Q3 2019 Earnings Call
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I would now like to Hana conference over to Mr. Roy Mcdonald. Please go ahead Sir.
Thank you very much Jamie and good morning, everybody welcome to Loblaw companies Limited third quarter 2019 results call I'm joined this morning by given Western our executive Chairman, Sarah Davis, our president and earn Meyers, our Chief Financial Officer, and before we begin the call I want to remind you the.
Today's discussion will include forward looking statements such as the company's beliefs and expectations regarding certain aspects of the financial performance in 2019 in future years.
These statements are based on assumptions and reflect management's current expectations.
And are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations.
And these risks and uncertainties are discussed in the company's materials filed with the Canadian regulators.
Any forward looking statements speak only as of the date there made the company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise unless.
What's required by law.
Also certain non-GAAP financial measures may be discussed are referred to today. So please refer to our annual report and other materials filed with the Canadian Securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure.
And with that I will turn the call over to Darren. Thank you ROI and good morning, everyone.
In the third quarter, we continue to live or other financial plan revenue grew by 2.3% adjusted EBITDA normalize for I first 16 increased 4.7% and adjusted diluted earnings per share increased by 5.6%.
Adjusted earnings per share grew by 7.9% during the quarter after taking into account the timing of Thanksgiving, which negatively impacted results by approximately three cents.
Our same store sales and drug retail grew 4.1% our strongest quarter since Q2 2016.
Front store same store sales grew 3.1% and pharmacy same store sales grew 5.3%.
For front store, we delivered positive comp growth in all categories.
Bio Tc habit and cosmetics.
Pharmacy continued its strong trend with prescription count growth of 2.9% and higher average script value the timing of Thanksgiving had a nominal impact on drug retail same store sales growth.
And our food retail business the timing of Thanksgiving had a negative impact on our same store sales of approximately 90 basis point.
Excluding this impact our food retail same store sales grew 1% in the quarter.
The P.I. equivalent internal inflation metric was moderately lower than CPR of 4.1%.
Our performance in food retail reflects measured adjustments that we we have been making in price in the quarter, we improve both our traffic at our tonnage trends that said, we will continue to make deliberate and measured investments to get our sales performance back in line with our stable trading range.
In the quarter total retail gross margin was 29.6% excluding the consolidation of franchises retail gross margin was essentially flat compared to last year retail gross margin was flat for food well drug retail declined slightly.
Retail that's today as a percentage of sales of 19.5% included $382 million benefit relating to ire for us 16.
Excluding this benefit in the impact the franchise consolidation retail lets DNA improved year over year by 10 basis points. All restaurant. They performance benefited from continued progress in a process efficiency initiatives and some one time and timing benefits realized in the quarter offsetting a ramping of investments in our strategic growth areas.
D.C. financial revenue grew by 12.8% driven by growth in our credit card portfolio and continued higher year over year sales at the mobile shot.
The adjusted EBITDA contribution from PC financial declined slightly year over year as growth in the portfolio was offset by investments.
Adjusted consolidated EBITDA margin was 10.2% in the quarter normalized for the impact of Firecrest 16, and the consolidation of franchise the margin improved by 10 basis points.
In the quarter fully diluted earnings per share is $1.25 on a comparable basis to last year. After excluding six cents per share from the incremental depreciation due the spin out of choice and a three cents per share negative impact from the timing of Thanksgiving fully diluted earnings per share for the quarter $1.34, an increase of approximately 7.9 per.
Absent the impact on EPS for my first 16 was immaterial in the quarter.
Hi for US net earnings available to common shareholders for kindred continuing ops was 331 million in the quarter.
Free cash flow was $186 million and we repurchased 4.3 million common shares at a total cost of $309 million.
Reflecting on the quarter, we continue to build on our culture of operational excellence and we're pleased with our progress against our strategy. We continue to deliver processing efficiency gains these gains offset cost pressures and enable us to invest in our growth areas for the future.
Drug retail business continued to perform very well our same store sales performance in food retail is improving and continues to be an area of focus. We're also seeing an increasing competitive intensity in certain sectors of the market. We will continue to make deliberate and measured investments to get our sales performance back inline with our stable trading range.
As a reminder, the timing of Thanksgiving holiday period. This year will positively impact fully diluted earnings per share performance in the fourth quarter by approximately three cents I will now turn the call over to cerus to provide additional color.
Good morning, we continue to execute our strategy and delivered against our financial plan in the quarter, we improved the trends of our fleet sale with measured margin investment our internal inflation was moderately lower than PPI with some categories nearing deflation. This has positioned us better with customers and in the core.
After our trajectory on traffic basket and tonnage improved.
Looking back at the quarter, our consolidated sales grew 2.3% shoppers drug Mart continued its strong performance, particularly in important categories like pharmacy and beauty. We are seeing signs of a strong flu season building on strong cough cold and allergy sale in beauty, we continue to build across our Omnichannel touch point.
Online sales are very strong growth and we added six next generation beauty boutiques with eight more to common Q4.
In grocery our key metrics improved we saw sales lift as customers responded to investments in service and lower prices in key categories.
Our lead value brand no name and get generating fantastic attention to remarketing and social media and is now being used as a global case study in branding.
While we were directionally better in the quarter, we're not where we want to be we have also seen an uptick in competitive intensity. As a result, we will continue to monitor prices I will make measured investments as necessary.
We're also enhancing our data driven insight everyday we have more information and we are using out to take practical auction, where better managing seasonal inventory piloting flyers with fewer pages and seeing new proof of our ability to build loyal customers through PC optima.
Ultimately, we have continued confidence in our strategy.
Just inefficiencies remain an important piece of that strategy with many initiatives completed and hundreds more underway, we continue to find new ways to streamline our business.
We have spoken before about the rollout of the blasted app that connect customers with the that is unlikely to sell before its co date at very attractive discount that system is now active and all of our corporate stores.
Our customers are enjoying discounts of up to 50% and we estimate that will eliminate millions of pounds of food waste for the years over the success of our purpose and efficiency initiative tell us has allowed us to invest in our future.
At the start up this year, our everyday digital retail investment shifted from building ecommerce infrastructure to improving the e-commerce experience.
As we near the end of 2019, our digital businesses are growing significantly year over year, we're seeing higher customer satisfaction score is based on speed of service and we are expanding capacity and service in many stores, where e-commerce demand is higher than we ever anticipated.
We're also trying new things in the quarter, we introduced shoppers drug Mart home delivery nationwide. We continue to enhance PC express processes like are picking up designed to increase efficiency accuracy and job satisfaction of our in store team.
We're now building an in store automated picking area that turns 12000 square feet of less productive phase into a high tech order fulfillment area dedicated to PC Express orders.
Pilot will automate picking up the high velocity items, helping our in store team still more orders faster and more efficiently right in your own neighborhood well start back up at the heart of RPC expressed success. We continue to test complimentary spoke for example, we just opened a new TCX, Brad pick up point and an urban Toronto Con.
No building, where we can provide a full grocery shop waiting for residents when they get home. The initial response has been stronger than we expected and we're delighted to see that most of the customers are new to PC Express.
Ultimately, we know we need to continue to retain and attract customer our trajectory of improving we have momentum and data driven insights our processing efficiencies our funding our future and we are investing in areas, where we have proven strength.
We have more work to do you have confidence in our strategy I will now pass the call over to gallon. Thank you Sarah and third quarter, we improved our sales trajectory may progress on post processing efficiencies and continued our significant ongoing investments in the future.
Sarah noted our supermarket sales are not yet where they need to be but we are doing the right things always focused on the customer we've taken steps like lowering prices and adding in store, adding two in store service levels and measured and meaningful ways are improving customer satisfaction scores in these areas clearly indicate we are on the right track.
Shoppers drug Mart continues its strong performance across all major categories beauty boutiques enhanced omnichannel beauty offering and the urban format food offer are all delivering at or above expectations. At the same time, we're investing to build the foundation for our connected health care strategy, our digital pharmacy system Healthwatch is now fully deploy.
In Ontario.
And 740 of our other pharmacies across the country. The new system is already driving improved customer prescription adherence and patient health outcomes and it represents another foundational building block for our health care strategy.
Across the enterprise, we continue to focus on executing our strategy and accelerating investments. Good topline sales performance is a strategic imperative as we use our success in processing efficiencies and data insights to strike the balance of investing in today's customer and tomorrow's to build shareholder value over the long term.
I'll now open the call for questions.
Thank you get Olin, Amy if you'd please introduce the Q in a process and I'll remind everybody dialing into please limit. Your question do a single subject area and we'll make sure you have a chance to dial back in for Paul.
As a reminder to ask a question you will need to press Star then one on your telephone keypad.
To withdraw your question you May press, the pound or hash key.
Please standby will be complete compile the Q and a roster.
Your first question today comes from the line of Irene Mattel of RBC capital markets. Your line is open.
Thanks, and good morning, everyone I'm, just listening to the commentary both Darren and Sarah mentioned.
Increased competitive intensity and show I guess I wanted to explore that a little that which channel is is it sure channel focused is it regional.
Is that on a category specific basis, and you know how much more intense are we talking.
Okay I'll start off so basically what we're saying as we have noticed an uptick in Q3 and the competitive intensity I don't know that we're going to go into the specific region, but it is more in the discount a division that we're seeing yet so we're seeing it through a new stores being added we're seeing it through more renovations being done and we're definitely seeing.
Through price investments some of that of course is off as well.
Okay. That's helpful. Thank you Sarah and are.
Are we seeing overall that having an impact in terms of the relative movement of customers with discount growing more quickly continuing to grow more quickly than conventional.
I wouldn't say, we saw a big trend in the difference between how our market to visit has been performing and our discount division has been performing in the quarter.
Discount Division of course has had more impact from the right hand side, which we've talked about being not as strong as it has been in previous years I would say no change introductory in Q3 from that.
Okay. That's very helpful. And you also talked about reducing flyer page, our testing sort of smaller less flyer pages and investing in pricing in certain categories.
Can you kind of walk us through how that's playing as and what you're seeing in terms of consumer response as you replace flyer pages with personalized promotion.
Well earlier this year, we developed Oh.
Oh that allows our customers to provide feedback every moment of everyday and every store. So we have a lot of but really allowed us to try a lot of different things.
So whether that pricing in certain categories, and then seeing sort of more immediate reaction or whether it changing flyers, we are able to see the impact and customer slots as I would say, we're using different tools. That's another example of using data in order to help us make sure that we make investments in the areas that mattered.
The most to our customer so that could turn turn out to be in certain categories, which are not going to go through with categories in certain regions of the country and turn but the flyer, what it's doing is allowing us to tough tough reduced wire pages and in only certain regions. So we could perhaps try a fly or that has.
Your items on a in the middle but just as many strong items on the front page in the back page in certain regions and seeing how that flyer.
Perform birth to other parts of the country.
So the data is allowing us to do up a lot more testing in this area and seeing how our customers respond.
So <unk> last question, so taking that one step further south or is it safe to say that as we move forward into 2020, we're going to see a lot more of that kind of thing and we should be expecting.
To see fewer of these sort of theory.
Sure and specific promotions and more targeted promotions.
I think we'll use a balance of we'd like we like the targeted programs. It's less expensive you target only certain customers are certain regions I bought the math promotions have a bigger impact.
Because of course, there to everybody. So I would say that we're trying to fine tune the bats combination of math and a and targeted promos will continue doing both but I would say we are emphasizing more at the targeted than just doing math as we would've done in the in the past.
Great. Thank you.
Your next question for cell line of Karen short of Barclays. Your line is open.
Hi, Thanks, very much I'm actually just want to elaborate a little bit if you could elaborate a little bit on the competitive environment commentary I mean, I guess coming from that angle that Walmart recently had a change in leadership in Canada typically that does come with increased price.
Focus on price from Walmart, maybe a little color on that specific Lee.
I think that is part of that so we don't specifically talk about each of our competitors, but we have seen you know you brought up Walmart. So we have seen some pricing activity in Walmart, but it's not just them it would be across a it would be across all of our competitors.
Okay, and then I'm turning to the basket within food, maybe can you parse out the composition of the basket with respect to tonnage price per unit and unit per transactions, a little bit of call. It there.
And what way so I would say in terms of our trends, we would say arch, we're seeing an improvement in our traffic trends and our basket size and in our tonnage and but we wouldn't get into the specifics of what each what each is worth.
Okay, and then just maybe some preliminary thoughts on how to think about 2020, I guess with respect to puts and takes and and I guess the bigger question would be what do you think you beat you will be closer to that 4% to 6% operating profit run rate in 2028% to 10%.
Yes, hi, good morning, Karen staring, Yeah, I think at this point, it's a little bit too early for us to provide guidance on on 2020 right now we're really focused on.
The fourth quarter and improving our trading in a more measured way I would say I don't expect that will be all the way to break just in one quarter. We're trying to do this in a measured way and then when you think about 2020, it's really going to be a continuation of our strategy. So that's going to be investing in the business. While we also continue the robust pro.
So sufficiency project there are stream that we have and as well the focus on data driven insight. So that's probably the most color I can provide today, but we'll give you a better update in or cold in February .
Thank you.
Your next question comes the line of Michael Van List of TD Securities. Your line is open.
Thank you I just wanted to try one more time on the inflation at least can you just for investors say because there's a lot of confusion out there can you clarify what you mean by moderately below CP.
Yeah, Mike Fincke moderately for us is 1% to 2% below cpis.
Okay, So let's say.
Take the midpoint, we're kind of.
2.5% negative same store tonnage and 0.9 to that as from Thanksgiving. So.
Negative 1.6 roughly.
Which compares to the negative three in Q2, so thats the improvement that you're seeing so far roughly on the tonnage side.
Okay, and you're saying that you think that that can you are not going to get it all back obviously in one quarter, but do you expect to be able to kind of get that closer to the nail heading into 2020.
I mean, certainly we're working hard at that but I think the key is that we're doing things at a measured way. If we just wanted to get the tonnage overnight. We know we could do things to do that but we're trying to do things in a responsible and targeted way, but I don't want to I don't want to give a forecast as to what exactly what that number will be but we're pleased with the progress we may.
Made from Q2 to Q3, despite the increase in and competitive activity that we've seen in the market.
Okay. Thank you and then on e-commerce .
You talked about demand being higher than you expected. So you're testing the micro fulfillment center in one store is this your or is this what you think is kind of your likely solution to that or.
Or is there are other things that you are piloting at the same time.
Yes.
Yeah, we did a couple of thing so in Western Canada, we actually have the highest penetration of a PC expressed and so we have we actually renovated seven of RPC expressed locations in order to expand for the amount of volume that we're seeing so we did seven renovation there.
And then we're also trying this is just the pilot and for the idea being that we're going to have an automated picking facility in one of our stores.
We don't know exactly what that could turn into but it could you can imagine it being in south side, you could have that in a few stores than it would be a hub that would allow some of the folks and other stores to not to I'll hop back and have the picking down in the store. So I would say that's what we're piloting but it's too early to tell exactly what we're going to do a point.
Our but that will often CLL at work.
Are you haven't tried any ALS like dark stores or anything like that at this point.
We have not.
Thank you.
Your next question comes from the line of Mark Patrice I've see IP see your line is open.
Hi, Good morning, just a follow up on the M.S.C. topic could you just give us a bit more detail in terms of what market as the store in or or what banner is the store under and then when do you expect it to be operation.
Well, it's in Toronto, then I superstar that the front end steel, it's not up so there's nothing to see yet, but I'm sure ROI could organized something when we have something for people to see so we expect it to be up and running early in 2020.
Okay. Thanks.
Then my other question is just around around the Opex efficiencies.
Wondering if you could sort of give us an example, or maybe highlight a couple of the areas that were the biggest sort of payoffs in the quarter and then.
Outlook for maybe the next couple of quarters. If you think this is kind of a relatively steady run rate and then if you could quantify the favorable timing.
That you called out for fresh in Q3.
Yeah I'll start on some of the initiative. So I would say somebody that's it at that where most.
Pleased with is in terms of a process and efficiencies would be self checkout, particularly in our shopper stores, there and there will be in 600 stores by the end of the year and the penetration is is quite high it's in the 30.
In terms of the people choosing to use self checkout and the customer response has been very positive and in terms of being able to have alternative.
For for checking out at the store another one that we feel it has been quite successful as our electronic shelf label.
Which we have which has an added benefit of improving the job up the colleague improving the customer experience or at least being no impact to the customer in terms of the pricing and of course.
Being a better customer experience the cashier, because theres no pricing differences.
At that time, so it's been very us news and it takes the labor in terms of that type of labor, which is not satisfying labor in the stores I would say that one has been a win.
Across the board as well those are a couple of examples, but theres lots of initiatives across the business anything from improving in all supply chain end to end processes, but those would be sort of some of the key one better easy to describe and then maybe Darren you can talk a little bit about the numbers, yes, Mark I'd just add to that.
We've talked about this in the past so it is a comprehensive program across six major areas of business is really not an area. That's not been touched by the process efficiencies serves mentioning some like she said easy ones to describe but but there's a there's a lot more obviously to that throughout the business. So we still see lots of runway on that it's a multiyear program probably.
The way to think about SDMA is we're driving that program that is helping to offset cost inflation in the business as well as the investments which has been ramping through this year and we're going to continue to make investments in the business. So the program.
It really serves as an anchor to be able to help fund fund those items for the quarter, we were up 10 basis points and our performance and I would say that is about $10 million that I would call out as timing and one timers in call. It a half half split five billing being timing from Q4 to Q3.
And 5 million being being onetime.
Okay. Appreciate the color. Thanks.
Your next question comes the line of Patricia Baker of Scotiabank. Your line is open.
Good morning, everyone. Thank you for taking my questions.
Firstly I just want to talk a come back to tonnage and traffic and and more specifically traffic. So you you indicated that you had improved trends, but traffic as I understand it still remains negative him you've had negative traffic for a while now so when you guys said sit down and talk about the business and think about what's going on what you would do you attribute the negative try.
Perfect too.
Well I think it's a good question I would say we have so yes, we are saying that we are thing that are tracking traffic is still negative, but we're pleased with the with pro rata, but the progress that we are seeing.
As we've said in previous quarters some of our focus.
With the data with Mike maybe not as accurate as we would like for making a few measured adjustments there, but I don't think that we've got one specific thing that we're attracting attributing it to.
We know that we have some work to do and we're working to improve it and that's what we're hoping to see by the end of the year, but to Darren point. It may not be finished then.
We might continue into 2020 as well, but no specific thing that were attributing it to.
Okay. So you don't think there's something different happening with the consumer as far as you're concerned. It's just it's just a compilation of factors.
I think when you think about our business in total you actually think of our enterprise anything about that our revenue our sales growth in the quarter at 2.3% I will perform really well in our shoppers division a little less and that's a few there's about just a whole bunch of different components to it some of it is the impact at the right inside that we've talked about some.
Of it as some of the things that we have done some of it is just some of the things that are competitors are doing by adding more stores, we havent been adding a lot of stores.
We focus some of our capital towards away from our store capital into some of our growth areas. So I would say all of those would have some impact that we're now working through okay fair enough out you've mentioned the right hand side twice now Sarah So I'm, just curious about and you've talked about it in the last last few.
Quarters, where it has had an impact on the business and obviously it did again this quarter are you guys thinking.
Strategically about what you should be doing with that business and how important it is to the overall enterprise.
Yeah, and I would say that we didn't match in the right hand side as being a factor that was any more or less impactful in this quarter. So I would say we had the biggest impact in Q4 last year and and we mentioned it in Q1, having a 60 basis point impact and that slowly been declining so I'd say, it's having a less of an impact as the year goes on so we are figuring out.
Some of our pieces, there and it hasnt had as negative an impact we're seeing improvements there as well in terms of the overall strategy I would say in terms of apparel were quite pleased with what we're seeing in terms of the change in performance. We think it's an important part of our business.
In terms of general merchandise the same thing.
I think as time goes on we'll see how much space in some of our large stores and keep in mind. We don't have people think about that's having a lot of large stores. We don't have that many but I think we will have to think about whether we have allocate as much space to general merchandise or whether we give the space to other things like the thus MFC that we were talking of.
So more to come on that we're not planning, we don't have a big strategic change in our right hand side right now Okay. I really appreciate that <unk> have another question I'm wondering you guys. So reluctant to actually give us a an actual inflation number which you know.
Which we which we get from everyone else, but you guys always give us the moderately the modest done today, you did a little bit better by saying moderate means between one and 2%, but like what's what's the rationale for just not giving us a number.
Yeah Fair question I think what we've talked about in many over many years is that it's just not always the CPI and different back. So we have a few different inflation measure. So we have one which we call LPI with the lot Loblaw price index, which is based on the exact same basket that cpis based on but really it's not rep. So we could get.
That number we also have one that we believe is more representative of our business, but doesn't necessarily tied to the same back basket as the pie and so I think we've just decided that we weren't a you know we weren't prepared to give a number based on a measure that multiple measures that we used in our business, we're not going to get multiple measures and so we just have decided not to get.
One, but I know rights that been asking us to reconsider for 2020.
So more to come on that but I don't think we're going to change and get about that number. Okay. So just technically though so the 1% to 2% blow it was that El <unk>.
It is yes, okay. Okay. Thanks, a lot and sorry, you mentioned that you've got 30% penetration self checkout.
Shoppers now can you give us what that figure is that level.
Oh, it wouldn't be as high we don't have self checkout and as many stores that law, but in the stores that we do have it in and it would be in that mid 20.
And it depends its just related to the size of the basket. When you think you have a grocery shop. Your if you're buying a big basket you are less likely to go through the self checkout so at that work.
Okay. Thanks, a lot.
Your next question comes from the line of Vishal Shreedhar National Bank. Your line is open.
Hi, Thanks for taking my questions.
Just on the competitive intensity in the industry or is that starting to stabilize or still continuing to increase.
Well I think we saw the intensity increasing at the end of the Q3, So I would say that it's going to continue into Q4 and of course, we're making.
Investments and price so it will be part of that so I think I would expect it to continue through Q4.
Okay, and it's reasonable to expect that to start impacting the inflation numbers that we see as well.
Yes, Matt we've already ours has already started to come down so we're already.
Currently lower than Cpis. So I would think that's not what happened impact on the whole industry.
Okay and at the same time I think you flagged in the color your management like in the call that.
The investments that.
That loblaws, making are escalating and in the Cana how is that correct.
Sorry, the well the investments I mean, if you if you think about it as you look forward, we are making further measured adjustments to get too.
Back to our stable trading so yes, that's a pressure as we look forward.
[noise] and are you talking about short term investments on long term investments because we're doing both so yes.
Oh, sorry go ahead with one Oh, I was referring not to be actual price promo investment, but the actual investment in the Pos.
In the long term strategic initiatives is that escalating or is that implies that level.
I mean, those have been ramping through through this year and we were looking to continue to make investments so, but we certainly been ramping those as the years going on.
Okay, and just some clear by by ramping doesn't mean that the dollar spend in the P. now it will be greater in the coming quarters than they were relative to the prior quarters. So is that with them, yes, yes. Okay.
And just switching gears here in terms of the.
And I'm not sure how much color you can provide but in terms of the backdrop on pharmacy.
A little bit more chatter on national pharma care I'm wondering if if a law has a perspective on national pharma care and what maybe if there's any.
The words of wisdom, you can offer the investment community on how to think about that and same factor shoppers.
I would say that we have offered up perspective, where we believe and national pharma care, but we believe and being funded by multiple sources. So we believe in more up to fill the gap on strategy and in terms of what's going to happen. We don't we don't know, but obviously, it's an act of file for us and we pay a lot of attention to it.
We there's not really any new news in that area at that time.
Okay. Thank you.
Your next question comes from the line of Peter Sklar of BMO capital markets.
Your line is open.
On retail food inflation.
Like Youve divested in terms of competitive dynamics, but I wanted to know what you're seeing through the quarter and as you exit the quarter in terms of.
Underlying.
Underlying food inflation in terms of commodities your pricing relationship with your CPG suppliers et cetera racing any movements in inflation is decelerating in terms of those underlying trends.
I'd say that certainly from our perspective, we have been free inflation is coming down.
And we're seeing that increase as we went through the quarter.
Increased in the reduction of inflation through the quarter.
Okay. Thank you that's all I have.
Your next question comes from the line of key tell it updates our debt Securities. Your line is open.
Hi, Yes, that's some questions around connected health as a first was the if you have any further details on the agreement between.
Ministry of health voluntary on the pharmacists on fee reductions.
And the second related to the.
Patent Medicine review board, what what information if they're on.
The adjustment.
Possible adjustment of.
[noise] branded drug prices I.
I think on the first one so the Ontario budget came out with a plan of about 436 million dollar and impact on a pharmacy over a four year period, and we would expect that we would take our proportionate share of that impact and so that is something that's going to cost pressure in 2000.
Funny that will factor into our 2020 plans in terms of the second question I would say right now we're not seeing it as having an impact on <unk>.
But we can.
Go through more detail, maybe with you offline, but right now I think we're not we're not seeing an impact on us as a result, though.
And our.
And then just if I could just on Connectedhealth.
What would be the primary initiatives that you'd be working on it this time.
So in connected health I think ideal imagined. So the first thing would be building the backbone, which is I'm putting in.
Our new health system into our stores so into our pharmacy than we're now in 740.
Stores, Oliver, Ontario is done so that would be the infrastructure and then through Q HR and they would be signing up more doctors to half the yen our software and they have market share of about 27% in terms of the MRF. So they're continuing to grow in that area and they would also be.
The rolling out basically software and I got to consumers that allows them to have contact between consumer and Dr. and we've got about 150000 consumer to have signed up for that it's more design for consumers that have.
Uh huh.
Maybe a stronger relationship with their doctor some more related to chronic illness. This is where you but the the biggest impact but a 150000 consumers have signed up for that as well. So we feel like we're making good progress in a connected health care piece as well.
Thank you.
[noise] and there are no further questions in queue at this time I turn the call back to the presenters for any closing remarks.
Thank you. Thank you everybody for your time this morning.
But to take any follow up questions offline and please mark your calendars for February the 20.
When we will be releasing our Q4 on full year 2019 results have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your thank you for participating you may now disconnect.