Q2 2022 MTY Food Group Inc Earnings Call
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Speaker 2: Good morning Ladies and gentlemen. Thank you for standing by. Welcome to the M T Y food group in Q2. 2020 two earnings conference call. At this time all participants are annalliston only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press St, followed by zero for operator assistance at any time. Before turning the meeting over to management, Please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
Speaker 3: Also remind you that all figures presented on today's call are in Canadian dollars, unless otherwise stated.
Speaker 3: The much anticipated lifting of our government impo restrictions in most of the territories in which we operate, allowed our network to operate at near normal capacity. During the second quarter, we gradually regained momentum and reestablish where the baseline is for our business.
Speaker 3: All their hard work done by our teammates and franchise partners during the last two years is finally paying off, now that the horizon seems for the most part year.
Speaker 3: We are delighted with our strong performance during the second quarter of 2020 -two and.
Speaker 3: There were multiple highlights, including the system sales reaching $1.1 billion, an increase of 18% year-over-year, the $47.6 million in adjusted EBITDA generated during the quarter and the quarterly net income attributable to owners rising sharply to $28.6 million.
Speaker 3: Canadian restaurants and in particular casual dining and food court restaurants were the most heavily impacted by government impo restrictions and as such benefited the most from the gradual lifting of those restrictions. Globally. Sales realizeded by casual dining concepts drew nearly $95 million or 107% in the second quarter of 2020. Two.
Speaker 3: Many of our casual dining concepts have reached or surpassed 2019 levels.
Speaker 3: And others are inching closer every month. In most cases, we see this as an opportunity, as we expect our sales to further pick up as our brands restore normal operating hours and as business people and tourists return to urban areas.
Speaker 3: The same can be said of our mall and office tower locations, which still lag 2019 materially, but are getting a lot closer. Not that restrictions have been most lifted and traffic gradually returns to prepandemic levels.
Speaker 3: Digital sales improved 2% year over year to two hundred and six point nine million dollars, or 20% of total sales. The increase in casual dining sales in the second quarter inevitably resulted in a slower digital sales for the segment as customer traded takeout orders for the dining room experience. Other segments continue to see progression in digital sales and there is still a lot of room for growth for many of our brands.
Speaker 3: To add color to the sales metrics just presented, 18 of our top 20 brands realized growth compared to the same quarter last year, averaging 14% year-over-year. These brands account for 84% of total sales and continue to perform well. Of note, our smaller brands grew 47% during the same period, showing the power of our diversified portfolio. Another key that a point in the second quarter: restaurant closing were at their lowest level in the last 16 quarters at 91 locations. This was achieved despite one Canadian franchisee closing 20 two nontraditional frozen yogur locations during the second quarter.
Speaker 3: Although we aim at closing as few restaurants as possible- and I hope we can do better than that number- this represents a small step in the right direction for mtyy.
Speaker 3: The opening of new locations, which reached 47 in the second quarter, remains under pressure due to supply chain and construction issues.
Speaker 3: There are however, encouraging signs. These matters are beginning to subside, particularly in the U? S.
Speaker 3: At the end of the quarter. mpise network add 6660 locations in operation, of which 89 were corporate and 6571 were franchise.
Speaker 3: The geographical split of emptywise location remains stable compared to Q2. 2021 at 54% in the? U's, 39% Canada and 7% international.
Speaker 3: Before turning it over to reaye to discuss financial results, I would like to say a word about mergers and acquisition.
Speaker 3: mpy finds itself in a great position to take advantage of opportunities that will arise in the future. As mentioned in our previous quarterly calls, the deal flow has become gradually more active and Devaluations seem to be reverting towards their historical values, although they are not there yet.
Speaker 3: mpy remains disciplined in its approach and will only transact on to right circumstances.
Speaker 3: That can sometimes mean letting go of brands we would love to add to our portfolio but that are selling for price. We are not willing to pay mergers and acquisitions thenend to come in waves, and our patients has generally paid off and resulted in the superior returns for our shareholders. We expect history to repeat itself when it comes to our ability to realize transactions, and we hope to produce returns that will reward our shareholders for their patients in the future.
Speaker 3: Our available liquidities exceed $3 million and, as before, our capital allocation preferences to invest in great brands. We can add to our portfolio.
Speaker 3: I will now turn the call over to Rene, who will discuss mpy's financial results in greater detail.
Speaker 4: Thank you Eric, and good morning everyone. As previously mentioned, emptii delivered a strong financial performance in the second quarter of 2022, which was marked by the removal of most government imposed restriction in Canada related to the COVID-19 pandemic, including the removal of vaccine passports and indoor seedating capacity limitationsthis is a latter franchisees and their staff to return their focus back to serving their customers the food they love.
Speaker 4: Company revenues increased 20% year-over-year to reach 162.5 million in the second quarter, mainly due to a 46% surge in revenue from franchise locations in Canada and a 32% improvement in food processing, distribution and retail revenue north of the border.
Speaker 4: The retail segment, revenues increased 23% year-over-year as we launched new products across Canada and continued to aggressively promote and sellerour existing product cines, while distribution and food processing segment revenues increased by 56%, driven largely by the kuto ktawa acal acquisition, as well as the reopening of the network we supply.
Speaker 4: Altogether, revenue in Canada grew 42% in the second quarter of 2022, while revenue in the U's and international segment declined by 1%.
Speaker 4: A slight drop in an overall revenues in the? U's was mostly due to the franchising of multiple papaommurphy's corporate locations in the second half of 2021, which was offset by a 6% increase in revenues in the franchising segment.
Speaker 4: Adjusted EBITDA improved 10% year-over-year to 47.6 million in the second quarter of 2022. the Canadian franchising segment contributed five point two million to the increase in EBITDA, with much of dis improvement coming from recurring revenue streams, as system sales increased 55% year-over-year.
Speaker 4: Most of the increase in system sales in Canada was generated by the casual dining segment, which generated growth of 117% as indoor dining became more accessible, while the QSR segment generated system sales growth of 46 percentglobally, moand street locations generated year-over-year growth of 61% and 13% respectively.
Speaker 4: Comparable to last quarter, our franchising segment margin saw a slight decrease from 56% to 53%. This continues to be partly due to the company no longer qualifying for the government wage subsidy, as well as an inflation impact on wages and other expenses.
Speaker 4: As mentioned by Eric, net income attributable to owners rose sharply to reach 28.6 million, or a dollar 17 per diluted share, in the second quarter of 2022, compared to 23 million, or 93 cents per diluted share in the same period last year, representing a twentandy-four percent increaseturning to liquidity and capital resources. Cash flow from operations amounted to thirty-point seven million in the second quarter of 2022, compared to 29.5 million in the second quarter of 2021.
Speaker 4: Free cash flows total 26 million, or a dollar six per diluted shair, in the second quarter of 2022, compared to 27.5 million, or a dollar 11 per diluted Sha, IR in the same period last year.
Speaker 4: The slight drop thumming from higher additions to property, plants and equipment and intangible assets in terms of capital allocation during the second quarter of 2022, we reimburse 12.1 million of long-term debt and paid five point one million in dividends to shareholders.
Speaker 4: We continue to aggressively repair debt to open-up available liquidities for future acquisition.
Speaker 4: This is also helping reduce our interest expense, which saw a significant decrease for the quarter, of over $1 million year-over-year.
Speaker 4: At quarter-end, long-term debt, mainly in the form of bank facilities and holdbacks on acquisition, stood at 348.9 million.
Speaker 4: We also closed the quarter with at wea cash position of 56.2 million.
Speaker 4: And with that, I'd like to thank you for your time, and we will now open the lines for questions operator.
Speaker 5: Thank you, Ladies and gentlemen, if you would like to ask a question at this time, please press star followed by one on your touch on phone. You will then hear a three town prompt acknowledging your request. And if you 'you would like to withdraw from the question Q, please press star, followed by two And if you're using a speaker phone, we do ask that you please lift the handssetup before pressing any keys. Please go ahead and press star one now if you you do have a question.
Speaker 2: And your first question will be from monoitz at CIBC capital markets. Please go ahead.
Speaker 6: Hi think for taking my question this morning. Just the first one on openings versus closure: S. is there any reason to think that the closures will B back up after this quarter? And on the openings, when do you anticipate you'll be back to more of a normal pace of openings without also PP changining construction issues?
Speaker 7: Yes well, I'll start with the openings and apologize if the sound is not great. Where we're it scrambl both with the rogers outage this morning. So the in terms of the openings.
Speaker 3: I think it's still going to take a quarter to before it comes back. There's there's a number of buildingings that we're supposed to be delivered to us that are late, also from landlordds, So consession has not been on time. So we are building stores as we speak and we anticipate that Q3 is going to be better in Q2 in terms of store openings, but in terms of getting clost Stride, we're not there yet. In terms of closures, we're pretty happy with where we landed in Q2. As mentioned during the call, we had the twenty-two.
Speaker 3: Closures from one partner and movie theaters. So obviously we don't like to see 22 locations go this way, but it's a one off and it's something that can't really repeat itself. So we're pretty satisfied with where we landed. Obviously it's still to many closures and we'd like all our stores to to stay open, but it's a reality of and that works, and it's work the size of ours. So there are so going to be closures, but we hope to be able to continue to control it as good as we can in the future and hopefully balance closures and openings in your future. That's helpful.
Speaker 6: And on operating hours on an aggregate kind of level across the system, either relative to prepandemic or your own expectation? Are the labor shortge just continuing come impact, and are you able to incentivize franchisees to open for additional hours now?
Speaker 3: Yes yes, labor shortages continue to have an impact. There's there's no doubt about it. We have some restaurants that, for example, operated breakfast, lunch and dinner and now have removed, for example, breakfast. So we still operate with the two main day parts. But if you lose one day part for a franchisee- and in the current circumstances I think they find their profitability with two the parts they have remaining, But as a franchise or because we, we take a percentage of the top line, obviously it's not ideal for us but we understand that our franchisees profitability and our franchisees operations need to.
Speaker 3: Need to be the primary factor here. So we're still missing some operating hours. We have fewer restaurants now that need to close for for year two a week. There are still a few exceptions to that, but it doesn't happen as much as it happened a few months ago.
Speaker 6: Understood okay great, and so on. Inflation, are any of your banners being greater resistance to price increases or, in general, these VIE, your portfolios being more advantageous because of the skeed towards quick service, So possibly benefit from a trade-down?
Speaker 7: Yes well, I don't necessarily believe in trade down. I think people either go to the restaurant where they don't, But as far as inflation is concerned, we do have few brands that are more value-oriented that will obviously become more price sensitive. So we need to be careful aboutwhat we what we put as far as price increases, and if we do have price increases we need to put through, we need to be careful we approach them on what products. So not all brands are equal. We have some brands that.
Speaker 3: Extremely resilient and we'll take a lot of price increases and some other brands where it's a little bit more sensitive and we need to be careful if we don't want to cause a massive decline in traffic. So.
Speaker 3: It's a fine line we're walking here for all the brands. We need to try to maintain the margins for franchisees as much as possible, but we also need to maintain traffic. So's an art, more in a science, and it's really needs to be run by brand and whether it's street or mall or office hour, we'll also make a difference in how much a price we can put through. So's really it's really an art and we need- we need to go almost store by store to get the right pricing strategy.
Speaker 6: Okay that's great color and just one last for me. I can does your approach to capital allocation, maybe favored debt repayment a little bit more, with interest rates rising due to the floating debt structure.
Speaker 3: Yes well, for sure, for sure. Debt repayment and all the repayments we've done in the past, in the past two years are are paying off. Now, with interest rates going up, we're saving a lot of money.
Speaker 3: But that being said, our preference remains to make good accretive acquisitions that we, that we can add to our portfolio. So that's the top priority, that's our preference. But, as mentioned earlier, we need to make sure that we make acquisitions for the right reasons and under the right circumstances. So we a we patient and while we're not doing acquisitions, our preference will'll go to debt repayments and build that dry powder and also avoid, if we have a wavever of acquisitions, avoid going into too much leverage that would become more expensive in terms of interest and that service costs.
Speaker 6: Okay great, that's how both all for me anything. Thank you. Next question will be from Michael lyenn at the Raymond James. Please go ahead. Hey, good morning. Thanks for taking the questions. Maybe just to start on on the capital allocation, can you just?
Speaker 8: Run us through any thoughts on how you think about the buyback. You were fairly active in one Q. doesn't look like you're active in two Q. you recent. You renewed the NCIB recently. Is there some like what sort of metrics? Or when do you become active in? When do you hold back like? I'm just trying to understand the philosophy there a little better.
Speaker 3: Yeah was it's a discussion we have at the Board level regularly and it's a.
Speaker 7: It's really again, it's really depends on circumstances, with interest rates going one way or the other, with availability of potential targets going one way or the other. So we need to balance it with a certainc set of metrics and factors and we have it certainly. No, it'to open discussion and we decided if we want to invest more and buybacks or if we want to build a treasure chest, if we want to try to reduce thatb So we can reduce our interest costs. And I mean there theres no set metrics. I'd like to give you a type of one L. that's all the type scenario where we buy back our we without. But it's really.
Speaker 7: A little bit more sensitive than that, and it's based on discussions on a great number of factors that need to be weighing.
Speaker 9: Okay and then, in terms of the labor situation at the MTY level, are you at the? You at the right level right now? Do you need to add people? I know it's a competitive labor environment out there. Is MTY corporate having any challenges in terms of retaining staff and is there competition for your people?
Speaker 3: Yeah it's well Yeah, it's a competitive environment now and and it's it's, it's certainly.
Speaker 7: It's hard to hire great people. It's hard to retain great people. Hopefully our, our.
Speaker 7: Our teammates are dui because they're passionate about what they do and they like the environment they work in. Yes, it's a tough environment. We did lose a few people here and there, as is not unusual, and there's always a few vacant positions. In this case, we tend to hire a little bit more and allow some of our departments to go slightly overstaff, just in case we lose some people, because there's a little bit more volatility on the market. But I would say that on average, I think we're fully staffed and obviously's.
Speaker 7: There's a vacancy here and there, But on average we're very pretty wellokay. And then.
Speaker 8: Eric you've been CEO is coming up on four years now and it's safe to say you've had to navigate some pretty unexpected operating conditions, like as you look from this point forward. In your opening remarks you talked about things sort of getting back to something that looks more as a as a normal operating environment. So what are your priorities and goals for the company over the next three to five years? What would you like M two Y to look like in the next three to five years?
Speaker 10: Yes well well, the priorities really haven't changed. So if you ask me what the priorities were three years ago, before govid happened, I would have said: well, we want to do good accretive mergers and acquisitions, we want to have good transactions that will benefit our shareholders and we want to grow organically.
Speaker 10: The strategy hasn't changed the goal haven't changed obviously how we get there might be slightly different today because a certain a certain number of metrics and parameters have changed in how we can get there. But it's really the same it was we want to achieve good good returns on investments for our franchisees we want to achieve organic growth. We want to have good same-store sales. We want to have positive unit account and we want to have good mergers and acquisitions. So.
Speaker 7: The strategy really hasn't changed and if you ask me about the type of stores we'd like that.
Speaker 10: And with where we want to be playing. What's the playing field for us? I would say that they're good chains and and malls are good. Change in office hours. They good change on the street. They good chains in nontraditional areas.
Speaker 7: So again, we're. We're happy to be where we need to be for each chain. And again, if there's a lot of competition or if there's whatever other sets of factors are thrown at us, if we're best in what we do, then everything is going to go smoothly, and if we're not best, then we need to work a little harder to get there.
Speaker 9: Okay thanks for taking my questionsthank you next question will be from ical shaida at national Bank financial. Please go aheadhi thanks for taking my questions just wondering what you're see seeing in terms of customer health and trend at your restaurants you. Even if you could break it down to us by a type of concept to geography. You know there's a lot of Mac concerns. So wondering if you're see any of that pressure and full through to quarter or post quarteryeah well in terms of consumer health and.
Speaker 10: And volume. I would say that so far, So good. There's a lot of talks about for the economic parameters. Is their recession coming or whatever? Right now, it looks like discretionary income is still there. Customers are still coming to our restaurants during the quarter and after the quarter. The traffic and the traffic is going well, trends are are favorable to us and we're not seeing a slowdown.
Speaker 7: Caused by by any economic factors at the moment. If anything, we're struggling to cope. Put demand more than we're struggling to attract cussumers.
Speaker 11: Okay thanks for that color. And with respect to near-term growth drivers with network location down.
Speaker 12: And obviously it's difficult for investors to understand the acquisition outlook and when that will manifest. What would you point to as the key near-term growth drivers from to Y?
Speaker 10: wellthere's still a room for us to grow existing stores back to 2019 levels. So you look at our malls, for example, we're still down compared to prepandemic levels, So there's room for us to go back to normal levels and even casual dining. We have a few concepts that are comping significantly over 2019, but we do have a few concepts also where we have opportunities. I'm thinking of our concepts that are in California, where the recovery has been a little bit slower, So just that is going to generate a growth by itself.
Speaker 7: And then again it's up to us to be best in class and to attract customers. We can generate organic growth, and then a is unpredictable. We know eventually we're going to have good transactions we're going to be able to bring to the finish line, but there's no guarantee as to when that's going to happen. So in the meantime, we need to focus on our existing network, on our existing franchisee. We need to make them as profitable as possible. We need to make our existing franchisees want to have a second or thir door for store and give them a reason to invest their, reinvest their profits and to more mptyy outlets. And then the rest is the risk is going to come natural.
Speaker 12: Okay and you've highlighted same-store sales growth as a key priority for management one does emptyy look to reinstate that metric for investors to review?
Speaker 10: Yes we want to we want to be careful. We do calculate it internally. The metric is still extremely misleading because of because of the.
Speaker 7: The deposits and where, where we had to shutdown than reopopen, and then halfway in between where we have some restrictions but not full restrictions. So to present same-store sales now would still be misleading. We have an opportunity to present it in Q3 because it's going to be for the most part comparable, but then we'd have to stop again for Q4 and Q1 because the restrictions that were reimposed last year. So most likely same-store sales would probably come back in Q2 of 2020 -three, assuming there will be no more shutdowns or other.
Speaker 7: Deposits and you know where we had to shutdown and reop and then halfway in between where we have some restrictions but not full restrictions. So to present same store sales now would still be misleading. We have an opportunity to present that in Q3 because it's going to be before the most part comparable, but then we'd have to stop again for Q4 in Q1 because the restrictions that were reimposeed last year, So most likely same store sales would probably come back in Q2 of 2020 3, assuming there will be no more shutdowns or or other sanitary measures impose on us.
Speaker 5: Okay Thank you. Thank you as a reminder, Ladies and gentlemen. If you would like to ask a question, Please slowly press star, followed by 1, on your touchdown phoneyour next question will be from dere lassard at TD. Please go ahead.
Speaker 13: Yes thanks. Good morning Eric, can congrress on on a good quarter. I just maybe wanted to drill down a little bit more on on the inflation topic particularly, and consumer behavior, particularly as it relates to your, your bigger banners like coldstone creamamery or or pop ammurphies. Just wondering if you've seen maybe more pressure on cold Stone given the maybe some of the higher price point that might be in that banner.
Speaker 10: Yes well in terms of coldstone. I think that it's a brand that's relatively resilient one The price increases that been as bad on coldstone as they been on other brands. The base products for coldstone are going up like the rest of products but we've had a pretty good run and the price increases have not been to the level of other brands. But given the premium nature of coldstone we believe that it's going to be a brand that will show some good resilience and in the endnow. The price is only one factor in the experience and.
Speaker 7: And if we want to increase prices, we need to understand that expectations of customers will go up accordingly. Higher prices will command higher expectations. Then it's up to us to deliver a really good experience and to rebalance the value equation if we offer really good experience to our customers.
Speaker 7: The perception of value will be there. The customers will be happy to pay a little bit more but to get that superior experience. So this is how we approach price increases. We understand that any time we increase prices, we increase our responsibility and if we deliver an even better experience, we believe customers will continue to come back. So coldstone, in terms of inflation, was okay, not bad, and then it's up to us the deliver the experience, and I believe we are delivering a great experience for coldsome. There's a lot going on for that brand and it's so proud of everything we're doing.
Speaker 7: There's a lot of. There's a lot of PR that was done. A lot of good appearances we had with this brand, and I think it's it's a brand that's firing and also lers and that will cope a little bit better inflation. You ask me also about pap, a urphes. That' that's a brand's a little bit moresensitive. When it comes to pricing obviously, the pizz sector is suffering from a decline in traffic in general. We're not the only ones that are feeling depension And if you look at our competitors, a lot of them are going extremely deep into value category, where the shahave their prices by material amounts.
Speaker 7: And we're not necessarily prepared to play. And in that game where the prices become sold over, the franchisees don't make money with every unit they sell, So a little bit more sensitive. When it comes to pop on murfees, we've also had some.
Speaker 7: Some issues in terms of supply chain that caused us to have some doal problems in Q1 and in Q4 last year, Q1 this year. So inflation is not the only factor here- that the entire supply chain disruption is causing some problems for the brand. It's up to us to find solutions for all these things. So the doal problem is behind us now.
Speaker 7: And inflation is still very real for the brand and we need to.
Speaker 7: Find a way to provide value to our customers without discounting our prices to deep sell by. The team is working, doing a great job at coming up with solutions, coming up with new products that we can sell, that we can add to our lineup. Sometimes it's just a add on like like. Dips are being launched now, or or do, and we believe that dips are going to be a really hot product where customers will simply add one or two items that are basket. So there's a few ways that we can add to our sales and add to our franchisee profitability.
Speaker 7: Cope with islation and the void playing with the extreme value equationthanks. It's a very good color and very helpful things Eric, and one final one for me. Obviously you know if you take up your balance sheet's really healthy and you look lock and moed for potential lemonand you didn't mention that the the market is is opening up on that front. I'm just curious right now, what's the major impediment to pulling the trigger on on on any transactions at this moment?
Speaker 10: Yes well, these processes take time. So we need to. We can't rush into these things. We need, we need to do it properly. So I mean it's nothing unusual if the deal flow came back, started seeing the deal flow come back. Maybe six to nine months ago the deal flow started to go back to a more normal place. Valuation was still high and then you start some. You start some processes and you start to work on some businesses and unfortunately we- sometimes you're not the buyer- sometimes dippu out of the market if we can't find their priceand then you start over with different companies. So these processes take time. There's never guartee we'regoingto beable tocross fin line with.
Speaker 13: Major difference between the two markets, or why? I think Yeah, I think the major differences is that before we always had a pipeline of transactions that we were working on at any given point in time. So we were, we always had, I don't know- four or 5, six transactions we working on and some of them pan out, some of them de't, and we replaced them and we always have the same number of transactions, were working on that. What happens during COVID-19 is that our pipeline dried out completely So we had to restart the pipeline, restart processes and start over. So we need to rebuild that pipeline and again, these transactions they time to happen, So it's not something you can do in the month or two it,'s, you know, sometimes it's six months, nine months of a year.
Speaker 13: Thanks so much for that Eric, and again con back on the good quarter.
Speaker 13: Can again talk back on the good quarter of things. Thank you.
Speaker 2: Thank you. Next question will be from a Nick corporan at akumen. Please go aheadgood morning and take you take my questions.
Speaker 14: Just the first question. You mentioned that there's been a recovery in cali.fornia that's being a bit slower, shortering what you're seeing on the West Coast and maybe how close the West Coast is to operating kind prepademic levels.
Speaker 10: Yes I think. I think we we're inching towards normal circumstances. What we're seeing is still, and probably a little bit more on the West Coast. Other place, people are less going back to the office and I think tourism- especially when it comes to California, tourism- is an extremely important factor in terms of generating traffic for restaurants and tourism. I think it starting to come back. I don't have the exact metrics or measures, but I think we're getting back to a level that's going to be closer to normal. So hopefully this year there no.
Speaker 7: Major fires are the things that Ed our ability to go back to normal and in California recovers. But it's been a little bit longer for this territory specifically and we're talking to some of our peers and, although it doesn't help us, they're all feeling the same pishch, and specifically with California. So we know, we know we're going in the right direction, we know overcoming back gradually.
Speaker 10: We have to be a little bit more patient for that territory. Unfortunately it's it's a strain on our franchisees because financially you- it's now almost two and a half years of of difficult economic environment for them. So hopefully we're going to get back to normal very soon and and California will be an important territory for us for future growth againthe color and then maybe switching gears. I know real estate is being not a bit of a headway and just finding the right locations.
Speaker 14: Is the market is still tight and it. Are there any signs that there might be a tual relaxing and you're' able to find location that you print on and being able to find even six or 12 months ago?
Speaker 3: Yes well yes, real estate is. It's a competitive market theres there, theres new types of outlets that are coming up that are not necessarily restaurants, that are taking spaces that traditionally would have gone to restaurants, and so the market remains tight. It's not?
Speaker 7: It's not crazy. I think we can manage the real estate. Obviously as I mentioned before, some of our landlords.
Speaker 3: They have sitees that they want to build but its states that if's taking two years to build a new site it's taking three years. So possession was supposed to happen last year it hasn't happenedand. Yet possession is delayed. So So construction there's ripple effect on if you have a delay at the onset on one thing that it has a riortple effect that becomes exponential at some point. Permitting is taking longer. No inspections of buildings are taking longer. So everything takes a few weeks more so we're getting to a point where.
Speaker 7: nowe can build stores now, but we need- we need everybody to catch up and then the real estate, I think, will become a little bit more available as all these projects get built. But for now it's a tight market, but it's not something we haven't seen before and we just need to cope with the market.
Speaker 14: S greatade in the last question. For me it think whe the retail products can maybe get some color on what you're seeing in your portfolio, and how is drctg forming and where you might be able to expand it going forward.
Speaker 10: Yes that's we're extremely proud of where we are with retail. it'sit's a good success story. We built it from almost nothing in 2018 to what it is now and it's it's a tough market and IC team every day they're scrambling, are struggling with with price increases and difficulties with shipments and availability of product and everything. But all in all, we have a really good product line. We have a few Champion products that are driving a lot of the EBITDA we're generating with the department. We have some really good innovation also.
Speaker 7: And now we can, I think, expend geographically. We have some products that are applicable in other geographies and it's a matter for us to find suppliers that are able to deliver the volume. More than anything. Now we RE limited by the volume. We can produce more than buy.
Speaker 7: Our ability to get listings, So we need to. We need to help our suppliers help us, but all in all, it it's a good product line. We can expand that product line. We have great brands, great ideas.
Speaker 7: And it's certainly a good growth segment for us for the future.
Speaker 14: S keler. Thank caate my questionsthank you at this time. We have no further questions. Ladies and gentlemen, this does conclude today's conference. Thank you for attending. We do ask that you please disconnect your lines. Have yourselves a good weekend.