ALERT- CHANGE TO TOP 6 PURPLE CHIPS: SWITCHING METRO (MRU) FOR DOLLARAMA (DOL-T)

 September 13, 2018 

CHANGE TO TOP 6 PURPLE CHIPS: 

SELL METRO (MRU-T, $40.17), BUY DOLLARAMA (DOL-T, $44.60) 

METRO INC. is engaged in food and pharmaceutical distribution. The Company operates or supplies a network of over 940 food stores under various banners, including Metro, Metro Plus, Super C, Food Basics, Adonis and Premiere Moisson, as well as approximately 260 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners. It also acts as franchisor and distributor for over 180 franchised Brunet Plus, Brunet, Brunet Clinique, and Clini Plus drugstores, owned by independent pharmacists. 

DOLLARAMA INC. is a Canadian dollar store retailer. It has approximately 1,030 stores in Canada. Its stores have an average area of approximately 9,942 square feet and offer a range of consumer products, general merchandise, and seasonal items, including private label and nationally branded products. Its merchandise is sold in individual or multiple units. The Company's stores are located in metropolitan areas, mid-sized cities, and towns. 

JUSTIFICATION: 

Metro recently had a second quarter of declining earnings; the company is facing headwinds due to higher wages and food price inflation. We expect it to trade sideways until its earnings recover. The companies that make up the Top 6 have the smoothest and most predictable earnings of all the companies in Purple Chips universe, therefore we will always choose the best companies to make up the Top 6. Dollarama has a better earnings profile and will likely continue to exhibit smooth and predictable earnings. We believe they are a better long-term choice with more potential as they have years of growth ahead of them and they have demonstrated creative ways of preserving and expanding their profit margins. 

[pdf-embedder url="https://purplechips.com/wp-content/uploads/2018/09/2018-09-SWITCH-MRU-FOR-DOL.pdf" title="2018-09 SWITCH MRU FOR DOL"]