Q3 2023 Loblaw Companies Limited Earnings Call
Okay.
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Good morning, ladies and gentlemen, thank you for standing by walk up to the Loblaw companies limited third quarter 2000, and actually results conference call at this time all lines.
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During the presentation, we will conduct a question and answer session. If at any time during this call you acquire images immediate assistance.
Please proceed as far as your old party operator.
This call is being recorded on Wednesday November 15, 2023, I would now like to turn the call. Thank Albert you probably looked at Arnold. Please go ahead.
Okay.
Great. Thanks, very much and good morning, everybody I apologize for the late start, but we have quite a few people texting and be sitting there waiting to get on the line, but it looks like we're all here now so welcome to Loblaw companies Limited third quarter 2023 results conference call.
I'm joined in the room. This morning by Galen Weston, our chairman and Richard <unk>, Our Chief Financial Officer before we begin the call I want to remind you that today's discussion will include forward looking statements, which may include but are not limited to statements made with respect to love life anticipated future results.
These statements are based on assumptions and reflect management's current expectations as such are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations.
These risks and uncertainties are discussed in the company's materials filed with the Canadian Securities regulator.
And any forward looking statements speak only as of the date, they're 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 other than what's required by law.
Certain non-GAAP financial measures may be discussed or 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 Richard.
Thank you Roy and good morning, everyone.
I am very pleased to report that we continued to deliver consistent operational and financial results with both strong top line performance and earnings call. Our business performance continues to be very healthy and our financials in line with our financial framework.
This is notable given that we are lapping an extremely strong second half last year, our EBITDA grow by double digits in both Q3 and Q4.
That period was also characterized by high double digit margin and earnings growth and record sales level in both our food and drug retail businesses.
We accomplish this by remaining focused on delivering value to consumers carefully managing our expenses and investing for the future.
On a consolidated basis revenue grew by 5% and EBITDA increased by four 3% adjusted.
Adjusted earnings per share grew by 12, 4% to $2 26 a share.
In drug retail absolute sales increased four 7% and same store sales grew four 6% front store same store sales grew by one 8% on continued strength in cosmetics and health and beauty.
<unk> sales remained strong but were off from peak levels.
Overall growth in our front store moderated as we lapped the strength experienced last year.
Pharmacy same store sales grew seven 4% driven by growth in acute and chronic prescriptions, including strong growth in specialty drugs at the same time, we are pleased with the growth of services related to expanded scope of practice. These services doubled in the quarter compared to last year, helping to offset lower COVID-19 vaccines and testing.
And food retail absolute sales increased five 1% and same store sales grew four 5% customers are finding value in our stores demonstrated by higher traffic and unit growth and positive market share momentum, we delivered positive tonnage growth in the quarter.
Our internal food inflation number was lower than food CPI in fact, our actual inflation on food items as measured as our at our checkout was significantly lower than food CPI clearly demonstrating the role we are playing to help stabilize food prices for our customers.
Since January food inflation in Canada has been falling rapidly and consistently.
While Canada continues to see lower food inflation than most of the world. We know that rising food prices have a real impact on Canadians and their families.
Loblaw continues to invest to keep prices lowered our stores the decrease in our food margin as evidenced that our costs continue to grow faster than our prices.
As we continue to do our part to fight inflation, we remain concerned about the level of commitment to discuss from some of our suppliers without the support of suppliers it will be difficult for the industry to sustain the current momentum of falling food inflation.
With lower supply supplier cost, we can lower prices on the shelf for our customers. Unfortunately, several large global suppliers are still coming with higher than expected cost increases for next year.
Returning to our performance our ability to deliver value was reflected across our food business.
Our hard discount banners continued to outperform delivering higher traffic increased tonnage and market share growth.
The strength of our discount offering across the country as evident as consumers continue to migrate their shop to hard discount stores.
We can go back our discount position continues to grow we converted seven probably go stores to Maxine the quarter, bringing our total to 18, so far this year and will add 66 more in Q4.
We continue to be very pleased with the higher than expected sales growth being generated from these converted stores.
We believe the outperformance of our discount stores will continue as Canadians continue to seek value to help manage through the challenges of this extended period of high inflation and economic uncertainty.
Our market banners remain healthy despite the ongoing shift to discount stores within the conventional market our market banners gained share against their peers, having the right customer offer in all of our stores remains a key focus.
Great example, is our home meal replacement offering where sales grew in the double digits as customers continue to look for more affordable alternatives to heating up.
Right hand side was a drag on our same store sales performance to the tune of 80 basis points. This quarter. These categories remain accretive to our gross margin and we continue to carefully manage inventory levels online sales in the quarter increased 13, 6%, reflecting the strength of our digital businesses.
Was led by <unk> delivery and online pharmacy.
We continue to enhance our customer experience and differentiate ourselves by offering more choice and flexibility.
Retail gross margin was 36% down 20 basis points compared to last year gross margin was down in both food and drug, but the driving factor was higher shrink and drugs.
We are taking steps to address shrink across our businesses and it's working as expected we saw sequential improvements in shrink from the second quarter that said, we continue to invest in stores and in labor and work with law enforcement to help reduce the impact of organized crime on our colleagues and customers.
This surge in organized retail crime remains a significant problem for the retail industry. These are sophisticated organizations that are increasingly using violent tactics and complex networks to steel and still sell stolen goods for profit.
Turning to SG&A, our spend rate as a percentage of sales was flat compared to last year driven by investment decisions, we are making for the future.
Positive operating leverage in our retail business offset our in quarter investments in store conversions and efficiency initiatives that will benefit us next year. These costs totaled approximately $50 million in the quarter.
Adjusted retail EBITDA increased by $61 million, yielding a margin of 10, 3% down 20 basis points compared to last year.
The quarter saw solid performance of the bank PC financial revenue increased eight 3% driven by growth in the credit card portfolio earnings before tax increased 15, 8% on higher interest income, which was partially offset by higher credit losses and loss provisions.
Our effective tax rate was positively impacted by the expiry of prior tax reassessment periods that allowed us to reverse certain tax provisions.
On a consolidated basis adjusted EBITDA margin was 10, 5% in the quarter down 10 basis points compared to last year.
Our retail free cash flow was $663 million, and we repurchased $341 million worth of shares in the quarter.
The bottom line is that last year in Q3, we delivered 8% of top line growth, 10% of EBITDA growth and 26% of EBIT of EPS growth.
This year, we invested $50 million to drive future performance gained share and still grew EPS, 12% all of our businesses are healthy and we remain confident in our ability to deliver our full year outlook I will now turn the call over to Galen.
You Richard and good morning, overall, I'm very pleased with our results Loblaw delivered another quarter of consistent performance notable for its topline strength.
Our drug business grew nicely on top of our very strong performance last year beauty continued to outperform and cough and cold sales remained extremely strong, albeit a bit lower than last year.
In pharmacy, we made more progress on our journey to provide Canadians with more convenient access to health care services. We're now operating over 70 pharmacist led clinics offering expanded scope of care. This includes four locations, where we've designed a truly differentiated patient experience that combines the convenience of a pharmacy with the.
<unk> of a medical clinic.
And the results are extremely promising in fact year to date, our pharmacists have written almost 2 million prescriptions.
And food momentum around the shift to discount continued and our maxi and no frills stores led the way generating double digit growth again this quarter.
In November we celebrated opening our 150 as Maxi store in Quebec, as we expand that banner each new one outperforms our expectations.
For new locations and conversions, we have opened 23 discount stores this year, bringing the option of shopping discount to two additional communities across the country and substantially lower everyday prices to over 2 million Canadians.
Our market stores continue to perform well against their peers delivering full surface value and great products that customers expect from us, especially at this time of year when we gather for holiday celebrations two.
Two weeks ago, we launched our 40th holiday insider for port with products already flying off the shelves.
Sales in our private brands continue to outpace national brands with no name, providing an average savings of 25% and our innovation pipeline is as strong as it's ever been with our newest PC Black label Pizza quickly turning into a category leading blockbuster at.
At 799, it perfectly delivers on the President's choice mantra of truly differentiated quality at an incredible price.
Canadians continue to take advantage of PC optimum points to get even better value.
We're issuing more points and redemption rates are climbing.
Our loyalty program, PC, Mastercard, and PC money account or recognized yet again, receiving several candidates choice awards, including top shopping loyalty program and top credit card rewards program.
Overall affordability remains a pressing issue on Canadians mines, and lower food prices remain a top priority for us throughout the business from our stores to our supply chain to our suppliers and it's important to reiterate that grocers are not the reason for high food prices and so we are unable to resolve.
<unk> inflationary pressures on our own.
Over the last two months, we have participated actively in discussions with government shared ideas and have provided them with the details of the specific actions we have taken.
As part of these efforts we are focused on delivering additional value across a basket of 35 items that matter most to customers on a weekly basis, we're doing so in four specific areas.
More savings in our weekly fliers.
Over and above value campaigns increased depth and breadth of PC optimum offers and the sustained delivery of our unrivaled add match program.
We measure the success of these efforts in our stores our customers tell us how we're doing every day.
In the quarter, our grocery stores attracted higher customer traffic those customers bought more items and our market share grew.
In every corner of the business. Our colleagues are working hard to reduce cost and do things more efficiently. These efforts have allowed us to reinvest savings to offset price inflation in our stores.
Alongside this retail excellence discipline, we continue to invest for the future with capital investments in new stores conversions and supply chain modernization.
As an example of this next year, we're planning 30 more store conversions to discount and will opened 40, net new stores and underserved communities.
Our efforts to reduce our environmental footprint is also reached an important milestone in the quarter.
In 2020, we set an ambitious target to convert all of our control brands and in store plastic packaging to recyclable or reusable material by 2025, I'm delighted to announce that we are now more than halfway towards achieving that goal.
Next time, you make your morning smoothie be shorter notice that your President's choice are no named frozen fruit standup pouch is now recyclable.
I'm extremely proud of the work our teams continue to do to execute against our strategy to ground ourselves against our purpose of helping Canadians live life well.
In 2021, I've returned to a day to day management role at Loblaw with Richard and Robert.
We refined our strategy establish a shorter list of priorities and put a particular focus on urgency and accountability.
Over the last two years, we've made tremendous progress with strong momentum in all our strategic pillars retail excellence driving growth investing in the future and embedding ESG into everything that we do.
The results speak for themselves Loblaw is in excellent shape.
But there is still a great deal to achieve and today I'd take a step back to focus on my role as chairman and I am thrilled to have per bank, joining the organization as president and CEO.
<unk> spent the past few months getting to know our stores our store support functions and our colleagues across the country. This month he steps fully into the role, bringing a wealth of experience and energy I know he's excited to get to work and that he is singularly focused on moving our strategy forward.
After 17 years of quarterly analyst calls today is my last one so I'd like to express my thanks to all of you for your thoughtful questions your support and your occasional enthusiastic by recommendations.
Look forward to seeing you with Richard at George Weston lunch in the spring.
I will now open the call for questions.
Thank you and ladies and gentlemen.
Yes.
Go ahead.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star although they did number one on your telephone keypad you will hear details from our January Greg and your questions No people going to order a de risking should you Richie declining I'm gonna calling process. Please.
Sorry.
And then number two and if you're using a speaker phone. Please keep your handset before pressing any tier one moment. Please for your first question.
Your first question comes from the line of Irina tell from RBC capital markets. Please proceed with your question.
Okay.
Before I ask my question gallon as someone who's been around for a hotel.
<unk> calls for 17 years. Thank you for thank you for your availability and you're always insightful comments.
Thanks, Eric.
Moving on to the question.
You did a very good job of outlining some of the behavior. We're seeing in the marketplace can you talk about.
Yes, sure what specifically, what youre seeing in market versus discount promotional intensity in the marketplace commercial penetration in the basket.
Various and sundry sort of trade down behaviors that you're seeing.
Yes. It is.
Going to be very boring Irene because it's essentially the same as the last quarter. So that shift to discount continues there is no sign of it slowing down in any meaningful way or our perspective is that this will continue for the foreseeable future promotional intensity continues to.
Build I think we mentioned last quarter that it's it's now back to those sort of pre COVID-19 levels.
But it's rational.
There's a lot of people, making an effort to put real value and into the market of course, we are too.
And but there is there are some bright spots in the conventional stores as well as Richard mentioned it is remarkable as people trade down from the inflationary pressures from that come from eating out theyre looking for.
At our quality higher value added food products in our supermarkets theyre seeing those in our market stores and that mealtime marketplace and other.
Other forms of home meal replacement continue to be very very strong. So those are the themes.
And they are about the same as what they were in in Q2.
Thanks for that and just sort of a similar type of question in pharmacy historically.
Cosmetics has been fairly resilient across the cycle, but we're starting to hear some commentary that suggests not so much can you talk about what's going on in shoppers and what tools you have to continue to drive strength now. Thank you.
Yes, it continues to be to be strong and in beauty across the board I mean, there might be a little bit of a shift towards mass.
Relative to prestige, but it would be around the edges as opposed to.
A major shift.
And it continues to be resilient and we would expect that to remain the case for the foreseeable future and may be slowing down at the super premium and a little bit, but but certainly not at shoppers today.
That's great. Thank you.
Okay.
And your next question comes from the line of Michael <unk> from TD, calling your line is open.
Hi, Thank you.
And I Echo those comments galin good luck.
The your.
Comment on that.
Discount.
Still growing or so growing double digits is that a comment.
On same store sales or just total dollar sales.
Yes, we.
We don't split.
The same store performance or a discounted market, but I can tell you might call that.
Theres a significant difference between same store sales performance in discount in the market.
And that that Delta that Delta is continuing and it's.
It's comp that he's referring to not just <unk>.
Absolutely.
Okay.
Alright, and then.
You mentioned that youre going to convert another 30 stores in 2024.
How does that split between Quebec with the Mcafee conversions that you are talking about in the past two and the rest of Canada.
So majority of it.
And the biggest biggest proportionate in Quebec with a few stores I would take effect, but most of them aren't giving.
Okay.
So in the end, where do you see probably go ending up.
When they get back orders I guess, there how many stores would you think is the right number.
It'll be it'll be substantially smaller no surprise.
But still an important network in the markets, where it where its trading and we're not going to give you the exact number right now.
Yes.
I think you said E Commerce was up 14% last quarter was mostly driven by <unk>.
Online prescription refills.
Was there any growth in e-commerce for food this year.
Yes.
As we said in our remarks.
It's the delivery side that is growing the fastest so so yes.
Okay. So how would that how would have been split between food and prescription was roughly equal both growing double digits.
Both were growing I would say delivery growing faster than click and collect that's what I would say.
Okay and in terms of growth, there's more growth in pharmacy than there is in in food.
But growth in both.
Okay, Great and then just my final question was on the.
Your opex growth, even if we back out that $50 million one time.
It does seem like it accelerated a little bit and then I'm wondering if we're seeing added pressures on labor now.
We haven't seen in the past.
In the last quarters.
The reason we are.
Took the charges because we.
We made the decision months ago that we needed to position the business to be.
Two to continue to deliver on our framework for 2000, and so we took action to.
Or do you have to have initiatives, where we can reduce cost. So so yes, we see costs growing across the board, but we're taking action early so that we can continue to deliver on our plan.
Alright, Thank you very much.
Yeah.
Thank you and your next question comes from the line of chat Tami Chen from BMO capital markets. Please go ahead.
Hi, good morning, Thanks for the question.
Last quarter, you gave some figures around that.
The supplier asks I think you said, it's down from the peak periods, but it's still elevated versus historical I am wondering if you could give an update on that you did say qualitatively that there's still certain large suppliers coming in.
I'm just wondering if you have an update versus what you said last quarter is the magnitude of numbers that at least improving sequentially or its still holding at these current levels.
It is slowing but.
Sure.
She could be slowing way more so.
Especially from the large suppliers they are still coming with that.
Large nominal cost increases that.
We are going to hit us next year or so so it's too early to predict what will be the total figure for for next year, but 'twenty three is essentially done now.
And that was a marked decrease two two last year by 20 for anyone who is not.
It's not starting on the best foot left from that perspective.
Okay. So are you seeing any of the national brands thinking more about wanting to regain some of the volumes that they've lost are by and large that it's now that conversation yet.
I think everybody is looking to gain volume, but it's not stopping them to come with significant cost increases.
Okay. Thank you.
And your next question comes from the line of George <unk> from Scotiabank. Your line is now open.
Yes, hi, good morning.
Also want to echo the comments there wish you all the best first question I want to talk about was the shoppers margins.
We're down I think can you talk a little bit about shrinks.
The outlook for when those we expect those margins to come back to flat.
Maybe on promo in general I think what you've alluded to earlier dealing about mass versus prestige. If that continues could you talk a little bit about maybe the outlook in general for gross margins for that segment or that business over the next couple of quarters.
Yeah. So.
We're very happy to see that.
We saw like <unk>.
Significant shrink improvement between Q2 and Q3, then we have hints of it when we released Q2, but now we have evidence that it's getting better. So a lot a lot of our actions are going to be fully in place by the end of the year. So as we recount the inventory in these stores and we expect this.
This trend will continue.
And so therefore, we.
We feel positive about the about the direction, which means that ultimately the shoppers margins should that should improve to reflect that improved our shrink performance.
Okay and can you talk a little bit about the front store performance of comp throughout the quarter was it was it pretty steady through the quarter month to month or any commentary you can provide there yeah, a very steady as.
As we've said to the market when we were planning the second half of this year. We were we were forecasting our comp to be negative because of the strength last year was so strong but like as Galen mentioned like we continue to see a lot of resilience and front of store in general and and we're lapping a strong growth what's still.
Positive comp, so, but it's been pretty even since our since the beginning of that since Q3 and even as it as Q4 has started and we're seeing the same trend.
Okay. That's helpful and just one last one Richard.
I know you haven't really issued any formal EPS guidance for next year understanding that its a tougher operating environment out there.
Is there anything really getting the way of us delivering kind of that typical.
Typical 8% to 10% EPS target next year.
No.
All right I'll leave it there thanks.
No.
I'll just add to what George I guess the reason we took action earlier. This year. The reason we are booking a charge. This quarter is because we were anticipating that 2024 would be more difficult and so we took action or lead to give us said give us the room to be able to deliver on our framework.
That's how we planned it.
Okay. Thank you.
Okay.
Thank you and your next question comes from the line of Mark Petrie from CIBC. Your line is open.
Thanks, and good morning, I'll start by also sharing my well wishes Galen.
On the topic of suppliers, you mentioned, a view on sort of them trying to rebuild volume momentum and Im curious if thats something thats already playing out or something that you expect to accelerate and if you view that as something that presents an opportunity for your business given the size of your size and scale or if it's potentially.
Our headwinds.
Maybe a pullback in private label is is there a risk to margins.
No I think I think our our private label sales continue to be quite strong.
And we expect that vendors will want to drive more volume soon and such conversations are happening, but as I mentioned like I think it's not stopping them from coming with.
With significant cost increase so I think there.
Trying to do both but.
But it's going to be difficult unless.
They slow down.
Is an increased promotional intensity from suppliers.
Something that would affect your margin profile or is it simply a matter of passing all of that through.
No nothing nothing that particularly on that now.
Okay, and just to clarify.
<unk> 30 conversions expected in 2024 are mostly in Quebec, and what about the 40, new stores were those also weighted to Quebec.
40 stores theres going to be about 60%.
<unk> drug Mart, and 40% food stores mature most of these food stores will be discount stores, and but theyre all over Canada.
Yeah, Okay, perfect and just a last one it sounds like the industry is getting closer to a proposed code of conduct and I'm. Just wondering if you can talk about your views on the impact of that and when it might be implemented.
Yeah. So so we've been active in conversations about this code of conduct for a for a couple of years now and continue to be active in conversations about the code I think we've been quite public.
Expressing some specific reservations about the way the Dakotas currently.
Constructed primarily because we think it leads to potential increases and inflationary pressure.
And so we continue in those conversations and we'll be working hard.
Two to make sure that the code doesn't.
Have any of those on anticipated or unexpected consequences and then we're continuing to work in <unk>.
Our own fashion.
To make sure that we're doing what we can to support vendors.
The right way.
As evidenced by our announcement yesterday with the smaller support small supplier program.
Which we think is a illustration of a really tangible.
Action to improve.
The stability the transparency of doing business with us and we expect.
More innovation.
On our shelves from those small suppliers as a result.
I appreciate all the comments and all the best.
Thank you and your next question comes from the line I know Michelle.
Vishal <unk> from National Bank Financial your line is open.
Hi, Thanks for taking my questions.
I just wanted to get your thoughts on some of these higher growth initiatives. That's lovaas working on like media and freight as a service maybe you can give us your perspective on those.
Does it does and how we should think about that in 'twenty four.
Yes sure.
Good morning. So yes. So these are these strategic initiatives are part of our plan for 'twenty four and they will help us deliver on our framework. That's how we're thinking about it and they are all now contributing so so so we're excited by the role they're playing.
Okay, and media was nascent and be profitable or are you seeing that ticks up that profit accelerate.
Media is slowly accelerating yes, and freight as a service.
He is also accelerating a lot in 'twenty four.
Okay, and just moving on here to growth.
The growth in E Commerce continues to show growth.
Should we expect any meaningful investment in terms of infrastructure to continued its about that business and maybe you can give us your thoughts on how that business evolves.
In terms of consumer demand since like the height of Covid.
Yeah. So so.
To the first question no no meaningful incremental investments in infrastructure to support E Commerce today.
And as I think you know.
In answer to your second question.
Peaked in terms of volume in online grocery during COVID-19.
Now settled down at a level, that's substantially higher than where it was pre COVID-19, but substantially lower than where it was at peak and now it seems to be growing.
At a slightly faster rate.
Then the overall core business, but not dramatically so and ultimately I think time will still tell.
Ultimately what the right penetration of E. Commerce is going to be so we have the infrastructure, we continue to drive customers into the channel.
Meaningful way.
And.
We'll just have to see ultimately how it unfolds.
Might add.
Simply that.
The cost pressure on consumers.
It's probably a bit of a headwind.
For e-commerce, particularly on the delivery side and.
And so there may be.
A headwind for a little while before it returns to maybe a more natural level of growth.
Thank you and congrats again on your successful tenure at the moment.
Thanks.
Yeah.
And your next question comes from the line of Chris <unk> from the Jordan. Your line is open.
Hi, Good morning, again, and that would be my best wishes to you as well.
I wanted to start with asking when you look at your UPC credit card data and third party spending are you seeing any notable decline in people eating out and she called out already about being high costing going tomorrow market formats.
Yes, slightly just slightly over the last month and a half ago, we started to notice it not material, but it's definitely slowing.
Okay. Good that's helpful and sorry, if you answered this ROE again wanted to maybe touch on a bit on the pharmacy and the expanded scope of practice, obviously, there's a lot of exciting things that are happening you guys are investing a lot in capitalizing that opportunity I'm, just wondering from a labor availability perspective.
Is that improving and also from an automation perspective, where are you in that journey. So that you can fully capitalize on other accruals that's coming thank you.
Yes.
You're absolutely right.
<unk> to be a very exciting and fast growing.
Area.
Of opportunity for us.
And in terms of the pharmacists availability that is a challenge.
We are actively managing it.
On a day in and day out week in week out basis actually just did a review.
Of this the last couple of days and the team has done an excellent job over the course of the year filling that gap.
So that it didn't become a constraint on growth.
We have a similarly robust plan for 2024 and and the team remains optimistic that it won't be a meaningful constraint, but it is hard work.
There's no doubt about it.
And then in terms of the deployment of the of the central fill.
Richard we're about two thirds of the way finished across the country now would you say, yes, we're opening one in the next few weeks so.
But yes, it's progressing really well.
Great.
And maybe we should just my last question for you as you know from your answers you seem quite confident that you can achieve that 8% to 10% EPS growth next year I'm. Just wondering what are the risks that would prevent us from achieving that target.
There's all sorts of risks relate to inflation shrink.
Are probably are probably the bigger ones, but we feel we feel we have a good.
Control on shrink we think we have visibility on our costs. That's why we took the initiatives we talked about so if we continue to deliver on our on our strategies.
We should we should deliver our framework, but we'll give you more.
More specific to that when we released Q4 in February that's when we will be presenting.
Presenting our outlook.
Ill, probably be able to give you a little bit more color there.
Okay, great. Thanks very much.
Yeah.
And we have a follow up question coming from Irene <unk> from RBC capital markets. Your line is open.
Thanks, just a question in the <unk>.
Paragon marks you talked about gaining market share and just curiosity because everyone seems to define it differently can you remind us how you define market share.
And what you forget University markets, you're referring to.
Define market share so we look at Nielsen.
And and that's the measure that we that we use it as a third party data source.
And we look at our performance relative to the rest of the combined market.
When we look at our absolute market share performance in terms of <unk> and also in terms of tonnage.
And then we look at our different divisions and their market share performance against their competitors.
And and that's what we what we use to gauge our performance and as Richard said our market share performance.
It's positive.
That's very helpful. Thank you.
Okay.
And our next question comes from the line of Mark Petrie from CIBC. Your line is open.
Yes. Thanks, I wanted to ask just about the right hand side of the store.
Their impact on same store sales in Q3 versus Q2, but still a pretty meaningful drag. So just wanted to ask if there was any change in your approach or execution if that drag is just simply.
The lesser drag is simply a matter of lapping easier numbers and then also just given how consumer behaviors are shifting any any views on Q4.
And what that drag might be.
Yes, so discretionary spending continues to slow and we're seeing it that's why impact was again, it's always between 80 basis points and 100 basis points, it's been like that for a while so that that trend is continuing so from our perspective, what we need to be laser focused on is our inventory levels.
As we've mentioned earlier this year, we have been slowing down our buys so we're buying less stuff. So that we were not left with excess inventory and we feel that so far we're doing we're doing a good job and <unk>.
We don't expect a worst trend in Q4, and we saw in Q3 that were already a third of the quarter are behind us and so it's more of the same that we're seeing.
Okay I appreciate that and then if I could just clarify also on shoppers with regards to shrink is it fair to say that's still a headwind an ongoing headwind for Q4 and Q1 and then by next year in Q2, you're sort of lapping the peak of that impact is that about right.
Our hope is that it continues to go down in Q4 and the ideas to hopefully that continues to go down throughout 2024. So we have we.
We have plans specific plans on shrink for both the food and drug and so we're going to be staying very focused on the delivery of these plans.
Okay, but it wasn't as big of a headwind in Q1 as it was in Q2. This year is that right.
That's right, but still in absolute numbers, it's still a big number and we need to.
When you get down.
Yes, perfect. Okay. Thanks, a lot all the best.
Yes.
And there are no further questions at this time I would like to turn it back to Roy Macdonald for closing remarks.
Alright, thanks, very much everybody for your time. This morning, if you have any follow up questions call or dropped me align.
And Mark your calendar for three years.
February 22nd when we will be releasing our Q4.
Full year results for 2023, thanks and have a great day.
Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.