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Morningstar’s Analysis

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No-Moat Metro Managing Through an Increasing Inflationary Environment; Shares Slightly Overvalued

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

No-moat Metro finished its fiscal 2021 largely in line with our forecast, although emerging inflationary pressures and an ongoing aggressive promotional environment elevate near-term concerns. We don’t expect a material change to our CAD 59 fair value estimate, as we largely account for these industry dynamics.

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Company Profile

Business Description

Metro is one of the largest grocery retailers in Canada. With its 2018 acquisition of Jean Coutu, it also boasts a meaningful drugstore footprint. Noteworthy grocery banners include Metro, Metro Plus, Super C, and Food Basics, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. It utilizes an array of business models, but it most frequently acts as either a retailer, operating individual stores, or a franchiser, licensing its trademarks and supplying merchandise to franchisees. The firm also acts as a distributor, leveraging its supply chain capabilities to service smaller neighborhood grocery stores. The preponderance of its operations are in Quebec, which houses over 70% of its owned and franchised food and drug outlets.

11011 Maurice-Duplessis Boulevard
Montreal, QC, H1C 1V6, Canada
T +1 514 643-1000
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings Sep 30, 2021
Fiscal Year End Sep 26, 2021
Stock Type
Employees 90,000