL STOCK, STOCK OPTIONS AND PERFORMANCE SHARE UNITS

	As at	As at
	December 19, 2020	September 26, 2020
Number of Common Shares outstanding (Thousands)	248,398	250,243
Stock options:
Number outstanding_(Thousands)_	2,305	2,322
Exercise prices (Dollars)	21.90 to 56.92	21.90 to 56.72
Weighted average exercise price (Dollars)	41.29	41.27
Performance share units:
Number outstanding (Thousands)	613	618

NORMAL COURSE ISSUER BID PROGRAM

Under the current normal course issuer bid program, the Corporation may repurchase up to 7,000,000 of its Common Shares between November 25, 2020 and November 24, 2021. Between November 25, 2020 and January 15, 2021, the Corporation has repurchased 1,750,000 Common Shares at an average price of $58.39, for a total consideration of $102.2 million.

DIVIDENDS

On January 25, 2021, the Board of Directors declared a quarterly dividend of $0.25 per share, an increase of 11.1% versus the same quarter last year.

SHARE TRADING

The value of METRO shares remained in the $57.30 to $66.25 range over the first quarter of Fiscal 2021. During this period, a total of 42.2 million shares were traded on the Toronto Stock Exchange. The closing price on January 15, 2021 was $58.27 compared with $64.02 at the end of Fiscal 2020.

FORWARD-LOOKING INFORMATION

We have used, throughout this 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 herein that does not constitute a historical fact may be deemed a forward-looking statement. Expressions such as "anticipate", "expect", "intend" and other similar expressions are generally indicative of forward-looking statements. The forward-looking statements contained herein are based upon certain assumptions regarding the Canadian food industry, the general economy, our annual budget, as well as our 2021 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 the 2020 Annual Report which 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, synergies and performance of the Corporation as well as on the forward-looking statements contained in this document.

We believe these statements to be reasonable and pertinent 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.

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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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 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.

OUTLOOK[(3)]

Government measures to curb the impact of the ongoing pandemic have been increased in recent weeks and continue to evolve. Restrictions on the sale of non-essential goods in Quebec and the milder cold and flu season is expected to have an unfavorable impact on our Pharmacy commercial sales. In the first four weeks of the second quarter of 2021, pharmacy front-end same store sales were down 11.7%. To mitigate this impact, we are adjusting our promotional activity and directing customers to shop online or to use the in-store order service. Prescription same store sales were up 5.7%. Furthermore, food revenues continue to grow at higher than normal rates. In the first four weeks of the second quarter of 2021, food same-store sales were up 12.0% versus the same period last year.

Montréal, January 26, 2021

(1) See table on "Net earnings adjustments" and section on "Non-IFRS Measurements"

(2) See table on "Operating income before depreciation and amortization adjustments" and section on "Non-IFRS Measurements" (3) See section on "Forward-looking Information"

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