The recovery has started - we''re not sure we like what a recovered Metro looks like With small independent hotels, restaurants and caterers (HoReCa) making up around a third of its customer base and much of its profit, COVID-19 has not been kind for Metro. Metro''s Q3 (calendar Q2) confirms however recovery is firmly underway so a tick and upgrade there. The problem we have is that if the recovery is simply a return to normal, it was one of declines in earnings due to structural headwinds. With the shares expensive on even recovered estimates, they still aren''t for us. Metro''s customers are emerging bruised and battered but potentially demanding more Though many independent HoReCa customers will emerge bruised but still fighting from the pandemic, some might not be so lucky. That will put pressure on the broader wholesale industry creating an opportunity for market share gains at Metro which the group showed there was good evidence of. We think however the pandemic will accelerate the transfer of custom away from Cash and Carry outlets to delivered foodservice and probably create an opportunity for larger HoReCa customers to take share from the small ones who weren''t so fortunate. Metro can chase the market share but it has historically come at higher cost Metro may well be able to reposition itself further to cater for this changed landscape but larger players have more pricing power and delivery is higher cost to serve. Further, initiatives to digitise the business have proven costly (we note for instance the creeping capitalisation of labour cost). Shaking the costs of the legacy outlet business is however challenging, made even harder because of successive sale and leasebacks to support the balance sheet / dividend. We think we need a very large jump in margins to justify the share price Metro''s new CEO then has a tough job ahead - we wish him luck and he may well prove us wrong. But our assessment today is that beyond a modest rebound...