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Metro Has Biggest Weekly Decline in 12 Months: Montreal Mover

Feb. 10 (Bloomberg) -- Metro Inc., Canada’s third-largest grocer, completed its biggest weekly decline in a year after Wal-Mart Stores Inc. said it would spend C$750 million ($750 million) this year expanding in Canada.

Shares of the Montreal-based company dropped 3.5 percent this week, the most since January 2011. Metro has declined 5.7 percent since closing at a record high Jan. 31, the day it reported first-quarter earnings that surpassed the average analyst estimate in a Bloomberg survey. The stock slipped 0.8 percent to C$51.50 today in Toronto.

Canadian consumer-staples stocks’ valuation discount to their U.S. peers has climbed to the widest since 2007 as Wal-Mart has expanded its presence in Canada and Target Corp. has planned its own entry into the country. Metro has outgained its Canadian peers in the past 12 months as it reported a third straight year of record earnings per share, excluding certain items.

“You get new companies coming on board,” Jean-Rene Ouellet, an analyst at Desjardins Securities’ Portfolio Advisory Group unit in Montreal, said in a telephone interview. The unit oversees about C$18 billion. “It’s still a good company. They still deliver good numbers. But it’s much more competition.”

Investors are particularly concerned about Wal-Mart’s plan to open more supercenters, which combine grocery and general-goods stores, in Quebec, Ouellet said. The province accounts for more than 60 percent of Metro’s earnings before interest, taxes, depreciation and amortization, Perry Caicco, an analyst at Canadian International Bank of Commerce, wrote in a note to clients Jan. 31.

Caicco and Michael Van Aelst, an analyst at Toronto-Dominion Bank, cut their ratings on Metro to “sector performer” and “hold,” respectively, after the company disclosed its financial results. Both cited increased competition.

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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