Metro Earnings: Ramp-Up of New Distribution Center on Track, Consumer Down-Trading Still a Headwind

We plan to maintain our CAD 69 fair value estimate for no-moat Metro after absorbing its second-quarter results, with sales up 2% and adjusted EPS down 5%. With the transition to the new Quebec distribution center progressing well, we are maintaining our 2024 projection for a 3% sales growth (on flattish volumes) and a 1% decline in adjusted EPS. Our 10-year forecast for low-single-digit top-line growth and an average operating margin of 6.5% remains in place, and we view shares as slightly undervalued.