Annual Report
2021
COMPANY PROFILE
METRO INC. is a food and pharmacy leader in Québec and Ontario. As a retailer, franchisor, distributor, and
manufacturer, the Corporation operates or services a network of 963 food stores under several banners including
Metro, Metro Plus, Super C, Food Basics, Adonis and Première Moisson, as well as 649 drugstores primarily under
the Jean Coutu, Brunet, Metro Pharmacy and Food Basics Pharmacy banners, providing employment directly or
indirectly to more than 90,000 people.
2021 HIGHLIGHTS
∙ Sales of $18,283.0 million, up 1.6%, and up 9.0% vs 2019
• Net earnings of $825.7 million, up 3.7%, and up 15.6% vs 2019
• Adjusted net earnings(1) of $854.2 million, up 3.0%, and up 16.8% vs 2019
• Fully diluted net earnings per share of $3.33, up 6.1%, and up 19.8% vs 2019
• Adjusted fully diluted net earnings per share(1) of $3.44, up 5.2%, and up 21.1% vs 2019
• Expenses related to COVID-19 totalling $104 million, including $24 million of gift cards to front-line employees
• Record level of capital spending of just under $600 million
• Return on equity of 13.1% and 13.6% based on adjusted net earnings, exceeding 12% for the 29th consecutive
year
• Dividends per share increase of 11.4%, the 27th consecutive year of dividend growth
RETAIL NETWORK
Québec
Ontario
New Brunswick Total
Supermarkets
Metro
Metro Plus
Adonis
198 Metro
11 Adonis
Discount stores
Super C
98 Food Basics
130
4
139
Neighbourhood
stores
Marché Richelieu
Marché Ami
53
307
Specialized
stores
Total food
Drugstores
Première Moisson
22 Première Moisson
1
689
274
Brunet
Brunet Plus
Brunet Clinique
Clini Plus
Metro Pharmacy
Food Basics Pharmacy
157
74
328
15
237
360
23
963
231
PJC Jean Coutu
PJC Health
PJC Health & Beauty 381
PJC Jean Coutu
PJC Health
Total drugstores
538
PJC Jean Coutu
PJC Health
PJC Health & Beauty 28 418
28 649
9
83
Forward-looking information: For any information on statements in this Annual Report that are of a forward-looking nature, see section on "Forward-
looking information" in the Management's Discussion and Analysis (MD&A).
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FINANCIAL HIGHLIGHTS
OPERATING RESULTS
(Millions of dollars)
Sales
Operating income*
Net earnings
Adjusted net earnings(1)
Cash flows from operating activities**
FINANCIAL STRUCTURE
(Millions of dollars)
Total assets
Non-current debt***
2021
2020
2019
2018
2017
(53 weeks)
18,283.0
17,997.5
16,767.5
14,383.4
13,175.3
1,732.5
1,683.6
1,321.5
1,011.1
825.7
854.2
796.4
829.1
1,583.3
1,474.1
714.4
731.6
794.6
1,718.5
579.2
750.4
13,592.1
13,423.9
11,073.9
10,922.2
2,618.2
2,612.0
2,629.0
2,630.4
966.4
608.4
548.2
696.2
6,050.7
1,441.6
—
Non-current lease liabilities****
1,657.5
1,811.4
—
—
Equity
PER SHARE
(Dollars)
Basic net earnings
Fully diluted net earnings
Adjusted fully diluted net earnings(1)
Dividends
FINANCIAL RATIOS
(%)
Operating income*/ Sales*****
Return on equity
Non-current debt and lease liabilities
/total capital****
SHARE PRICE
(Dollars)
High
Low
Closing price (At year-end)
6,412.8
6,155.4
5,968.6
5,656.0
2,923.9
3.34
3.33
3.44
3.15
3.14
3.27
2.79
2.78
2.84
7.20
7.16
2.41
2.59
2.57
2.31
0.9750
0.8750
0.7800
0.7025
0.6275
9.5
13.1
9.4
13.1
7.9
12.3
7.0
40.1
40.0
41.8
30.6
31.7
66.25
52.63
60.18
64.61
49.03
64.02
58.94
39.04
57.91
45.44
38.32
40.18
7.3
21.7
33.0
47.41
38.00
42.91
* Operating income before depreciation and amortization (OI)
** Interest paid on debt and payments and interests on lease liabilities reclassified to financing activities as well as payments and interests received
from subleases reclassified to investing activities following the adoption of IFRS 16 Leases in the first quarter of fiscal 2020
*** Including in 2021 is the current debt related to the Series C Notes refinanced in November 2021 and in 2019 is the current debt related to the
Series E Notes refinanced in February 2020
**** Non-current lease liabilities resulting from to the adoption of IFRS 16 in 2020
***** Ratio of 8.4% in 2021 and 8.3% in 2020 when excluding the impact of the adoption of IFRS 16
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MESSAGE FROM THE CHAIR OF THE BOARD
Dear Shareholders,
I would first like to acknowledge the involvement and leadership of Mr. Réal Raymond, whom I have succeeded as
Chairman of the Board of the Company at the end of the January 2021 shareholders' meeting. Mr. Raymond had
been a director of the Company since 2008, became Lead Director in 2010 and then Chairman of the Board in 2015.
He was an effective Chairman at a time of significant growth for the Company, notably the acquisition of the Jean
Coutu Group. On behalf of the Board, I would like to express our gratitude and appreciation to Mr. Raymond for his
contribution to METRO's success.
As in 2020, the 2021 fiscal year was marked by the COVID-19 pandemic. I would like to acknowledge the exemplary
work of the management team, employees, our retailers, and pharmacist owners in the face of changing conditions
during the year. They continued to adapt to the circumstances to allow the stores, pharmacies, distribution centers
and offices to maintain their operations and made the required effort and took the necessary measures to provide a
safe environment for our customers and employees.
The Board of Directors continued to support the Company's management in its efforts regarding COVID-19 and was
regularly involved and informed about the pandemic and its impact on the Company's operations through written
updates from management and at meetings of the Board of Directors and its committees.
The Company maintained a strong financial performance throughout the year that compares favourably to pre-
pandemic results. I would also like to highlight the record level of capital expenditures of close to $600 million related
to the Company's major projects including supply chain modernization, store network and omnichannel strategy. The
Board of Directors fully support management in the pursuit of these major projects and closely monitor their progress.
Board of Directors
Throughout the year, the Board of Directors also continued to support management in the realization of the strategic
plan as well as in the various projects, including the development of the new 2022-2026 corporate responsibility plan,
which will be published in January. To assist management in the development of this new plan, the Governance and
Corporate Responsibility Committee discussed the new plan with the members of senior management responsible for
its development prior to its approval by the Board of Directors.
Again in 2021, the Chair of the Governance and Corporate Responsibility Committee and I met with some of the
Company's significant shareholders to discuss matters relating to the Board of Directors. This initiative is part of the
program established each year by the Governance and Corporate Responsibility Committee to engage in a
constructive dialogue with the Company's shareholders.
The year 2021 was also marked by sustained efforts by the Governance and Corporate Responsibility Committee to
ensure succession planning for the Board of Directors. The Committee identified the criteria, profiles and skills sought
on the Board and, with the help of its recruitment consultants, identified and met with several potential candidates. As
a result of this rigorous process, the Board of Directors appointed Mr. Brian McManus as a director of the Company in
April 2021. This process also led to the recruitment of Ms. Lori-Ann Beausoleil who is now a first-time candidate for a
position on the Board of Directors.
After 16 years as a director of the Company, Mr. Claude Dussault will retire from the Board of Directors at the end of
the next annual shareholders' meeting. From 2015 to 2021, Mr. Dussault was Chairman of the Human Resources
Committee and ensured that the Company's executive compensation practices were aligned with the Company's
performance and encouraged sound risk-taking to stimulate growth and performance. Mr. Dussault was also
Chairman of the Corporate Governance Committee from 2008 to 2015 where he ensured the development of good
governance practices for the Company. I would also like to acknowledge the departure of Ms. Line Rivard who
accepted last November the position of Quebec Delegate General in London, United Kingdom. Ms. Rivard served on
the Board of Directors of the Corporation from 2014 to 2021 and was a member of the Audit and Human Resources
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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Committees. On behalf of my colleagues and our shareholders, I would like to thank them for their great contribution
and leadership on the Board and its committees over the years. Their professionalism and experience have been of
great benefit to the Company.
Pierre Boivin
Chairman of the Board
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MESSAGE FROM THE PRESIDENT AND CEO
Another Exceptional Year
Our 2021 fiscal year began at the height of the second wave of the pandemic and ended with the fourth wave. The
second year of the pandemic presented many challenges and demanded a lot from our teams in difficult conditions. I
would like to acknowledge the remarkable work and extraordinary resilience of our employees, our affiliated
merchants and pharmacist owners, and our executive team. Together, we continued to provide a safe environment for
all while meeting the food and pharmacy needs of our customers and joining forces with the health care system to
support the provincial vaccination campaigns. We are proud to have lived our Company purpose: To nourish the
health and well-being of our communities.
Furthermore, while operating in the midst of a pandemic, our team also achieved three key milestones of our strategic
plan: the opening of our Toronto fresh produce distribution centre in January 2021, the start of operations of an online
order fulfillment site in Montreal in June 2021 and the completion of the METRO, Groupe Jean Coutu and McMahon
combination in July 2021.
Impact
Contributing to the health of our customers by offering them quality products, healthy choices, the medication they
need and tools and advice to improve their well-being is an important business priority for METRO.
As additional measures were announced by the governments of Quebec, Ontario and New Brunswick to curb the
pandemic which led to a lockdown in Quebec, a partial closure in Ontario in late 2020 and a lockdown in parts of New
Brunswick in early 2021, communities were able to continue to count on us to serve them safely. For several weeks,
when we were among the only businesses open, we were able to provide our customers with the food and pharmacy
products and services they needed, without ever relaxing the prevention measures we put in place to protect our
customers and our employees.
We have tangibly thanked all our food store and distribution centre employees who have been on the front lines since
the beginning of the pandemic. They were recognized on three occasions, in December 2020, February and May
2021, with gift cards of $300, $150 or $75, totaling over $24 million.
Bill 31, which came into effect in January 2021 in Quebec, increased the frontline responsibilities of pharmacists by
expanding their scope of practice. Pharmacists in our networks and their teams were thus able to play a leading role
in the vaccination campaign, working in tandem with government authorities to deploy vaccination in pharmacies.
Some 430 Jean Coutu and Brunet pharmacies in Quebec, Ontario and New Brunswick took part in the vaccination
campaign, as did most of our supermarket pharmacies in Ontario. In total, nearly 470,000 doses were administered in
our network.
METRO also contributed to the vaccination effort in Quebec, in partnership with four other major companies, by
offering COVID-19 vaccination clinics to its employees, their immediate family members and the community at clinics
in Montreal, Laval, Brossard and Quebec City. As a result, we facilitated the vaccination of close to 70,000
employees, family and community members.
Finally, an innovative partnership between three health and social services centres on the island of Montreal and our
Jean Coutu and Brunet pharmacies made it possible to launch two "Vaccivans", vehicles designed to reach out to
citizens in parks and other outdoor locations in order to offer a first or second dose of the vaccine without an
appointment.
We can be proud of our contribution to the collective effort to fight the pandemic which will allow us to get back to our
normal lives and get the economy moving again.
Strategic Achievements
January marked the opening of our new fresh produce distribution centre in Toronto. This semi-automated facility
represents the first phase of our distribution network modernization project, an $800 million investment in METRO's
future. Our new centre puts us in an excellent position to deliver the freshest, highest quality products in the most
efficient way possible.
Another important milestone in our modernization project is approaching with work nearing completion on our Toronto
automated frozen food distribution centre. This facility is scheduled to be operational in January 2022.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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In Quebec, construction is well underway on a new automated distribution centre for fresh and frozen products in
Terrebonne. This new centre, scheduled to open in 2023, will use state-of-the-art technology, which will allow us to
make significant efficiency gains and improve service to our stores with increased accuracy and reduced handling
time.
Despite an eight-week labour conflict at our Varennes distribution centre in the fall of 2021, the combination of
METRO, The Jean Coutu Group and McMahon was completed at the end of the summer with the integration of
distribution activities in Varennes, including transportation and replenishment. The deployment of pharmacy software
solutions in the Brunet network was also completed last June. This pooling of pharmacy tools and information
systems allows us to unify our operational chain to maximize its potential.
We continued to invest in our food and pharmacy networks together with our affiliated retailers and pharmacy owners.
We completed 17 major renovations and opened 11 new stores and pharmacies in Québec and Ontario. Marché
Adonis opened the chain’s 15th store, the first in Quebec City.
To better respond to changing consumer shopping behaviour, METRO continues to accelerate the deployment of its
digital plan by adding new services and more options to its portfolio. We opened an online order fulfillment site in
June 2021 that offers delivery service on the island of Montreal, allowing us to better serve our customers in this
region. The in-store click and collect service continues to expand and is now available in 196 Metro supermarkets in
Quebec and Ontario. In addition, 260 Jean Coutu pharmacies in Quebec, Ontario and New Brunswick now offer click
and collect. In Quebec, Super C is now part of the partnership concluded last year with Cornershop for our Metro,
Jean Coutu and Brunet banners, which allows for delivery in two hours or less.
Ultimately, METRO's digital strategy will enable us to reach a larger portion of the population, increase our operational
capabilities and leverage partnerships to be even more efficient and timely in delivering orders, serving 85% of the
market in Quebec and Ontario.
We also continued to roll out our technology initiatives in our various banners in Quebec and Ontario. 350 stores now
offer self-service checkout and 187 stores have switched to electronic shelf labels. Seventeen stores now offer "Scan,
Bag and Go" technology, allowing customers to scan products as they add them to their cart. Self-service checkout
was also made available to our Jean Coutu and Brunet networks and pharmacies have begun implementation. We
also deployed online prescription payment, a first in Quebec.
Meeting the needs of our customers is at the heart of METRO's business strategy. The Metro banner has launched
an innovative program in Quebec and Ontario: My health my choices. This is a unique guide on the food attributes of
products for consumers who want to make the best choices according to their lifestyle, values or health needs. Nearly
10,000 products in stores, online and on the My Metro application carry one or more of the program's 50 attributes,
offering an easier and faster shopping experience to customers.
Financial Results
We had an excellent financial performance once again in Fiscal 2021. Revenues increased 1.6% to $18,283.0 million,
and were up 9.0% over 2019. Adjusted net income increased 3.0% to $854.2 million, and were up 16.8% over 2019.
The Company's financial position is strong. In fiscal 2021, we generated $1,583 million in operating cash flow, made
record capital investments of nearly $600 million, and increased our dividend per share by more than 11%. This was
our 27th consecutive annual dividend increase. Under our annual share buyback program, which ended November
24, 2021, we repurchased 8.5 million common shares at an average price of $58.55.
In fiscal 2021, the share price ranged from $52.63 to $66.25 to close at $60.18 compared to $64.02 at the end of
fiscal 2020, a 6% decrease in share price for the year but a 36% increase over 5 years and a 304% increase over 10
years.
2022 Outlook and Priorities
Our strategies remain customer-focused while considering the upcoming post-pandemic environment. The pandemic
caused an increase in food consumption at home, and we expect that a portion of this increase will remain in the
short and mid term. Many consumers changed their habits and adopted new ways of shopping. In this regard, we are
well positioned with our e-commerce offer, providing operational flexibility to serve our customers in the way that is
most convenient for them.
Consumers also expect technology to improve their in-store experience. It is very important to choose the right
solutions and deploy them at the right time.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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Consumer interest in local products, a priority in our corporate responsibility approach, has increased significantly
during the pandemic. We look forward to continuing to build lasting relationships with entrepreneurs who will grow
with us and thereby contribute to the growth of local businesses.
Inflationary pressures on our costs began to emerge at the end of fiscal 2021 and we expect them to increase in the
coming months, including the cost of goods, transportation and labour. In this context, consumers will be more
prudent and will look for more value for their money. Furthermore, our teams will need to continue to deal with labour
shortages and find solutions that support talent acquisition, retention and development.
Our priorities for Fiscal 2022 are:
1.
2.
Increase our market share in the food sector
Increase our leadership position in the pharmacy sector
3. Continue to modernize our supply chain and accelerate the company's digital transformation
4. Continue to develop our loyalty programs
5. Develop the best team
6. Achieve our corporate responsibility objectives
Community Investments
Supporting the communities in which we live and work remains at the heart of what we do to help the most vulnerable
and most in need. Thanks to the generosity and hard work of employees across METRO's food and pharmacy
banners, we exceeded our goals for our 23rd United Way campaign, with more than $2.3 million donated, an increase
of 11% over last year's total. We are particularly proud to have achieved this result in the context of the pandemic. In
addition, METRO provided financial support to numerous health, education and cultural organizations, and gave more
than 4,700 tonnes of food to Ontario and Quebec food banks.
Acknowledgements
I would like to thank all our employees, retailers and pharmacist owners for their hard work and dedication, and
especially all frontline employees who again this year worked in demanding circumstances. We have a great
management team, and I thank them for executing our business plans and advancing our strategic priorities. I would
also like to thank our directors for their continued support and oversight. Finally, thank you, dear shareholders, for
your confidence.
Eric La Flèche
President and Chief Executive Officer
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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CORPORATE RESPONSIBILITY
This year, we concluded our 2016-2020 Corporate Responsibility (CR) plan, which was extended to 2021 due to the
pandemic. Throughout the year, in addition to working on the priorities of our plan, we continued to improve our
understanding of key issues such as responsible procurement, animal welfare and the environment, as we prepared
our 2022-2026 CR plan development.
We continued the implementation of our Responsible Procurement Framework. We advanced our efforts to
characterize our supply chain by updating the assessment of our purchases. We developed new tools to document
our suppliers' practices on specific topics of interest, including a questionnaire on working conditions, such as
employee housing. Proactive management allows us to ensure compliance with our Supplier Code of Conduct.
Our leading food waste initiative, One More Bite, continued this year at Metro, Super C, Food Basics, Adonis and
Marché Richelieu stores. Started in 2014, our food recovery program consists of donating unsold products collected
in our participating stores in Quebec and Ontario that are still fit for consumption, to our food bank partners – Food
Banks of Québec as well as Second Harvest and Feed Ontario in Ontario. Thanks to the collaboration of our in-store
teams and our partners, the program has made it possible to recover and redistribute more than 4,700 tonnes of food,
the equivalent of more than 9.4 million meals.
Our efforts to promote local products and support their artisans continued as consumer interest and demand keep
growing. In this regard, we maintained our collaboration with our partners, such as the MAPAQ (Ministère de
l’Agriculture, des Pêcheries et de l’Alimentation du Québec), Aliments du Québec, as well as OMAFRA (Ontario
Ministry of Agriculture, Food and Rural Affairs).
Several new collaborations were initiated both in Ontario and Quebec. Many regional suppliers have grown with us,
adding new products to their offer available in our stores, or distributing to more stores.
In September 2021, we launched a new Respect in the Workplace policy. We see this latest best practice framework
as a complement to our Diversity policy that will allow us to continue to promote a healthy workplace where
employees can grow and develop their full potential while respecting their differences.
We have updated our Environmental policy, which reflects the evolution of our approach with new issues that are now
taken into account, such as pollution prevention, climate change mitigation, sustainable resource use and the
protection of biodiversity and ecosystems.
With respect to our Packaging and printed materials management policy, our teams continued to make progress in
several areas and are aligned with our commitments to reduce the environmental footprint of our packaging and
printed material as much as possible. In fact, we surpassed our objective to reduce the total weight of paper used in
the flyers of our food and pharmacy banners relative to 2018.
METRO's CR report covering the 2021 fiscal year will be available on January 25, 2022, at which time we will also
introduce our new 2022-2026 CR plan. Our goal is to focus on what METRO can and should do to fulfill its mission
from a sustainability perspective and to continue to properly integrate environmental, social and governance (ESG)
factors into its business model.
For more details, please visit the Corporate Responsibility section of our corporate website: metro.ca/responsibility.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
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MANAGEMENT'S DISCUSSION AND ANALYSIS
AND CONSOLIDATED FINANCIAL STATEMENTS
For the year ended September 25, 2021
TABLE OF CONTENTS
Overview ............................................................................................................................................................................
Purpose, mission and strategy ......................................................................................................................................
Key performance indicators ............................................................................................................................................
Key achievements ............................................................................................................................................................
Event after the reporting period .....................................................................................................................................
Selected annual information ...........................................................................................................................................
Outlook ..............................................................................................................................................................................
Operating results ..............................................................................................................................................................
Quarterly highlights ..........................................................................................................................................................
Cash position ....................................................................................................................................................................
Financial position .............................................................................................................................................................
Sources of financing ........................................................................................................................................................
Contractual obligations ....................................................................................................................................................
Related party transactions ..............................................................................................................................................
Fourth quarter ...................................................................................................................................................................
Derivative financial instruments .....................................................................................................................................
Forward-looking information ...........................................................................................................................................
Non-IFRS measurements ...............................................................................................................................................
Controls and procedures ................................................................................................................................................
Significant judgments and estimates ............................................................................................................................
Risk management ............................................................................................................................................................
Management's responsibility for financial reporting ...................................................................................................
Independent auditors' report ..........................................................................................................................................
Annual consolidated financial statements ....................................................................................................................
.
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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 quality-
conscious. 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 long-
term 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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 13 -
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 two-
year 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
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 14 -
•
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 15 -
SELECTED ANNUAL INFORMATION
(Millions of dollars, unless otherwise indicated)
Sales
Net earnings attributable to equity holders
of the parent
Net earnings attributable to non-controlling
interests
Net earnings
Basic net earnings per share
Fully diluted net earnings per share
Adjusted net earnings(1)
Adjusted fully diluted net earnings per
share(1)
Return on equity (%)
2021
2020
Change
2019
Change
Change
2021 vs 2019
18,283.0 17,997.5
1.6 16,767.5
%
%
7.3
%
9.0
823.0
795.2
3.5
711.6
11.7
15.7
2.7
1.2
125.0
2.8
(57.1)
(3.6)
825.7
796.4
3.34
3.33
3.15
3.14
854.2
829.1
3.44
13.1
3.27
13.1
3.7
6.0
6.1
3.0
5.2
—
714.4
2.79
2.78
731.6
2.84
12.3
11.5
12.9
12.9
13.3
15.1
—
12.2
21.2
(0.9)
15.6
19.7
19.8
16.8
21.1
—
25.0
22.7
(0.8)
Dividends per share (Dollars)
0.9750
0.8750
11.4
0.7800
Total assets
13,592.1 13,423.9
1.3 11,073.9
Current and non-current portions of debt
2,636.7
2,632.6
0.2
2,657.6
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 pre-
pandemic 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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 16 -
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)
Operating income before depreciation and
amortization
OI
2021
Sales
(%)
OI
2020
Sales
(%)
1,732.5 18,283.0
9.5
1,683.6 17,997.5
9.4
Loss on disposal of a subsidiary
—
7.5
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%.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 17 -
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)
Net earnings
825.7
3.33
796.4
3.14
3.7
6.1
2021
2020
Change (%)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
(Millions of
dollars)
Fully diluted
EPS
(Dollars)
Net
earnings
Fully
diluted
EPS
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)
28.5
4.2
28.5
854.2
3.44
829.1
3.27
3.0
5.2
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 18 -
QUARTERLY HIGHLIGHTS
(Millions of dollars, unless otherwise indicated)
2021
2020
Change (%)
Sales
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Net earnings
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Adjusted net earnings(1)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Fully diluted net earnings per share (Dollars)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
Adjusted fully diluted net earnings per share(1) (Dollars)
Q1(4)
Q2(4)
Q3(5)
Q4(4)
Fiscal
(4) 12 weeks
(5) 16 weeks
4,278.2
4,193.0
5,719.8
4,092.0
4,029.8
3,988.9
5,835.2
4,143.6
18,283.0
17,997.5
191.2
188.1
252.4
194.0
825.7
197.7
194.7
261.2
200.6
854.2
0.76
0.75
1.03
0.79
3.33
0.79
0.78
1.06
0.81
3.44
170.2
176.2
263.5
186.5
796.4
180.9
182.8
272.3
193.1
829.1
0.67
0.69
1.04
0.74
3.14
0.71
0.72
1.08
0.77
3.27
6.2
5.1
(2.0)
(1.2)
1.6
12.3
6.8
(4.2)
4.0
3.7
9.3
6.5
(4.1)
3.9
3.0
13.4
8.7
(1.0)
6.8
6.1
11.3
8.3
(1.9)
5.2
5.2
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 19 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 20 -
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)
Net earnings
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
Loss on disposal of a subsidiary, after taxes
— — — —
4.2 — — —
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Adjusted net earnings(1)
6.5
6.6
8.8
6.6
6.5
6.6
8.8
6.6
197.7 194.7 261.2 200.6
180.9 182.8 272.3 193.1
2021
2020
(Dollars)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Fully diluted net earnings per share
0.76 0.75 1.03 0.79
0.67 0.69 1.04 0.74
Adjustments impact
0.03 0.03 0.03 0.02
0.04 0.03 0.04 0.03
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 21 -
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:
Revolving Credit Facility
Interest Rate
Rates fluctuate with changes in bankers'
Maturity
Series C Notes
Series F Notes
Series G Notes
Series B Notes
Series D Notes
Series H Notes
Series I Notes
acceptance rates
3.20% fixed rate
2.68% fixed rate
3.39% fixed rate
5.97% fixed rate
5.03% fixed rate
4.27% fixed rate
3.41% fixed rate
September 3, 2026
December 1, 2021
December 5, 2022
December 6, 2027
October 15, 2035
December 1, 2044
December 4, 2047
February 28, 2050
Balance
(Millions of dollars)
—
300.0
300.0
450.0
400.0
300.0
450.0
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:
Financial structure
Non-current debt (Millions of dollars)
Non-current lease liabilities (Millions of dollars)
Equity (Millions of dollars)
Non-current debt and lease liabilities/total capital (%)
As at
As at
September 25, 2021
September 26, 2020
2,618.2
1,657.5
4,275.7
6,412.8
40.0
2,612.0
1,811.4
4,423.4
6,155.4
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.
Interest Coverage Ratio
Operating income before depreciation and amortization/Financial costs (Times)
13.0
12.3
2021
2020
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 22 -
CAPITAL STOCK
(Thousands)
Balance – beginning of year
Share redemption
Stock options exercised
Balance – end of year
Balance as at December 1, 2021 and November 27, 2020
(Thousands)
Balance – beginning of year
Acquisition
Release
Balance – end of year
Balance as at December 1, 2021 and November 27, 2020
Common Shares issued
2021
250,795
(7,850)
446
243,391
241,560
Treasury shares
2021
552
—
(110)
442
442
2020
254,440
(3,910)
265
250,795
249,746
2020
577
112
(137)
552
552
STOCK OPTIONS PLAN
Stock options (Thousands)
Exercise prices (Dollars)
As at
December 1, 2021
As at
September 25, 2021
As at
September 26, 2020
2,300
2,318
2,322
35.42 to 57.81
35.42 to 57.81
21.90 to 56.92
Weighted average exercise price (Dollars)
46.78
46.69
41.27
PERFORMANCE SHARE UNIT PLAN
Performance share units (Thousands)
615
615
618
As at
December 1, 2021
As at
September 25, 2021
As at
September 26, 2020
NORMAL COURSE ISSUER BID PROGRAM
the normal course
Under
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 period between November 25, 2020 and
issuer bid program covering
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 27th 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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 23 -
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)*
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
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 24 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 25 -
CONTRACTUAL OBLIGATIONS
Payment commitments by fiscal year (capital and interest)
(Millions of dollars)
2022
2023
2024
2025
2026
2027 and thereafter
Loans
Notes
Lease
liabilities
Service
contract
commitments
Total
20.4
396.7
313.5
149.0
879.6
3.5
1.8
1.4
1.2
388.4
309.2
129.5
830.6
87.1
87.1
87.1
287.3
252.0
214.9
45.6
421.8
29.9
370.4
16.7
319.9
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 26 -
FOURTH QUARTER
(Millions of dollars, except for net earnings per share)
Sales
Operating income before depreciation and amortization
Adjusted operating income before depreciation and amortization (1)
Net earnings
Adjusted net earnings(1)
Fully diluted net earnings per share
Adjusted fully diluted net earnings per share(1)
Cash flows from:
Operating activities
Investing activities
Financing activities
OPERATING RESULTS
SALES
2021
2020
Change (%)
4,092.0
4,143.6
(1.2)
403.6
403.6
194.0
200.6
0.79
0.81
415.3
(187.3)
(193.2)
403.5
403.5
186.5
193.1
0.74
0.77
415.8
(181.9)
(159.0)
—
—
4.0
3.9
6.8
5.2
—
—
—
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.
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 27 -
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
Net earnings
194.0
0.79
186.5
0.74
4.0
6.8
Amortization of intangible assets acquired in
connection with the Jean Coutu Group
acquisition, after taxes
Adjusted net earnings(1)
6.6
6.6
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 28 -
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
EARNINGS AND ADJUSTED FULLY DILUTED NET EARNINGS PER SHARE
INCOME BEFORE DEPRECIATION AND AMORTIZATION, ADJUSTED NET
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 29 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 30 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 31 -
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
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 32 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 33 -
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.
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 34 -
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
(1) See table on "Net earnings adjustments" and section on "Non-IFRS measurements"
(2) See table on "Operating income before depreciation and amortization" and section on "Non-IFRS measurements"
(3) See section on "Forward-looking information"
- 35 -
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The preparation and presentation of the consolidated financial statements of METRO INC. and the other financial
information contained in this Annual Report are the responsibility of management. This responsibility is based on a
judicious choice of appropriate accounting principles and policies, the application of which requires making estimates
and informed judgments. It also includes ensuring that the financial information in the Annual Report is consistent with
the consolidated financial statements. The consolidated financial statements were prepared in accordance with
International Financial Reporting Standards and were approved by the Board of Directors.
METRO INC. maintains accounting systems and internal controls over the financial reporting process which, in the
opinion of management, provide reasonable assurance regarding the accuracy, relevance and reliability of financial
information and the well-ordered, efficient management of the Corporation's affairs.
The Board of Directors fulfills its duty to oversee management in the performance of its financial reporting
responsibilities and to review the consolidated financial statements and Annual Report, principally through its Audit
Committee. This Committee is comprised solely of directors who are independent of the Corporation and is also
responsible for making recommendations for the nomination of external auditors. Also, it holds periodic meetings with
members of management as well as internal and external auditors to discuss internal controls, auditing matters and
financial reporting issues. The external and internal auditors have access to the Committee without management. The
Audit Committee has reviewed the consolidated financial statements and Annual Report of METRO INC. and
recommended their approval to the Board of Directors.
The enclosed consolidated financial statements were audited by Ernst & Young LLP and their report indicates the
extent of their audit and their opinion on the consolidated financial statements.
Eric La Flèche
President and Chief Executive Officer
December 10, 2021
François Thibault
Executive Vice President,
Chief Financial Officer and Treasurer
- 36 -
INDEPENDENT AUDITORS' REPORT
To the shareholders of METRO INC.
Opinion
We have audited the consolidated financial statements of METRO Inc. and its subsidiaries (the “Group”), which
comprise the consolidated statements of financial position as at September 25, 2021 and September 26, 2020, and
the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then
ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at September 25, 2021 and September 26, 2020, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report. We are independent of the Group in accordance with the ethical requirements that
are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
consolidated financial statements of the current period. These matters were addressed in the context of the audit of
the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide
a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report, including in relation to this matter. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
consolidated financial statements. The results of our audit procedures, including the procedures performed to address
the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Key Audit Matter
How our audit addressed the key audit matter
Impairment test of the goodwill of the
pharmaceutical operating segment
Impairment testing of goodwill is to be done at least
annually, or at any time an indicator of impairment
exists. As disclosed in note 12, goodwill with a
carrying amount of $1,323.3M was attributed to the
to pharmaceutical
related
operating segment
operations. For the purpose of the impairment test,
the recoverable amount was determined based on its
value in use, which was calculated using discounted
pre-tax cash
from management-
forecasts
approved budgets.
flow
To test the estimated recoverable amount of the
pharmaceutical operating segment, we performed,
among others, the following procedures:
•
•
•
in
Recalculated the value in use of the
pharmaceutical operating segment using
the Corporation’s discounted cash flow
model.
underlying
Compared Management’s
the recoverable
assumptions used
amount, such as the revenue growth rates
and EBITDA margins to business plans
and previous forecasts to actual results.
Evaluated, with the assistance of our
the Corporation's
valuation specialists,
valuation methodology and significant
assumptions such as the discount rate by
referencing current
industry, economic
and comparable company information.
- 37 -
Auditing management’s annual goodwill impairment
test was complex, given the degree of judgment and
subjectivity in evaluating management’s estimates
and assumptions in determining the recoverable
amount of the pharmaceutical operating segment as
at September 25, 2021. Significant assumptions
included revenue growth rate, earnings before
interest, tax, depreciation and amortization (EBITDA)
margins, and the discount rate, which are affected by
expectations about future market and economic
conditions.
•
•
Other Information
result
the
Performed sensitivity analyses of
significant assumptions
to evaluate
changes in the recoverable amount that
would
the
underlying inputs.
Assessed the adequacy of the disclosures
in respect of the significant judgements
made by management as described
above.
from changes
in
Management is responsible for the other information. The other information comprises:
•
•
The information included in the Management’s Discussion and Analysis
The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and The Annual Report prior to the date of this auditor’s report.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRSs, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
- 38 -
•
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Martine Quintal.
Montréal, Canada
December 10, 2021
1 CPA auditor, CA, public accountancy permit no. A112005
- 39 -
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- 40 -
Annual Consolidated Financial Statements
METRO INC.
September 25, 2021
- 41 -
Table of contents
Consolidated statements of income ..............................................................................................................................
Consolidated statements of comprehensive income ..................................................................................................
Consolidated statements of financial position .............................................................................................................
Consolidated statements of changes in equity ............................................................................................................
Consolidated statements of cash flows ........................................................................................................................
Notes to consolidated financial statements .................................................................................................................
1- Description of business ............................................................................................................................................
2- Significant accounting policies ................................................................................................................................
3- Significant judgments and estimates ......................................................................................................................
4- Additional information on the nature of earnings components ...........................................................................
5- Income taxes ..............................................................................................................................................................
6- Net earnings per share .............................................................................................................................................
7- Inventories ..................................................................................................................................................................
8- Fixed assets ...............................................................................................................................................................
9- Investment properties ...............................................................................................................................................
10- Leases ........................................................................................................................................................................
11- Intangible assets ........................................................................................................................................................
12- Goodwill ......................................................................................................................................................................
13- Other assets ...............................................................................................................................................................
14- Bank loans ..................................................................................................................................................................
15- Offsetting ....................................................................................................................................................................
16- Provisions ...................................................................................................................................................................
17- Debt .............................................................................................................................................................................
18- Capital stock ..............................................................................................................................................................
19- Dividends ....................................................................................................................................................................
20- Employee benefits ....................................................................................................................................................
21- Commitments .............................................................................................................................................................
22- Contingencies ............................................................................................................................................................
23- Related party transactions .......................................................................................................................................
24- Management of capital .............................................................................................................................................
25- Financial instruments ................................................................................................................................................
26- Event after the reporting period ..............................................................................................................................
27- Approval of financial statements .............................................................................................................................
Page
43
44
45
46
47
48
48
48
54
56
57
58
59
59
60
60
63
64
65
65
65
66
67
68
71
71
75
75
77
78
78
80
80
- 42 -
Consolidated statements of income
Years ended September 25, 2021 and September 26, 2020
(Millions of dollars, except for net earnings per share)
Sales (notes 4 and 23)
Cost of sales and operating expenses (note 4)
Loss on disposal of a subsidiary (notes 4 and 12)
Operating income before depreciation and amortization
Depreciation and amortization (note 4)
Financial costs, net (note 4)
Earnings before income taxes
Income taxes (note 5)
Net earnings
Attributable to:
Equity holders of the parent
Non-controlling interests
Net earnings per share (Dollars) (notes 6 and 18)
Basic
Fully diluted
See accompanying notes
2021
2020
18,283.0
17,997.5
(16,550.5)
(16,306.4)
—
(7.5)
1,732.5
1,683.6
(478.3)
(133.5)
(462.5)
(136.8)
1,120.7
1,084.3
(295.0)
825.7
(287.9)
796.4
823.0
2.7
825.7
3.34
3.33
795.2
1.2
796.4
3.15
3.14
- 43 -
Consolidated statements of comprehensive income
Years ended September 25, 2021 and September 26, 2020
(Millions of dollars)
Net earnings
Other comprehensive income
Items that will not be reclassified to net earnings
Changes in defined benefit plans
Actuarial gains (losses) (note 20)
Asset ceiling effect (note 20)
Minimum funding requirement (note 20)
Corresponding income taxes (note 5)
Comprehensive income
Attributable to:
Equity holders of the parent
Non-controlling interests
See accompanying notes
2021
2020
825.7
796.4
214.2
(41.5)
(21.4)
(40.1)
111.2
936.9
934.2
2.7
936.9
(15.5)
(0.3)
0.8
4.1
(10.9)
785.5
784.3
1.2
785.5
- 44 -
Consolidated statements of financial position
As at September 25, 2021 and September 26, 2020
(Millions of dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (notes 13 and 23)
Accounts receivable on subleases (note 10)
Inventories (note 7)
Prepaid expenses
Current taxes
Non-current assets
Fixed assets (note 8)
Investment properties (note 9)
Right-of-use assets (note 10)
Intangible assets (note 11)
Goodwill (note 12)
Deferred taxes (note 5)
Defined benefit assets (note 20)
Accounts receivable on subleases (note 10)
Other assets (note 13)
LIABILITIES AND EQUITY
Current liabilities
Bank loans (note 14)
Accounts payable (note 15)
Deferred revenues
Current taxes
Provisions (note 16)
Current portion of debt (note 17)
Current portion of lease liabilities (note 10)
Non-current liabilities
Debt (note 17)
Lease liabilities (note 10)
Defined benefit liabilities (note 20)
Provisions (note 16)
Deferred taxes (note 5)
Other liabilities
Equity
Attributable to equity holders of the parent
Attributable to non-controlling interests
Commitments and contingencies (notes 21 and 22)
Event after the reporting period (note 26)
See accompanying notes
On behalf of the Board
2021
2020
445.8
679.2
92.8
1,169.0
46.6
33.4
2,466.8
3,129.8
33.4
1,064.7
2,854.7
3,301.2
57.1
84.8
549.6
50.0
13,592.1
0.1
1,546.5
35.9
25.9
1.6
318.5
269.7
2,198.2
2,318.2
1,657.5
61.5
13.5
927.7
2.7
7,179.3
441.5
641.8
88.0
1,268.2
45.0
16.0
2,500.5
2,860.8
40.2
1,150.5
2,850.2
3,300.7
43.5
19.7
596.3
61.5
13,423.9
0.4
1,458.9
38.0
81.7
2.5
20.6
258.0
1,860.1
2,612.0
1,811.4
129.9
19.2
833.9
2.0
7,268.5
6,399.9
12.9
6,412.8
13,592.1
6,142.2
13.2
6,155.4
13,423.9
ERIC LA FLÈCHE
Director
RUSSELL GOODMAN
Director
- 45 -
Consolidated statements of changes in equity
Years ended September 25, 2021 and September 26, 2020
(Millions of dollars)
Balance as at
September 26, 2020
Net earnings
Other comprehensive income (loss)
Comprehensive income
Stock options exercised
Shares redeemed (note 18)
Share redemption premium (note 18)
Share-based compensation cost
Performance share units settlement
Dividends (note 19)
Repurchase of shares in joint ventures
Balance as at
September 25, 2021
Balance as at
September 28, 2019
Net earnings
Other comprehensive income (loss)
Comprehensive income
Stock options exercised
Shares redeemed (note 18)
Share redemption premium (note 18)
Acquisition of treasury shares
Share-based compensation cost
Performance share units settlement
Dividends (note 19)
Adoption of IFRS 16 "Leases"
Change in fair value of non-controlling
interests liability (note 25)
Balance as at
September 26, 2020
See accompanying notes
Attributable to the equity holders of the parent
Capital
stock
(note 18)
Treasury
shares
(note 18)
Contributed
surplus
Retained
earnings
Non-
controlling
interests
Total
Total
equity
1,713.8
(25.1)
22.2
4,431.3
6,142.2
13.2
6,155.4
—
—
—
14.2
(53.7)
—
—
—
—
—
—
—
—
—
—
—
—
4.6
—
—
—
—
—
(1.6)
—
823.0
823.0
2.7
825.7
111.2
111.2
—
111.2
934.2
934.2
2.7
936.9
—
—
12.6
(53.7)
—
—
12.6
(53.7)
—
(402.6)
(402.6)
—
(402.6)
10.6
(7.0)
—
10.6
(0.9)
(3.3)
—
—
10.6
(3.3)
—
(240.1)
(240.1)
(1.9)
(242.0)
—
—
—
(1.1)
(1.1)
(39.5)
4.6
2.0
(643.6)
(676.5)
(3.0)
(679.5)
1,674.3
(20.5)
24.2
4,721.9
6,399.9
12.9
6,412.8
Attributable to the equity holders of the parent
Capital
stock
(note 18)
Treasury
shares
(note 18)
Contributed
surplus
Retained
earnings
Non-
controlling
interests
Total
Total
equity
1,732.3
(24.6)
19.2
4,228.3
5,955.2
13.4
5,968.6
—
—
—
8.2
(26.7)
—
—
—
—
—
—
—
(18.5)
—
—
—
—
—
—
(6.2)
—
5.7
—
—
—
(0.5)
—
—
—
(1.0)
—
795.2
795.2
1.2
796.4
(10.9)
(10.9)
784.3
784.3
—
—
7.2
(26.7)
—
1.2
—
—
(10.9)
785.5
7.2
(26.7)
—
(190.5)
(190.5)
—
(190.5)
—
9.5
—
—
(5.5)
(0.2)
(6.2)
9.5
—
—
—
—
(6.2)
9.5
—
—
(220.7)
(220.7)
(1.4)
(222.1)
—
(169.4)
(169.4)
—
(169.4)
—
(0.5)
(0.5)
—
(0.5)
3.0
(581.3)
(597.3)
(1.4)
(598.7)
1,713.8
(25.1)
22.2
4,431.3
6,142.2
13.2
6,155.4
- 46 -
Consolidated statements of cash flows
Years ended September 25, 2021 and September 26, 2020
(Millions of dollars)
Operating activities
Earnings before income taxes
Non-cash items
Gain on disposal of an investment
Loss on disposal of a subsidiary (note 12)
Depreciation and amortization
Gain on disposal and write-offs of fixed and intangible assets and investment
properties
Impairment losses on fixed assets and right-of-use assets
Share-based compensation cost
Difference between amounts paid for employee benefits and current year cost
Financial costs, net
Net change in non-cash working capital items
Income taxes paid
Investing activities
Net proceeds on disposal of a subsidiary (note 12)
Buyout of a minority interest (note 25)
Net change in other assets
Additions to fixed assets and investment properties (notes 8 et 9)
Disposals of fixed assets and investment properties (notes 8 et 9)
Additions to intangible assets (note 11)
Payments received from subleases
Interests received from subleases
Financing activities
Net change in bank loans
Shares issued (note 18)
Shares redeemed (note 18)
Acquisition of treasury shares (note 18)
Performance share units settlement
Increase in debt
Repayment of debt
Interest paid on debt
Payment of lease liabilities (principal)
Payment of lease liabilities (interest)
Net change in other liabilities
Dividends (note 19)
Net change in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
See accompanying notes
- 47 -
2021
2020
1,120.7
1,084.3
(0.3)
—
478.3
(7.1)
—
10.6
13.5
133.5
1,749.2
162.2
(328.1)
1,583.3
—
(1.1)
1.7
(520.0)
22.4
(79.3)
89.0
15.7
(471.6)
(0.3)
12.6
(456.3)
—
(3.3)
21.9
(24.0)
(109.1)
(260.9)
(48.6)
0.7
(240.1)
(1,107.4)
4.3
441.5
445.8
—
7.5
462.5
(4.5)
3.0
9.5
3.8
136.8
1,702.9
(34.5)
(194.3)
1,474.1
3.5
(51.6)
0.8
(463.3)
12.4
(47.4)
85.6
15.9
(444.1)
0.4
7.2
(217.2)
(6.2)
—
413.1
(428.7)
(107.1)
(252.9)
(51.1)
1.3
(220.7)
(861.9)
168.1
273.4
441.5
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
1. DESCRIPTION OF BUSINESS
METRO INC. (the Corporation), is incorporated under the laws of Quebec. The Corporation is one of Canada’s
leading food and pharmacy retailers and distributors. It operates a network of supermarkets, discount stores and
drugstores. Its head office is located at 11011 Maurice-Duplessis Blvd., Montréal, Québec, Canada, H1C 1V6. Its
business segments, food operations and pharmaceutical operations, are combined into a single reportable operating
segment due to the similar nature of their operations (see note 3).
2.
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements, in Canadian dollars, have been prepared by management in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). The consolidated financial statements have been prepared within the reasonable limits of materiality, on a
historical cost basis, except for certain financial instruments and defined benefit plan assets measured at fair value
and defined benefit obligations measured at present value. The significant accounting policies are summarized below:
Consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries, as well as those of
structured entities (notes 3 and 23). All intercompany transactions and balances were eliminated on consolidation.
Revenue from contracts with customers
Revenue from contracts with customers are accounted for when control of goods or services is transferred to the
customer. Retail sales of corporate stores and stores that qualify as structured entities are recorded at the time of
sale to the consumer. Sales to unconsolidated affiliated or franchised stores and other customers are recorded when
the goods are delivered to them. Discounts granted by the Corporation are recorded as a reduction in revenue.
Recognition of considerations from vendors
Cash considerations from vendors are considered as an adjustment to the vendor's product pricing and are therefore
characterized as a reduction of cost of sales and related inventories when recognized in the consolidated financial
statements.
Loyalty programs
The Corporation has two loyalty programs.
The first program, for which the Corporation acts as an agent, belongs to a third party and its cost is recorded as a
reduction in sales at the time of sale to the customer.
The second program belongs to the Corporation. At the time of a sale to the customer, part of it is recorded as
deferred revenue equal to the fair value of the program's issued points. This fair value is determined based on the
exchange value of the points awarded and the expected redemption rate which are regularly remeasured. The
deferred revenue is recognized as sales when the points are redeemed.
Foreign currency translation
The consolidated financial statements are presented in Canadian dollars, the Corporation's functional currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the
transaction. At each closing, monetary items denominated in foreign currency are translated using the exchange rate
at the closing date. Non-monetary items that are measured at historical cost in foreign currency are translated using
the exchange rate at the date of the transaction. Gains or losses resulting from currency translations are recognized
in net earnings.
Income taxes
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to determine these amounts are those that
are enacted or substantively enacted by tax authorities by the closing date.
- 48 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The Corporation follows the liability method of accounting for income taxes. Under this method, deferred tax assets
and liabilities are accounted for based on estimated taxes recoverable or payable that would result from the recovery
or settlement of the carrying amount of assets and liabilities. Deferred tax assets and liabilities are measured using
substantively enacted tax rates expected to be in effect when the temporary differences are expected to reverse.
Changes in these amounts are included in current net earnings in the period in which they occur. The carrying
amount of deferred tax assets is reviewed at every closing date and reduced to the extent that it is no longer probable
that sufficient earnings will be available to allow all or part of the deferred tax assets to be utilized.
Income tax relating to items recognized directly in equity is recognized in equity.
Share-based payment
A share-based compensation expense is recognized for the stock option and performance share unit (PSU) plans
offered to certain employees as well as a deferred share unit (DSU) plan offered to directors.
Stock option awards vest gradually over the vesting term and each tranche is considered as a separate award. The
value of the remuneration expense is calculated based on the fair value of the stock options at the option grant date
and using the Black-Scholes valuation model. The compensation expense is recognized over the vesting term of
each tranche.
The compensation expense for the PSU plan is determined based on the market value of the Corporation's Common
Shares at grant date. Compensation expense is recognized on a straight-line basis over the vesting period. The
impact of any changes in the number of PSUs is recorded in the period where the estimate is revised. The grant
qualifies as an equity instrument.
The compensation expense and corresponding liability for the DSU plan are recognized on the grant date and
determined based on the grant date market value of the Corporation’s Common Shares. The DSU liability is included
in accounts payable and is periodically adjusted to reflect any changes in the stock market valuation of the
Corporation’s Common Shares.
Net earnings per share
Basic net earnings per share is calculated by dividing the net earnings attributable to equity holders of the parent by
the weighted average number of Common Shares outstanding during the year. For the fully diluted net earnings per
share, the net earnings attributable to equity holders of the parent and the weighted average number of Common
Shares outstanding are adjusted to reflect all potential dilutive shares.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances, highly liquid investments (with an initial term of
three months or less) and outstanding deposits. They are classified as “Financial assets at fair value through net
earnings”.
Accounts receivable
Accounts receivable, accounts receivable on subleases and loans to certain customers are classified as “Loans and
receivables”. After their initial fair value measurement, they are measured at amortized cost using the effective
interest method. For the Corporation, the measured amount generally corresponds to cost.
Inventories
Inventories are valued at the lower of cost and net realizable value. Warehouse inventories cost is determined using
the average cost method net of certain considerations received from vendors. Retail inventories cost is valued at the
retail price less the gross margin and certain considerations received from vendors. All costs incurred in bringing the
inventories to their present location and condition are included in the cost of warehouse and retail inventories.
Investment in a joint venture
The Corporation has an investment in a joint venture, whereby the venturers have a contractual agreement that
establishes joint control over the economic activity of the entity. The investment is accounted for using the equity
method and is presented in other assets.
- 49 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Fixed assets
Fixed assets are initially recorded at cost. Principal components of a fixed asset with different useful lives are
depreciated separately. Buildings and equipment are depreciated on a straight-line basis over their useful lives.
Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the
remaining lease term. The depreciation method and estimate of useful lives are reviewed annually.
Buildings
Equipment
Leasehold improvements
Leases
20 to 50 years
3 to 20 years
5 to 20 years
The Corporation as lessee
The Corporation recognizes right-of-use assets and the corresponding lease liabilities at the lease inception date, the
date at which the lessor makes available the leased asset to the Corporation. Rental payments under short-term
leases or leases with low-value underlying assets and variable payments that are not based on an index or rate are
recorded in operating expenses on a straight line basis over the duration of the lease.
Lease liabilities represent the present value of fixed and variable lease payments that are based on an index or rate,
net of lease incentives receivable. Subsequent to the initial measurement, the Corporation measures the lease
liabilities at amortized cost using the effective interest method. Lease liabilities are remeasured when a change is
made to the lease agreement. Lease payments are discounted at the lessee’s incremental borrowing rate at lease
inception. The interest expense is recognized in net financial costs. The lease term includes renewal options that the
Corporation is reasonably certain to exercise.
Right-of-use assets are measured at the initial value of the lease liabilities, less lease incentives received and
restoration costs. Subsequent to initial measurement, the Corporation applies the cost model to right-of-use assets.
Right-of-use assets are measured at cost less accumulated amortization, accumulated impairment losses and any
remeasurement of lease liabilities. Assets are depreciated from the lease inception date on a straight-line basis over
the shorter of the asset’s useful life and the lease term.
The Corporation as lessor
For subleases, for which the Corporation acts as an intermediate lessor, it evaluates the classification in relation to
the right-of-use assets arising from the main lease. The Corporation accounts for the main lease and the sublease as
two separate leases. A sublease contract is classified as a finance lease if substantially all risks and rewards
incidental to the underlying asset are transferred to the lessee. Otherwise, leases are classified as operating leases
and rental income is recognized on a straight-line basis over the lease term.
For subleases that are classified as finance leases, the Corporation derecognizes the corresponding right-of-use
assets and records a net investment in the subleases. Interest income is recorded in net financial costs. The net
investment is presented in current and non-current accounts receivable on subleases.
Investment properties
Investment properties are held for capital appreciation and to earn rentals. They are not occupied by the owner for its
ordinary activities. They are recognized at cost. Principal components, except for land which is not depreciated, are
depreciated on a straight-line basis over their respective useful lives which vary from 20 to 50 years. The depreciation
method and estimates of useful lives are reviewed annually.
Intangible assets
Intangible assets with finite useful lives are recorded at cost and amortized on a straight-line basis over their useful
lives. The amortization method and estimates of useful lives are reviewed annually.
Leasehold rights
Software
Retail network retention premiums
Customer relationships
20 to 40 years
3 to 7 years
5 to 30 years
10 to 27 years
- 50 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The banners that the Corporation intends to keep and operate, the private labels for which it continues to develop
new products and the loyalty programs it intends to maintain qualify as intangible assets with indefinite useful lives.
They are recorded at cost and not amortized.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of the acquired enterprise's identifiable
net assets at the date of acquisition, is recognized at cost and is not amortized.
Impairment of non financial assets
At each reporting date, the Corporation must determine if there is any indication of depreciation of its fixed assets,
intangible assets with finite and indefinite useful lives, investment properties, right-of-use assets and goodwill. If any
indication exists, the Corporation has to test the assets for impairment. Impairment testing of intangible assets with
indefinite useful lives and goodwill is to be done at least annually, regardless of any indication of depreciation.
Impairment testing is conducted at the level of the asset itself, a cash generating unit (CGU) or group of CGUs. A
CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. Each store is a separate CGU. Impairment testing of warehouses is
conducted at the level of the different groups of CGUs. Impairment testing of common assets is conducted at the level
of the smallest CGU to which assets have been allocated. Impairment testing of goodwill is conducted at the level of
the smallest CGU to which the goodwill relates. Impairment testing of investment properties, banners, private labels
and loyalty programs is conducted at the level of the asset itself.
To test for impairment, the carrying amount of an asset, CGU or group of CGUs is compared with its recoverable
amount. The recoverable amount is the higher of the value in use and the fair value less costs of disposal. The value
in use corresponds generally to the pre-tax cash flow projections from the management-approved budgets for the
next fiscal year. These projections reflect past experience and are discounted at a pre-tax rate corresponding to the
expected market rate for this type of investment. The recoverable amount of investment properties, banners, private
labels and loyalty programs is these assets' fair value less costs of disposal. Fair value represents the price that
would be obtained for the sale of an asset in an arm's length transaction. If the carrying amount exceeds the
recoverable amount, an impairment loss in the amount of the excess is recognized in net earnings. CGU or group of
CGUs' impairment losses are allocated first to goodwill, if applicable then pro rata to the assets of the CGU or group
of CGUs, without however reducing the carrying amount of the assets below the highest of their fair value less costs
of disposal, their value in use or zero.
Except for goodwill, any reversal of an impairment loss is recognized immediately in net earnings. A reversal of an
impairment loss for a CGU or group of CGUs is allocated pro rata to the assets of the CGU or group of CGUs. The
recoverable amount of an asset increased by a reversal of an impairment loss may not exceed the carrying amount
that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized for
the asset in prior years.
Employee benefits
Employee benefits include short-term employee benefits which correspond to wages and fringe benefits and are
recognized immediately in net earnings as are termination benefits which are also recorded as a liability when the
Corporation cannot withdraw the offer of termination.
Employee benefits also include post-employment benefits which comprise pension benefits (both defined benefit and
defined contribution plans) and ancillary benefits such as post-employment life and medical insurance. Employee
benefits also comprise other long-term benefits, namely long-term disability benefits not covered by insurance plans
and ancillary benefits provided to employees on long-term disability. Assets and obligations related to employee
defined benefit plans, ancillary retirement benefits and other long-term benefits plan are accounted for using the
following accounting policies:
•
•
Defined benefit obligations and the cost of pension, ancillary retirement benefits and other long-term benefits
earned by participants are determined from actuarial calculations according to the projected credit unit method.
The calculations are based on management’s best assumptions relating to salary escalation, retirement age of
participants, inflation and expected health care costs.
Defined benefit obligations are discounted using high-quality corporate bond yield rates with cash flows that
match the timing and amount of expected benefit payments.
- 51 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
•
•
•
•
•
•
•
Defined benefit plan assets or liabilities recognized in the consolidated statement of financial position correspond
to the difference between the present value of defined benefit obligations and the fair value of plan assets. In the
case of a surplus funded plan, these assets are limited at the lesser of the actuarial value determined for
accounting purposes or the value of the future economic benefit by way of surplus refunds or contribution
holidays. Furthermore, an additional liability could be recorded when minimum funding requirements for past
services exceed economic benefits available.
The interest expense on defined benefit obligations, on the asset ceiling and on the minimum funding
requirement is net of interest income on plan assets, which is calculated by applying the same rate used to
evaluate the obligations, and is recognized as financing costs.
Actuarial gains or losses on pension plans and ancillary post-employment benefits arise from changes to current
year end actuarial assumptions used to determine the defined benefit obligations. They also arise from variances
between the experience adjustments of the plans for the current year and the assumptions defined at the end of
the previous fiscal year to determine the employee benefit expense for the current fiscal year and the defined
benefit obligations at the previous fiscal year end.
Remeasurements of defined benefit net liabilities include actuarial gains or losses, the yield on plan assets, and
asset ceiling and minimum funding requirement changes, excluding the amount already recorded in net interest.
Remeasurements are recognized under other comprehensive income during the period in which they occur and
reclassified from accumulated other comprehensive income to retained earnings at the end of each period.
Actuarial gains or losses related to other long-term employee benefits are recognized in full immediately in net
earnings.
Past service amendment costs are recognized immediately in net earnings.
Defined contribution plan costs, including those of multi-employer plans, are recorded when the contributions are
due. As sufficient information to reliably determine multi-employer defined benefit plan obligations and assets is
not available and as there is no actuarial valuation according to IFRS, these plans are accounted for as defined
contribution plans and the Corporation participation is limited to the negotiated contributions. The vast majority of
the Corporation's contributions to multi-employer plans are paid into the Canadian Commercial Workers Industry
Pension Plan (CCWIPP). The Corporation and its franchisees represent approximately 25% of the Plan’s total
number of participants.
Deferred revenues
The portion of revenue that is unearned is recorded in deferred revenues when payments are received. This includes
prepayments received by the Corporation for future periods for which revenue is recognized when the goods are
delivered or services are rendered. Deferred revenues also include loyalty points issued as part of the Corporation’s
loyalty programs and gift cards outstanding as at year end for which revenue is recognized upon redemption.
Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive) resulting from a past
event, when it will likely have to settle the obligation and the amount of which can be reliably estimated. The amount
recognized as provision is the best estimate of the expense required to settle the present obligation at the closing
date. When a provision is measured based on estimated cash flows required to settle the present obligation, its
carrying amount is the discounted value of these cash flows.
Other financial liabilities
Bank loans, accounts payable, the revolving credit facility, notes and loans payable are classified as “Liabilities
measured at amortized cost” and initially measured at fair value less financing costs. They are subsequently
measured at amortized cost using the effective interest method.
Financing costs related to debt are deferred and amortized using the effective interest method over the term of the
corresponding loans. When one of these loans is repaid, the corresponding financing costs are charged to net
earnings.
Non-controlling interests
Non-controlIing interests are recognized in equity.
- 52 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Financial instruments
Financial assets and liabilities are recognized when the Corporation becomes a party to the contractual provisions of
a financial instrument. Upon initial recognition, financial instruments are measured at fair value adjusted for
transaction costs that are directly attributable to the acquisition or issue of financial instruments that are not classified
as fair value through profit or loss (FVTPL). Subsequently, financial assets are measured on the basis of their
classification, which is included in one of the following categories: at amortized cost, at fair value through other
comprehensive income (FVOCI), and at FVTPL.
Financial assets that are not designated as FVTPL upon initial recognition, are classified and measured at amortized
cost if they are held within a business model whose objective is to hold assets to collect contractual cash flows, and
the contractual terms give rise, on specified dates, to cash flows that correspond only to payments of principal and
interest. Otherwise, they are classified and measured at FVOCI, as long as the asset is held within a business model
whose objective is achieved by both the collection of contractual cash flows and the sale of financial assets, and the
contractual terms, on specified dates, give rise to cash flows that correspond only to payments of principal and
interest. Classification and measurement of financial liabilities are based on amortized cost or FVTPL.
In summary, the Corporation's assets and liabilities are classified and measured valued as follows:
•
Cash, cash equivalents, accounts receivable, accounts receivable on subleases and loans to certain customers
are classified and measured at amortized cost;
Bank loans, accounts payable, the revolving credit facility, notes and loans are classified and measured at
amortized cost;
Non-controlling interests are classified and measured at FVTPL. Gains and losses from the remeasurement at
the end of each period are recorded through retained earnings;
Derivative financial instruments that are not designated as hedges are classified and measured at FVTPL.
•
•
•
Impairment of financial assets
At the end of each reporting period, the Corporation estimates expected credit losses (ECL) based on lifetime credit
losses. ECLs are adjusted for factors specific to receivables, receivables on subleases and loans to certain
customers, the general economic condition and an assessment of the current and expected economic conditions at
the reporting date, including the time value of the money, if applicable. The measurement is carried out using the
simplified method for cash, current assets and long-term accounts receivable on subleases and the general method
for loans. The net change in ECLs on receivables, receivables on subleases and loans to certain customers is
recorded in net income.
Derivative financial instruments
In accordance with its risk management strategy, the Corporation uses derivative financial instruments for hedging
purposes. On inception of a hedging relationship, the Corporation indicates whether or not it will apply hedge
accounting to the relationship. Should there be any, the Corporation formally documents several factors, such as the
election to apply hedge accounting, the hedged item, the hedging item, the risks being hedged and the term over
which the relationship is expected to be effective, as well as risk management objectives and strategy.
The effectiveness of a hedging relationship is measured at its inception to determine whether it will be highly effective
over the term of the relationship and assessed periodically to ensure that hedge accounting is still appropriate. The
results of these assessments are formally documented.
- 53 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The Corporation could use foreign exchange forward contracts, cross currency interest rate swaps and equity forward
transaction. Given their short-term maturity, the Corporation elected not to apply hedge accounting. These derivative
financial instruments are classified as "Financial assets or liabilities measured at FVTPL" and measured at fair value
with revaluation at the end of each period. Resulting gains or losses are recorded in net earnings.
Fiscal year
The Corporation's fiscal year ends on the last Saturday of September. The fiscal years ended September 25, 2021
and September 26, 2020 included 52 weeks of operations.
3.
SIGNIFICANT JUDGMENTS AND ESTIMATES
The preparation of the consolidated financial statements 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 PSU 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.
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.
- 54 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
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.
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.
- 55 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
4. ADDITIONAL INFORMATION ON THE NATURE OF EARNINGS COMPONENTS
Sales
Cost of sales
Gross margin
Operating expenses
Wages and fringe benefits
Employee benefits expense (note 20)
Rent and occupancy charges (note 10)
Loss on disposal of a subsidiary (note 12)
Other
2021
%
2020
%
18,283.0
(14,628.2)
17,997.5
(14,415.7)
3,654.8
20.0
3,581.8
19.9
(980.6)
(106.6)
(302.3)
—
(532.8)
(954.9)
(96.9)
(296.2)
(7.5)
(542.7)
(1,922.3)
10.5
(1,898.2)
10.5
Operating income before depreciation and amortization
1,732.5
9.5
1,683.6
9.4
Depreciation and amortization
Fixed assets (note 8)
Investment properties (note 9)
Right-of-use assets (note 10)
Intangible assets (note 11)
Financial costs, net
Current interest
Non-current interest
Net interest on lease liabilities (note 10)
Interest on defined benefit obligations net of plan assets (note 20)
Amortization of deferred financing costs
Interest income
Passage of time
Earnings before income taxes
(240.9)
(0.6)
(158.6)
(78.2)
(478.3)
(3.6)
(105.0)
(32.9)
(4.3)
(1.7)
14.3
(0.3)
(133.5)
1,120.7
(232.3)
(0.6)
(154.2)
(75.4)
(462.5)
(3.1)
(103.4)
(34.9)
(4.0)
(2.4)
11.2
(0.2)
(136.8)
1,084.3
- 56 -
2021
26.5
—
(0.2)
26.3
2020
26.5
(0.3)
0.4
26.6
2021
2020
254.9
271.1
40.1
295.0
16.8
287.9
2021
2020
56.8
(11.0)
(5.7)
40.1
(4.2)
(0.1)
0.2
(4.1)
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
5.
INCOME TAXES
The effective income tax rates were as follows:
(Percentage)
Combined statutory income tax rate
Changes
Loss on disposal of a subsidiary (note 12)
Other
The main components of the income tax expense were as follows:
Consolidated income statements
Current
Current tax expense
Deferred
Adjustment related to temporary differences
Consolidated comprehensive income statements
Deferred tax related to items reported directly in other
comprehensive income during the year
Changes in defined benefit plans
Actuarial losses
Asset ceiling effect
Minimum funding requirement
- 57 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Deferred income taxes reflect the net tax impact of temporary differences between the value of assets and liabilities
for accounting and tax purposes. The main components of the deferred tax expense and deferred tax assets and
liabilities were as follows:
Consolidated statements
of financial position
Consolidated statements
of income
As at
September 25, 2021
As at
September 26, 2020
2021
2020
Accrued expenses, provisions and
other reserves that are tax-
deductible only at the time of
disbursement
Lease liabilities
Deferred tax losses
Inventories
Employee benefits
Accounts receivable on subleases
Investment in a joint venture
Difference between net carrying value
and tax value
Fixed assets
Investment properties
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
Deferred tax liabilities
(2.9)
(35.7)
(3.2)
1.1
5.5
11.1
—
(1.7)
(24.5)
8.0
0.1
2.4
9.5
—
(42.3)
(23.7)
0.1
22.9
6.1
(2.8)
(40.1)
0.2
11.1
5.1
(3.3)
(16.8)
18.4
510.7
5.6
(10.2)
(7.1)
(170.2)
1.0
(262.2)
0.4
(282.1)
(618.7)
(56.2)
(870.6)
57.1
(927.7)
(870.6)
21.3
546.4
8.8
(11.3)
27.5
(181.3)
1.0
(219.9)
0.3
(305.0)
(624.8)
(53.4)
(790.4)
43.5
(833.9)
(790.4)
6. NET EARNINGS PER SHARE
Basic net earnings per share and fully diluted net earnings per share were calculated using the following number of
shares:
(Millions)
Weighted average number of shares outstanding – Basic
Dilutive effect under:
Stock option plan
Performance share unit plan
Weighted average number of shares outstanding – Fully diluted
2021
2020
246.2
252.1
0.6
0.5
0.7
0.5
247.3
253.3
- 58 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
7.
INVENTORIES
Wholesale inventories
Retail inventories
8.
FIXED ASSETS
2021
686.6
482.4
2020
808.1
460.1
1,169.0
1,268.2
Land
Buildings
Equipment
Leasehold
improvements
Buildings
under
finance
leases
Total
Cost
Balance as at September 28, 2019
480.4
1,276.6
1,557.4
861.8
55.8
4,232.0
Acquisitions
Disposals and write-offs
Adoption of IFRS16
8.8
(2.0)
—
171.6
(12.5)
—
198.4
(79.4)
—
84.5
(43.3)
—
—
463.3
(137.2)
—
(55.8)
(55.8)
Balance as at September 26, 2020
487.2
1,435.7
1,676.4
Acquisitions
Disposals and write-offs
49.9
(2.4)
167.9
(34.9)
226.8
(50.7)
Balance as at September 25, 2021
534.7
1,568.7
1,852.5
903.0
74.5
(18.2)
959.3
—
—
—
—
4,502.3
519.1
(106.2)
4,915.2
Accumulated depreciation and
impairment
Balance as at September 28, 2019
Depreciation
Disposals and write-offs
Impairment losses
Adoption of IFRS16
Balance as at September 26, 2020
Depreciation
Disposals and write-offs
Balance as at September 25, 2021
Net carrying value
—
—
—
—
—
—
—
—
—
(281.8)
(49.9)
10.6
—
—
(321.1)
(56.3)
30.3
(830.4)
(122.0)
76.6
(1.0)
—
(876.8)
(132.7)
48.5
(422.8)
(39.2)
(1,574.2)
(60.4)
40.8
(1.2)
—
—
—
—
39.2
(232.3)
128.0
(2.2)
39.2
(443.6)
—
(1,641.5)
(51.9)
18.2
—
—
(240.9)
97.0
(347.1)
(961.0)
(477.3)
—
(1,785.4)
Balance as at September 26, 2020
487.2
1,114.6
Balance as at September 25, 2021
534.7
1,221.6
799.6
891.5
459.4
482.0
—
—
2,860.8
3,129.8
Impairment losses were recorded during fiscal 2020 on food store assets where cash flows decreased due to local
competition. As food stores' profitability improved, impairment loss reversals can be recognized on previously
impaired food store assets.
As at September 25, 2021, work in progress not yet amortized included in buildings, equipment and leasehold
improvements totalled $196.4, $77.6 and $1.6, respectively.
As at September 25, 2021, the Corporation had contractual commitments to purchase fixed assets totaling $244.1 in
2022, consisting mainly of buildings and equipment.
- 59 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
9.
INVESTMENT PROPERTIES
Balance as at September 28, 2019
Disposals and write-offs
Depreciation
Balance as at September 26, 2020
Acquisitions
Disposals and write-offs
Depreciation
Balance as at September 25, 2021
Cost
42.9
(0.9)
—
42.0
0.9
(7.3)
—
35.6
Accumulated
depreciation
Net carrying
value
(1.4)
0.2
(0.6)
(1.8)
—
0.2
(0.6)
(2.2)
41.5
(0.7)
(0.6)
40.2
0.9
(7.1)
(0.6)
33.4
The fair value of investment properties was $39.9 as at September 25, 2021 ($45.6 as at September 26, 2020). The
Corporation classified the fair value measurement in Level 2, as it is derived from observable market inputs, i.e.
recent transactions on these assets or similar assets.
10. LEASES
The Corporation as lessee
The main right-of-use assets held under the Corporation's leases are real estate, vehicles and equipment.
As at September 25, 2021, changes in right-of-use assets were as follows:
Balance at September 29, 2019
New leases
Terminations and adjustments
Impairment losses
Depreciation
Balance as at September 26, 2020
New leases
Terminations and adjustments
Depreciation
Balance as at September 25, 2021
Buildings
Rolling stock
and other
1,194.4
85.2
(15.5)
(0.8)
(143.7)
1,119.6
46.9
16.5
(147.8)
1,035.2
28.0
13.4
—
—
(10.5)
30.9
10.1
(0.7)
(10.8)
29.5
Total
1,222.4
98.6
(15.5)
(0.8)
(154.2)
1,150.5
57.0
15.8
(158.6)
1,064.7
The Corporation has variable lease payments for property taxes, common operating costs and insurance costs for
leased properties. The Corporation also has variable lease payments that vary according to a percentage of retail
sales. These expenses are recorded in operating expenses and totalled $122.0 in 2021 ($111.2 in 2020).
- 60 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
As at September 25, 2021, changes in lease liabilities were as follows:
Balance as at September 29, 2019
Additions
Terminations and adjustments
Lease payments
Interest expense on lease liabilities
Balance as at September 26, 2020
Current portion
Non-current portion
Balance as at September 26, 2020
Additions
Terminations and adjustments
Lease payments
Interest expense on lease liabilities
Balance as at September 25, 2021
Current portion
Non-current portion
2,199.8
150.1
(27.6)
(303.7)
50.8
2,069.4
258.0
1,811.4
2,069.4
86.4
32.3
(309.6)
48.7
1,927.2
269.7
1,657.5
The weighted average incremental borrowing rate was 2.41% as at September 25, 2021 (2.35% in 2020). The
weighted average remaining contractual life as at September 25, 2021 was 6 years (8 years in 2020).
Contractual undiscounted payments under leases defined above will be as follows:
2022
2023
2024
2025
2026
2027 and thereafter
313.5
309.2
287.3
252.0
214.9
795.7
2,172.6
The Corporation has also entered into short-term leases or leases with underlying low-value asset, specifically for the
rental of machinery and equipment, as well as vehicles and trailers. These leases were recorded in operating
expenses for a total of $5.8 in 2021 ($5.3 in 2020).
- 61 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The Corporation as lessor
The Corporation acted as intermediate lessor for real estate subleases.
Finance leases
Finance income for the year ended in 2021 was $15.7 ($15.9 in 2020). Future minimum lease payments receivable
by the Corporation relating to subleased properties to third parties will be as follows:
2022
2023
2024
2025
2026
2027 and thereafter
Total undiscounted lease payments receivable
Unearned finance income
Accounts receivable on subleases
Current portion
Non-current portion
Operating leases
105.9
105.3
98.9
89.3
72.1
233.0
704.5
(62.1)
642.4
92.8
549.6
The Corporation leases buildings under operating leases. The Corporation recorded rental income of $51.0 in 2021
($51.2 in 2020).
The lease payments expected to be received over the next five fiscal years for owned properties will be as follows:
2022
2023
2024
2025
2026
2027 and thereafter
45.7
34.4
23.4
14.9
10.5
62.2
191.1
- 62 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
11.
INTANGIBLE ASSETS
Intangible assets with finite useful lives were as follows:
Leasehold
rights
Software
Retail network
retention
premiums
Customer
relationships
Total
Cost
Balance as at September 28, 2019
57.4
246.3
262.6
1,067.4
1,633.7
Acquisitions
Disposals and write-offs
Adoption of IFRS16
Balance as at September 26, 2020
Acquisitions
Disposals and write-offs
Balance as at September 25, 2021
Accumulated amortization
and impairment
—
—
(57.4)
—
—
—
—
37.9
(2.2)
—
282.0
65.5
(0.3)
347.2
14.5
(13.6)
—
—
—
—
52.4
(15.8)
(57.4)
263.5
1,067.4
1,612.9
17.8
(10.7)
—
—
83.3
(11.0)
270.6
1,067.4
1,685.2
Balance as at September 28, 2019
(43.9)
(183.5)
(121.7)
Amortization
Disposals and write-offs
Adoption of IFRS16)
Balance as at September 26, 2020
Amortization
Disposals and write-offs
Balance as at September 25, 2021
Net carrying value
Balance as at September 26, 2020
Balance as at September 25, 2021
—
—
43.9
—
—
—
—
(16.1)
0.3
—
(199.3)
(19.4)
0.2
(18.5)
13.2
—
(73.9)
(40.8)
—
—
(423.0)
(75.4)
13.5
43.9
(127.0)
(114.7)
(441.0)
(18.0)
10.2
(40.8)
—
(78.2)
10.4
(218.5)
(134.8)
(155.5)
(508.8)
—
—
82.7
128.7
136.5
135.8
952.7
1,171.9
911.9
1,176.4
Net additions of intangible assets excluded from the consolidated statement of cash flows amounted to $4.5 in 2021
($5.6 in 2020).
As at September 25, 2021, work in progress for software not yet amortized totalled $51.5.
Intangible assets with indefinite useful lives were as follows:
Balances as at September 26, 2020 and
September 25, 2021
1,473.3
121.5
83.5 1,678.3
Banners
Private labels
Loyalty programs
Total
- 63 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Impairment testing of loyalty programs and exclusive private labels was conducted at the individual asset level. The
recoverable amount was determined based on its fair value less costs of disposal, which was calculated using the
capitalized excess EBIT method. The estimated EBIT directly allocated to the programs and private labels, after
deduction of the return on contributory assets, was based on historical data reflecting past experience. For loyalty
programs, the earnings multiples used were 21.1 and 17.8 (22.9 and 15.9 in 2020) considering a growth rate of 2.0%
(2.0% in 2020) corresponding to the consumer price index. For the private labels, the earnings multiples used were
18.2 and 21.1 (19.5 and 25.0 in 2020) considering a growth rate of 2.0% (2.0% in 2020) corresponding to the
consumer price index. The Corporation classified the fair value measurement in Level 3, as it is derived from
unobservable market inputs.
Impairment testing of banners and other private labels were conducted at the level of the asset itself. The recoverable
amount was determined based on its fair value calculated using the royalty-free license method. The estimated
royalty rate was based on information from external sources and historical data reflecting past experience. For the
banners and these private labels, the royalty rate used was 1.0% to 3.0% (1.0% to 3.0% in 2020) and the multiples
used were between 18.2 and 21.1 (21.6 and 25.0 in 2020) considering growth rate of 2.0% (2.0% in 2020)
corresponding to the consumer price index. The Corporation classified the fair value measurement in Level 3, as it is
derived from unobservable market inputs.
No reasonably possible change in any of these assumptions would result in a carrying amount higher than the
recoverable amount.
12. GOODWILL
Balance – beginning of year
Acquisitions through business combinations
Disposals
Balance – end of year
2021
2020
3,300.7
3,306.5
0.5
—
0.6
(6.4)
3,301.2
3,300.7
The Corporation disposed of the assets of subsidiary MissFresh on December 9, 2019 for a cash consideration of
$3.5 and recorded a loss on disposal of $7.5 mainly related to tangible and intangible assets. The Corporation also
recognized a deferred tax asset of $3.3 related to this subsidiary’s fiscal attributes.
For impairment testing, goodwill with a carrying amount of $1,977.9 ($1,977.4 as at September 26, 2020) was
allocated to the operating segment related to food operations. The recoverable amount was determined based on its
value in use, which was calculated using pre-tax cash flow forecasts from the management-approved budgets for the
next fiscal year. The forecasts reflected past experience. A pre-tax discount rate of 8.1% (8.2% in 2020) was used. No
reasonably possible change in any of these assumptions would result in a carrying amount higher than the
recoverable amount.
For impairment testing, goodwill with a carrying amount of $1,323.3 ($1,323.3 as at September 26, 2020) was
allocated to the operating segment related to pharmaceutical operations. The recoverable amount was determined
based on its value in use, which was calculated using pre-tax cash flow forecasts from the management-approved
budgets for the next fiscal year. Cash flows for subsequent years are based on forecasts reflecting past experience
and 2% growth in line with the consumer price index. A pre-tax discount rate of 8.3% (8.8% in 2020) was used. No
reasonably possible change in any of these assumptions would result in a carrying amount higher than the
recoverable amount.
- 64 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
13. OTHER ASSETS
Loans to certain customers, bearing interest at floating rates, weighted average rate
of 3.88% in 2021 repayable in monthly installments, maturing through 2031
Investment in a joint venture
Other assets
Current portion included in accounts receivable
2021
2020
50.3
10.3
2.4
63.0
13.0
50.0
59.8
8.4
3.4
71.6
10.1
61.5
14. BANK LOANS
As at September 25, 2021 and September 26, 2020, the Corporation's bank loans were the credit margins of
structured entities. The consolidated structured entities have credit margins
totaling $8.7 ($8.4 as at
September 26, 2020), bearing interest at prime plus 0.5%, unsecured and maturing on various dates through 2022.
As at September 25, 2021, $0.1 had been drawn down under credit margins (0.4 as at September 26, 2020) at an
interest rate of 3.0% (3.0% as at September 26, 2020).
15. OFFSETTING
Accounts payable (gross)
Vendor rebate receivables
Accounts payable (net)
2021
2020
1,593.1
1,521.0
(46.6)
(62.1)
1,546.5
1,458.9
- 65 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
16. PROVISIONS
Retail
network
restructuring
expenses
Pharmacy
network
closure and
restructuring
expenses
Distribution
network
modernization
project
expenses
Other
onerous
leases
Total
14.8
(6.8)
(5.6)
—
2.4
1.5
0.9
2.4
2.4
(1.4)
—
1.0
0.4
0.6
1.0
11.6
(2.5)
(2.1)
—
7.0
1.0
6.0
7.0
7.0
(5.5)
—
1.5
1.2
0.3
1.5
12.0
—
—
0.3
12.3
—
12.3
12.3
12.3
(0.1)
0.4
12.6
—
12.6
12.6
2.7
—
41.1
(9.3)
(2.7)
(10.4)
—
—
—
—
—
—
—
—
—
—
—
—
0.3
21.7
2.5
19.2
21.7
21.7
(7.0)
0.4
15.1
1.6
13.5
15.1
Balance as at September 28, 2019
Amounts used
Adoption of IFRS16
Passage of time
Balance as at September 26, 2020
Current provisions
Non-current provisions
Balance as at September 26, 2020
Balance as at September 26, 2020
Amounts used
Passage of time
Balance as at September 25, 2021
Current provisions
Non-current provisions
Balance as at September 25, 2021
The Corporation announced in October 2017, a projected $400.0 investment over six years in its Ontario distribution
network. The Corporation will modernize its Toronto operations between 2018 and 2024, building a new fresh
distribution centre and a new frozen distribution centre. During the first quarter of 2018, the Corporation recorded an
$11.4 before taxes provision related to termination and retirement benefits in connection with the modernization of the
Ontario distribution network.
- 66 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
17. DEBT
Series C Notes, bearing interest at a fixed nominal rate of 3.20%, maturing on
December 1, 2021
Series F Notes, bearing interest at a fixed nominal rate of 2.68%, maturing on
December 5, 2022
Series G Notes bearing interest at a fixed nominal rate of 3.39%, maturing on
December 6, 2027
Series B Notes, bearing interest at a fixed nominal rate of 5.97%, maturing on
October 15, 2035
Series D Notes, bearing interest at a fixed nominal rate of 5.03%, maturing on
December 1, 2044
Series H Notes, bearing interest at a fixed nominal rate of 4.27%, maturing on
December 4, 2047
Series I Notes, bearing interest at a fixed nominal rate of 3.41%, maturing on
February 28, 2050
Loans, maturing on various dates through 2060, bearing interest at an average
rate of 2.17% (2.11% in 2020)
Deferred financing costs
Current portion
2021
2020
300.0
300.0
300.0
300.0
450.0
450.0
400.0
400.0
300.0
300.0
450.0
450.0
400.0
400.0
49.7
(13.0)
47.2
(14.6)
2,636.7
2,632.6
318.5
20.6
2,318.2
2,612.0
On February 26, 2020, the Corporation issued through a private placement Series I unsecured senior notes in the
aggregate principal amount of $400.0, bearing interest at a fixed nominal rate of 3.41%, maturing on
February 28, 2050. On February 27, 2020, the Corporation redeemed all of the Series E notes in the amount of
$400.0 that matured on the same day.
The Notes of the Corporation are redeemable at the issuer's option prior to maturity at the prices, terms and
conditions specified for each series.
The Corporation has access to an unsecured revolving credit facility with a maximum of $600.0 bearing interest at
rates that fluctuate with changes in bankers' acceptance rates. As at September 25, 2021 and September 26, 2020,
the authorized revolving credit facility was unused. Given that the Corporation frequently increases and decreases
this credit facility through bankers' acceptances with a minimum of 30 days and to simplify its presentation, the
Corporation found that it is preferable for the understanding of its financing activities to present the consolidated
statement of cash flows solely with net annual changes.
The debt related to the acquisition of intangible assets, excluded from debt changes presented at the consolidated
statements of cash flows, totaled $4.5 in 2021 ($5.6 in 2020).
- 67 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Repayments of debt in the upcoming fiscal years will be as follows:
2022
2023
2024
2025
2026
2027 and thereafter
Loans
Notes
Total
18.5
4.2
1.4
1.0
0.8
23.8
49.7
300.0
300.0
—
—
—
318.5
304.2
1.4
1.0
0.8
2,000.0
2,023.8
2,600.0
2,649.7
18. CAPITAL STOCK
The authorized capital stock of the Corporation was summarized as follows:
•
•
unlimited number of Common Shares, bearing one voting right per share, participating, without par value;
unlimited number of Preferred Shares, non-voting, without par value, issuable in series.
Common Shares issued
The Common Shares issued and the changes during the year were summarized as follows:
Balance as at September 28, 2019
Shares redeemed for cash, excluding premium of $190.5
Stock options exercised
Balance as at September 26, 2020
Shares redeemed for cash, excluding premium of $402.6
Stock options exercised
Balance as at September 25, 2021
Number
(Thousands)
254,440
1,732.3
(3,910)
265
(26.7)
8.2
250,795
1,713.8
(7,850)
446
(53.7)
14.2
243,391
1,674.3
- 68 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Treasury shares
The treasury shares changes during the year are summarized as follows:
Balance as at September 28, 2019
Acquisitions
Released
Balance as at September 26, 2020
Released
Balance as at September 25, 2021
Number
(Thousands)
577
112
(137)
552
(110)
442
(24.6)
(6.2)
5.7
(25.1)
4.6
(20.5)
Treasury shares are held in trust for the PSU plan. They will be released into circulation when the PSUs settle. The
trust, considered a structured entity, is consolidated in the Corporation's financial statements.
Stock option plan
The Corporation has a stock option plan for certain Corporation employees providing for the grant of options to
purchase up to 30,000,000 Common Shares. As at September 25, 2021, a balance of 3,478,496 shares could be
issued following the exercise of stock options (3,923,996 as at September 26, 2020). The subscription price of each
Common Share under an option granted pursuant to the plan is equal to the market price of the shares on the day
prior to the option grant date and must be paid in full at the time the option is exercised. While the Board of Directors
determines other terms and conditions for the exercise of options, in general no options may have a term of more
than five years from the date the option may initially be exercised, in whole or in part, and the total term may in no
circumstances exceed ten years from the option grant date. Options may generally be exercised two years after their
grant date and vest at the rate of 20% per year.
The outstanding options and the changes during the year were summarized as follows:
Weighted
average
exercise
price
(Dollars)
Number
(Thousands)
2,281
355
(265)
(49)
2,322
488
(446)
(46)
2,318
37.30
56.92
27.35
45.08
41.27
55.95
28.07
51.88
46.69
Balance as at September 28, 2019
Granted
Exercised
Cancelled
Balance as at September 26, 2020
Granted
Exercised
Cancelled
Balance as at September 25, 2021
- 69 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The information regarding the stock options outstanding and exercisable as at September 25, 2021 is summarized
below:
Range of exercise prices
(Dollars)
Number
(Thousands)
Weighted
average
remaining
period
(Months)
Weighted
average
exercise
price
(Dollars)
Weighted
average
exercise
price
(Dollars)
Number
(Thousands)
Outstanding options
Exercisable options
35.42 to 40.31
41.16 to 57.81
808
1,510
2,318
18.2
59.1
44.9
38.93
50.84
46.69
613
205
818
38.50
43.52
39.76
The weighted average fair value of $6.18 per option ($8.10 in 2020) for stock options granted during fiscal 2021 was
determined at the time of grant using the Black-Scholes model and the following weighted average assumptions: risk-
free interest rate of 0.4% (1.7% in 2020), expected life of 5.5 years (5.5 years in 2020), expected volatility of 16.2%
(16.0% in 2020) and expected dividend yield of 1.8% (1.4% in 2020). The expected volatility is based on the historic
share price volatility over a period similar to the life of the options.
Compensation expense for these options amounted to $2.3 for fiscal 2021 ($2.3 in 2020).
Performance share unit plan
The Corporation has a PSU plan. Under this program, senior executives and other key employees (participants)
periodically receive a given number of PSUs. The PSUs entitle the participant to Common Shares of the Corporation,
or at the latter's discretion, the cash equivalent, if the Corporation meets certain financial performance indicators.
PSUs vest at the end of a period of three years.
PSUs outstanding and changes during the year are summarized as follows:
Balance as at September 28, 2019
Granted
Settled
Cancelled
Balance as at September 26, 2020
Granted
Settled
Cancelled
Balance as at September 25, 2021
Number
(Thousands)
605
205
(137)
(55)
618
231
(171)
(63)
615
The weighted average fair value of $55.95 per PSU ($54.11 in 2020) for PSUs granted during fiscal 2021 was the
stock market valuation of a Common Share of the Corporation at grant date.
The compensation expense comprising all PSUs amounted to $8.3 for fiscal 2021 ($7.2 in 2020).
- 70 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Deferred Share Unit Plan
The Corporation has a DSU plan designed to encourage stock ownership by directors who are not Corporation
officers. Under this program, directors may choose to receive all or part of their compensation in DSUs. DSUs vest
when granted. On leaving, a director receives a lump-sum cash payout from the Corporation.
The DSU expense totalled $1.2 for fiscal 2021 ($2.9 in 2020).
As at September 25, 2021, the DSU liability amounted to $15.9 ($17.5 as at September 26, 2020).
19. DIVIDENDS
In fiscal 2021, the Corporation paid $240.1 in dividends to holders of Common Shares ($220.7 in 2020), or $0.9750
per share ($0.8750 in 2020). On September 27, 2021, the Corporation's Board of Directors declared a quarterly
dividend of $0.25 per Common Share payable on November 9, 2021.
20. EMPLOYEE BENEFITS
The Corporation maintains several defined benefit and defined contribution plans for eligible employees, which
provide most participants with pension, ancillary retirement benefits, and other long-term employee benefits which in
certain cases are based on the number of years of service or final average salary. The defined benefit plans are
funded by the Corporation's contributions, with some plans also funded by participants' contributions. The Corporation
also provides eligible employees and retirees with health care, life insurance and other long-term benefits. Ancillary
retirement benefits plans and other long-term employee benefits are not funded and are presented in other plans.
Pension committees made up of employer and employee representatives are responsible for all administrative
decisions concerning certain plans.
Defined benefit pension plans and ancillary retirement benefit plans expose the Corporation to actuarial risks such as
interest rate risk, longevity risk, investment risk and inflation risk. Consequently, the Corporation’s investment policy
provides for a diversified portfolio whose bond component matches the expected timing and payments of benefits.
The changes in present value of the defined benefit obligation were as follows:
Balance – beginning of year
Participant contributions
Benefits paid
Items in net earnings
Current service cost
Past service cost
Interest cost
Actuarial gains
Items in comprehensive income
Actuarial gains from demographic assumptions
Actuarial losses (gains) from financial assumptions
Adjustments due to experience
Balance – end of year
- 71 -
2021
2020
Pension
plans
Other
plans
Pension
plans
Other
plans
1,644.6
10.1
(60.2)
64.9
2.2
46.5
—
113.6
(4.7)
(150.3)
0.6
(154.4)
1,553.7
33.5
—
(3.3)
2.4
—
0.9
(0.4)
2.9
(0.8)
(1.4)
—
(2.2)
30.9
1,512.0
9.6
(55.2)
56.2
—
46.9
—
103.1
—
74.9
0.2
75.1
1,644.6
34.9
—
(3.5)
2.5
—
1.1
(1.4)
2.2
(2.2)
0.7
1.4
(0.1)
33.5
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The present value of the defined benefit obligation may be reflected as follows:
(Percentage)
Active plan participants
Deferred plan participants
Retirees
The changes in the fair value of plan assets were as follows:
Fair value – beginning of year
Employer contributions
Participant contributions
Benefits paid
Items in net earnings
Interest income
Administration costs
Items in comprehensive income
Return on plan assets, excluding the amounts included in
interest income
Fair value – end of year
2021
2020
Pension
plans
Other
plans
Pension
plans
Other
plans
58
5
37
71
—
29
59
5
36
70
—
30
2021
2020
Pension
plans
Other
plans
Pension
plans
Other
plans
1,584.0
54.6
10.1
(60.2)
43.5
(2.3)
41.2
57.6
1,687.3
—
3.3
—
(3.3)
—
—
—
—
—
1,475.6
52.0
9.6
(55.2)
44.5
(2.0)
42.5
59.5
1,584.0
—
3.5
—
(3.5)
—
—
—
—
—
The changes in the asset ceiling and the minimum funding requirement for pension plans were as follows:
Balance - beginning of year
Interest
Change in defined benefit assets
Change in defined benefit liabilities
Balance - end of year
2021
2020
Asset
ceiling
Minimum
funding
requirement
Asset
ceiling
Minimum
funding
requirement
(16.1)
(0.4)
(41.5)
—
(58.0)
—
—
—
(21.4)
(21.4)
(15.3)
(0.8)
(0.5)
(0.3)
—
(16.1)
—
—
0.8
—
The value of the economic benefit that determined the asset ceiling represents the present value of future contribution
holidays, and the minimum funding requirement represents the present value of required contributions under the law,
which do not result, once made, in an economic benefit for the Corporation.
- 72 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
The changes in the defined benefit plans' funding status were as follows:
Balance of defined benefit obligation – end of year
(1,553.7)
(30.9)
(1,644.6)
(33.5)
2021
2020
Pension
plans
Other
plans
Pension
plans
Other
plans
Fair value of plan assets – end of year
1,687.3
—
1,584.0
Funded status
Asset ceiling effect
Minimum funding requirement
Defined benefit assets
Defined benefit liabilities
(60.6)
(16.1)
—
—
(33.5)
—
—
133.6
(30.9)
—
—
(58.0)
(21.4)
54.2
84.8
(30.6)
54.2
(30.9)
(76.7)
(33.5)
—
(30.9)
(30.9)
19.7
(96.4)
(76.7)
—
(33.5)
(33.5)
The defined contribution and defined benefit plans expense recorded in net earnings was as follows:
2021
2020
Pension
plans
Other
plans
Pension
plans
Other
plans
Defined contribution plans, including multi-employer plans
35.2
—
37.6
—
Defined benefit plans
Current service cost
Past service cost
Actuarial gains
Administration costs
Employee benefits expense
Interest on obligations, asset ceiling effect and minimum
funding requirement net of plans assets, presented in
financial costs
Net total expense
64.9
2.2
—
2.3
69.4
104.6
3.4
108.0
2.4
—
(0.4)
—
2.0
2.0
0.9
2.9
56.2
—
—
2.0
58.2
95.8
2.9
98.7
The remeasurements recognized as other comprehensive income were as follows:
2021
2020
Pension
plans
Other
plans
Pension
plans
Actuarial losses (gains) on accrued obligation
(154.4)
(2.2)
Return on plan assets
Change in the effect of the asset ceiling
Change in the minimum funding requirement
(57.6)
41.5
21.4
—
—
—
(149.1)
(2.2)
75.1
(59.5)
0.3
(0.8)
15.1
2.5
—
(1.4)
—
1.1
1.1
1.1
2.2
Other
plans
(0.1)
—
—
—
(0.1)
Total cash payments for employee benefits, consisting of cash contributed by the Corporation to its funded pension
plans and cash payments directly to beneficiaries for its unfunded other benefit plans, amounted to $57.9 in 2021
($55.5 in 2020). The Corporation plans to contribute $57.3 to the defined benefit plans and $28.3 to multi-employer
plans during the next fiscal year.
- 73 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
Weighted average duration of defined benefit obligations was 15 years as at September 25, 2021 and was 16 years
as at September 26, 2020.
The most recent actuarial valuations for funding purposes in respect of the Corporation's pension plans were
performed on various dates between December 2018 and December 2020. The next valuations will be performed in
December 2021.
Plan assets, evaluated at level 1 as it is based on quoted market prices in an active market for the shares and at
Level 2 for bonds and other as it is derived from observable market inputs, held in trust and their weighted average
allocation as at the measurement dates were as follows:
Asset categories (Percentage)
Shares in Canadian corporations
Shares in foreign corporations
Government and corporation bonds
Other
2021
2020
21
25
48
6
19
25
49
7
Pension plan assets included shares issued by the Corporation with a fair value of $4.7 as at September 25, 2021
($6.3 as at September 26, 2020).
The principal actuarial assumptions used in determining the defined benefit obligation and service costs were as
follows:
(Percentage)
Pension plans
Other plans
Pension plans
Other plans
2021
2020
Discount rate on defined benefit obligation
Discount rate on service costs
Rate of compensation increase
3.33
2.88
3.00
3.33
2.88
3.00
2.74
3.30
3.00
2.74
3.30
3.00
Mortality table
CPM2014Priv CPM2014Priv
CPM2014Priv CPM2014Priv
To determine the most suitable discount rate, management considers the interest rates for high-quality bonds issued
by entities operating in Canada with cash flows that match the timing and amount of expected benefit payments. The
mortality rate is based on available mortality tables. Projected inflation rates are taken into account in establishing
future wage and pension increases.
A 1% change in the discount rate, taking into consideration any modifications to other assumptions, would have the
following effects:
Pension plans
Other plans
1% increase
1% decrease
1% increase
1% decrease
Effect on defined benefit obligation
(214.2)
274.8
(2.6)
3.2
The assumed annual health care cost trend rate per participant was set at 5.5% (5.5% in 2019). Under the
assumption used, this rate should gradually decline to 4.0% in 2040 and remain at that level thereafter. A 1% change
in this rate would have the following effects:
Effect on defined benefit obligation
1% increase
1% decrease
(1.2)
1.4
- 74 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
21. COMMITMENTS
Service contracts
The Corporation has service contract commitments essentially for transportation and IT, with varying terms through
2030 and no renewal option. Future minimum payments under these service contracts will be as follows:
Under 1 year
Between 1 and 5 years
Over 5 years
22. CONTINGENCIES
Guarantees
2021
149.0
221.7
3.9
374.6
2020
100.2
178.6
0.2
279.0
The Corporation has guaranteed loans granted to certain customers by financial institutions, with varying terms
through 2026. The balance of these loans amounted to $22.2 as at September 25, 2021 ($23.5 as at
September 26, 2020). No liability has been recorded in respect of these guarantees for the years ended
September 25, 2021 and September 26, 2020.
Buyback agreements
Under inventory repurchase agreements, the Corporation has undertaken with respect to financial institutions to
repurchase at cost the inventories of certain customers, when they are in default, up to the amount drawn on lines of
credit granted to these same customers by the financial institutions. As at September 25, 2021, inventory financing
amounted to $146.3 ($159.3 as at September 26, 2020). However, under these agreements, the Corporation has not
undertaken to make up for any deficit created if the value of inventories falls below the amount of the advances.
Under buyback agreements, the Corporation is committed to financial institutions to purchase equipment held by
customers and financed by finance leases not exceeding five years and loans not exceeding eight years. For finance
leases, the buyback value is linked to the net balance of the lease at the date of the buyback. For equipment financed
by bank loans, the minimum buyback value is either set by contract with financial institutions or linked to the loan
balance at the buyback date. As at September 25, 2021, financing related to the equipment amounted to $26.6 ($36.2
as at September 26, 2020).
No liability has been recorded in respect of these guarantees for the years ended September 25, 2021 and
September 26, 2020 and historically, the Corporation has not made any indemnification payments under such
agreements.
Claims
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
- 75 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
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
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.
- 76 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
23. RELATED PARTY TRANSACTIONS
The Corporation has significant interest in the following subsidiaries and joint venture:
Names
Subsidiaries
Metro Richelieu Inc.
Metro Ontario Inc.
The Jean Coutu Group (PJC) Inc.
McMahon Distributeur pharmaceutique Inc.
Pro Doc Ltée
RX Information Centre Ltd.
Metro Québec Immobilier Inc.
Metro Ontario Real Estate Limited
Metro Ontario Pharmacies Limited
Groupe Adonis Inc.
Groupe Phoenicia Inc.
Groupe Première Moisson Inc.
Cuisine centrale Prêt-à-Manger Inc.
Joint venture
Medicus Group Inc.
Country of
incorporation
Percentage of
interest in the capital
Percentage of
voting rights
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Canada
46.5
46.5
In the normal course of business, the following transactions have been entered into with related parties:
Companies controlled by a member of
the Board of Directors
2021
2020
Sales
Accounts
receivable
Sales
Accounts
receivable
18.5
18.5
1.3
1.3
32.8
32.8
2.1
2.1
Compensation for the principal officers and directors was as follows:
Compensation and current benefits
Post-employment benefits
Share-based payment
2021
2020
6.7
1.3
6.9
6.1
1.3
5.8
14.9
13.2
- 77 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
24. MANAGEMENT OF CAPITAL
The Corporation aims to maintain a capital level that enables it to meet several objectives, namely:
•
Striving for a percentage of non-current debt and lease liabilities to total combined non-current debt, lease
liabilities and equity (non-current debt and lease liabilities/total capital ratio) of less than 50%.
• Maintaining an adequate credit rating to obtain an investment grade rating for its term notes.
•
Paying total annual dividends representing a target range of 30% to 40% of the prior fiscal year's net earnings,
excluding non-recurring items.
In its capital structure, the Corporation considers its stock option and PSU plans for key employees and officers. In
addition, the Corporation's stock redemption plan is one of the tools it uses to achieve its objectives.
The Corporation is not subject to any capital requirements imposed by a regulator.
The Corporation's fiscal 2021 annual results regarding its capital management objectives were as follows:
•
•
•
non-current debt and lease liabilities/total capital ratio of 40.0% (41.8% as at September 26, 2020);
a BBB credit rating confirmed by S&P and BBB/Stable by DBRS (same rating in 2020);
a dividend representing 29.0% of the previous year net earnings, excluding non-recurring items (30.2% in 2020).
25. FINANCIAL INSTRUMENTS
FAIR VALUE
The non-current financial instruments' book and fair values were as follows:
Other assets
Assets measured at amortized cost
Loans to certain customers (note 13)
Debt (note 17)
Liabilities measured at amortized cost
Series C Notes
Series F Notes
Series G Notes
Series B Notes
Series D Notes
Series H Notes
Series I Notes
Loans
2021
2020
Book value
Fair value
Book value
Fair value
50.3
50.3
59.8
59.8
300.0
300.0
450.0
400.0
300.0
450.0
400.0
49.7
303.8
308.9
488.1
519.9
363.4
494.7
377.3
49.7
300.0
300.0
450.0
400.0
300.0
450.0
400.0
47.2
307.9
311.0
503.6
542.8
391.0
536.6
416.5
47.2
2,649.7
2,905.8
2,647.2
3,056.6
Fair value measurements hierarchy
Fair value measurements of those assets and liabilities recognized at fair value in the consolidated statements of
financial position or whose fair value is presented in the notes to the consolidated financial statements are classified
in accordance with the following hierarchy:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- 78 -
Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of loans to certain customers and loans payable is equivalent to their carrying value since their interest
rates are comparable to market rates. The Corporation classified the fair value measurement in Level 2, as it is
derived from observable market inputs.
The fair value of notes represents the obligations that the Corporation would have to meet in the event of the
negotiation of similar notes under current market conditions. The Corporation classified the fair value measurement in
Level 2, as it is derived from observable market inputs.
The changes of the current non-controlling interest-related liability were as follows:
Balance – beginning of year
Buyout of minority interests
Change in fair value
Balance – end of year
2021
—
—
—
—
2020
51.1
(51.6)
0.5
—
Under the shareholder agreement, the Corporation acquired the minority interest in Première Moisson during the first
quarter of fiscal 2020 for a cash consideration of $51.6, which represents the price payable based on Première
Moisson’s fiscal 2019 results.
INTEREST RATE RISK
In the normal course of business, the Corporation is exposed primarily to interest rate risk as a result of loans and
receivables that it grants, as well as the revolving credit facility and loans payable that it contracts at variable interest
rates.
The Corporation keeps a close watch on interest rate fluctuations and, if warranted, uses derivative financial
instruments such as interest rate swap contracts. As at September 25, 2021 and September 26, 2020, there were no
outstanding interest rate swap contracts.
CREDIT RISK
Loans and receivables / Guarantees
The Corporation sells products to consumers and retailers in Canada. When it sells products, it gives retailers credit.
In addition, to help certain retailers finance business acquisitions, the Corporation grants them long-term loans or
guarantees loans obtained by them from financial institutions. Hence, the Corporation is subject to credit risk.
To mitigate such risk, the Corporation performs ongoing credit evaluations of its customers and has adopted a credit
policy that defines the credit terms to be met and the required guarantees. As at September 25, 2021 and
September 26, 2020, no customer accounted for over 10% of total loans and receivables.
To cover its credit risk, the Corporation holds guarantees over its clients' assets in the form of deposits, movable
hypothecs on the Corporation stock and/or second hypothecs on their inventories, movable property, intangible
assets and receivables.
In recent years, the Corporation has not recognized any material losses related to credit risk.
As at September 25, 2021, the maximum potential liability under guarantees provided amounted to $22.2 ($23.5 as
at September 26, 2020) and no liability had been recognized as at that date.
Financial assets at fair value through profit and loss
With regard to its financial assets at fair value through profit and loss, consisting of foreign exchange forward
contracts, the Corporation is subject to credit risk when these contracts result in receivables from financial institutions.
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Notes to consolidated financial statements
September 25, 2021 and September 26, 2020
(Millions of dollars, unless otherwise indicated)
In accordance with its financial risk management policy, the Corporation entered into these agreements with major
Canadian financial institutions to reduce its credit risk.
As at September 25, 2021, the maximum exposure to credit risk for the foreign exchange forward contracts was equal
to their carrying amount. As at September 26, 2020, the Corporation was not exposed to credit risk in respect of its
foreign exchange forward contracts, as they resulted in amounts payable.
LIQUIDITY RISK
The Corporation is exposed to liquidity risk primarily as a result of its debt, lease liabilities and trade accounts
payable.
The Corporation regularly assesses its cash position and feels that its cash flows from operating activities are
sufficient to fully cover its cash requirements as regards its financing activities. Its revolving credit facility and its
Series C, F, G, B, D, H and I Notes mature only in 2021, 2022, 2027, 2035, 2044, 2047 and 2050, respectively. The
Corporation also has an unused authorized balance of $600.0 on its revolving credit facility.
Undiscounted cash flows (capital and interest)
Accounts
payable
Loans
Notes
Lease
liabilities
Total
1,546.5
20.4
396.7
313.5
2,277.1
—
—
—
1,546.5
7.9
5.1
24.1
57.5
1,476.7
1,653.1
3,137.7
976.1
199.8
1,181.0
1,431.1
6.2
1,461.4
4,280.6
2,172.6
8,057.2
Maturing under 1 year
Maturing in 1 to 10 years
Maturing in 11 to 20 years
Maturing over 20 years
FOREIGN EXCHANGE RISK
Given that some of its purchases are denominated in foreign currencies and that it has, depending on market
conditions, US borrowings on its revolving credit facility, the Corporation is exposed to foreign exchange risk.
In accordance with its financial risk management policy, the Corporation could use derivative financial instruments,
consisting of foreign exchange forward contracts and cross currency interest rate swaps, to hedge against the effect
of foreign exchange rate fluctuations on its future foreign-denominated purchases of goods and services and on its
US borrowings. As at September 25, 2021 and September 26, 2020, the fair value of foreign exchange forward
contracts was insignificant and there were no cross-currency interest rate swaps outstanding.
26. 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, bearing interest at a fixed nominal rate of 1.92%, maturing on
December 2, 2024, and redeemable at fair value at the issuer’s option at any time prior to maturity. On
December 1, 2021, the Corporation redeemed all of the Series C notes in the amount of $300.0 that matured on the
same day. In conjunction with this offering, Metro entered into a $300.0 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.
27. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements for the fiscal year ended September 25, 2021 (including comparative figures)
were approved for issue by the Board of Directors on December 10, 2021.
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DIRECTORS AND OFFICERS
Board of Directors
Maryse Bertrand(1)(3)
Westmount, Québec
Pierre Boivin
Montréal, Québec
Chair of the Board
François J. Coutu
Montréal, Québec
Michel Coutu
Montréal, Québec
Management of METRO INC.
Stephanie Coyles(1)(3)
Toronto, Ontario
Christian W.E. Haub(2)
Greenwich, Connecticut
Brian McManus(1)
Montréal, Québec
Claude Dussault(2)(3)
Québec, Québec
Russell Goodman(1)(3)
Mont-Tremblant, Québec
Marc Guay(1)(2)
Oakville, Ontario
Eric La Flèche
Town of Mount-Royal,
Québec President and
Chief Executive Officer
Christine Magee(2)(3)
Oakville, Ontario
Line Rivard(1)(2)
Montréal, Québec
(1) Member of the Audit
Committee
(2) Member of the Human
Resources Committee
(3) Member of the Governance
and Corporate Responsibility
Committee
Eric La Flèche
President and Chief Executive
Officer
Alain Champagne
President of The Jean
Coutu Group (PJC) inc.
François Thibault
Executive Vice President,
Chief Financial Officer and
Treasurer
Serge Boulanger
Senior Vice President,
National Procurement and
Corporate Brands
Christina Bédard
Vice President,
eCommerce and Digital
Strategy
Sam Bernier
Vice President, Technology
Infrastructure
Frédéric Legault
Vice President,
Information Systems
Simon Rivet
Vice President, General
Counsel and Corporate
Secretary
Marc Giroux
Executive Vice President and
Quebec Division Head and
eCommerce
Carmine Fortino
Executive Vice President,
Ontario Division Head and
National Supply Chain
Martin Allaire
Vice President, Real
Estate and Engineering
Genevieve Bich
Vice President, Human
Resources
Alain Tadros
Vice President,
Marketing
Marie-Claude Bacon
Vice President, Public
Affairs and
Communications
Dan Gabbard
Vice President, Supply
Chain
Yves Vézina
National Vice President,
Logistics and Distribution
Karin Jonsson
Vice President, Corporate
Controller
SHAREHOLDER INFORMATION
The corporate information, annual and quarterly reports, the annual information form, and press releases are available on
our website: www.metro.ca
Les renseignements sur la Société, les rapports annuels et trimestriels, la notice annuelle et les communiqués de presse sont disponibles sur Internet à
l’adresse suivante : www.metro.ca
Head office
11011 Maurice-Duplessis Blvd.
Montréal, Québec H1C 1V6
Tel: (514) 643-1000
Transfer agent and
registrar
TSX Trust Company
Auditors
Ernst & Young LLP
Annual meeting
The Annual General Meeting of
Shareholders will be held virtually
via a live webcast on
January 25, 2022 at 10:00 a.m.
Stock listing
Toronto Stock Exchange
Ticker Symbol: MRU
DIVIDENDS*
2022 FISCAL YEAR
Declaration date
January 24, 2022
April 12, 2022
August 9, 2022
September 26, 2022
Record date
February 10, 2022
May 12, 2022
August 31, 2022
October 21, 2022
Payment date
March 7, 2022
June 1, 2022
September 21, 2022
November 8, 2022
* Subject to approval by the Board of Directors
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