Q1 2025 Loblaw Companies Ltd Earnings Call

Good morning, ladies and gentlemen, and welcome to the La Luz, Inc. First quarter 2025 results conference call at this some lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the Loblaws Inc. First Quarter 2025 Results Conference Call. At this time, all lines are in listen-only mode.

Unknown Executive: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Speaker Change: Any time during this call may be quite immediate assistance. Please press star zero for the all beating this call is being recorded on Wednesday April take each dosing 25, I would now like to turn the conference over to Mr. William Mcdonald, Vice President of Investor Relations. Thank you. Please go ahead.

Unknown Executive: This call is being recorded on Wednesday, April 30, 2021.

Roy MacDonald: I would now like to turn the conference over to Mr. Roy MacDonald, Vice President of Investor Relations. Thank you. Please go ahead. Thank you very much and good morning, everybody.

William Mcdonald: Thank you very much and good morning, everybody welcome to the Loblaw companies Limited first quarter 2025 results conference call and as usual I'm joined this morning by peer Bank, our President and Chief Executive Officer, and by Richard Dufresne, Our Chief Financial Officer.

Roy MacDonald: Welcome to the Loblaw Companies Limited first quarter 2025 results conference call. And as usual, I'm joined this morning by Per Bank, our President and Chief Executive Officer and by Richard Dufresne, our Chief Financial Officer.

Roy MacDonald: Before we begin the call, I'll remind you that today's discussion will include forward-looking statements, which may include, but are not limited to, statements with respect to Loblaw and its future results. And 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 Canadian Securities Regulatory Commission. 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.

William Mcdonald: Before we begin the call I'll remind you that today's discussion will include forward looking statements, which may include or not but are not limited to statements with respect lovelock added future result.

William Mcdonald: And 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.

William Mcdonald: These risks and uncertainties are discussed in the company's materials filed with the Canadian Securities regulators and any forward looking statements speak only as of the date they're made.

William Mcdonald: 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.

Roy MacDonald: Also, 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.

Speaker Change: Also 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'll turn the call over to Richard Thank you.

Roy MacDonald: And with that, I'll turn the call over. Thank you. Thank you, Roy.

Richard Dufresne: Thank you Roy and good morning, everyone I'm.

Richard Dufresne: And good morning, everyone. I'm pleased to report we delivered strong financial and operational performance in the first quarter, carrying on the momentum from 2024 and setting up 2025 on strong footing. Our businesses continue to perform well, reflecting our ongoing focus on providing Canadians with value, quality, service and convenience, all part of retail excellence. Our retail segment delivered strong revenue growth at 4.1% and adjusted retail EBITDA growth of 4.1%. Evidence that our offering continues to resonate very well with customers, especially in light of the strong Q1 performance of last year. On a consolidated basis, revenue growth was also 4.1%, reaching $14.1 billion and adjusted EBITDA increased by 3%.

Richard Dufresne: I'm pleased to report, we delivered strong financial and operational performance in the first quarter carrying on the momentum from 2024 and setting up 2025 on strong footing.

Richard Dufresne: Our businesses continue to perform well, reflecting our ongoing focus on providing Canadians with value quality service and convenience all part of retail excellence.

Richard Dufresne: Our retail segment delivered strong revenue growth at four 1% and adjusted retail EBITDA growth of four 1% evidenced that our offering continues to resonate very well with customers, especially in light of the strong Q1 performance of last year.

Richard Dufresne: On a consolidated basis revenue growth was also four 1%, reaching $14 $1 billion and adjusted EBITDA increased by 3%.

Richard Dufresne: Adjusted dollar and net earnings per share grew by 9.3% to $1.88, and on a gap basis, our net earnings per share increased by 12.9%. In food retail, we drove higher tonnage and basket growth while lapping our strongest quarter of last year. Absolute sales grew 4% reflecting our new store growth. While our food same store sales momentum continues as same store sales increased 2.2%.

Richard Dufresne: The diluted net earnings per share grew by nine 3% to $1 88, and on a GAAP basis, our net earnings per share increased by 12, 9%.

Richard Dufresne: In food retail, we drove a higher tonnage and basket growth, while lapping our strongest quarter of last year.

Richard Dufresne: Absolute sales grew 4%, reflecting our new store growth, while our food same store sales momentum continues our same store sales increased two 2%.

Unknown Executive: are right hand side and a negligible impact on St.

Richard Dufresne: Ah right that inside and a negligible impact on same store sales.

Richard Dufresne: Thor's sale. Canada's gross CPI was 2.6% in Q1, in line with our internal CPI like food inflation. Looking at our average article price data, which reflects the full basket mix bought by our customers across our network, our internal inflation rate was much lower than CPI. Looking ahead, we're still we're still seeing higher than normal cost increases coming in from our larger global vendors, including many in the double digit. continue to push back to ensure that any increases we accept are fair and reasonable. In Q1, this was compounded by the incremental pressure we experienced from higher commodity prices and a lower Canadian dollar.

Richard Dufresne: Canada is grocery CPI was two 6% in Q1 in line with our internal CPI like food inflation measure.

Richard Dufresne: Looking at our average article price data, which reflects the full basket mixed bought by our customers across our network. Our internal inflation rate was much lower than CPI. Looking ahead, we're still we're still seeing higher than normal cost increases coming in from our larger global vendors, including many in the double digits.

Richard Dufresne: Continue to push back to ensure that any increases we accept are fair and reasonable.

Richard Dufresne: In Q1, this was compounded by the incremental pressure, we experience from higher commodity prices and a lower Canadian dollar.

Richard Dufresne: As an example, Statistics Canada data shows that coffee prices rose 11% in March. That said, the recently introduced tariffs and counter-tariffs did not impact food inflation in Q1. Tariff related impacts are only showing up in shell prices, are now only showing up in shell prices, and we continue to work with vendors to attempt to mitigate those. Our hot discount banner, Safe Source Health Performance continues to outperform our conventional stores, demonstrating the ongoing consumer focus on value. While the gap between hard discount and conventional has stabilized, the growth in hard discount continues to be significantly higher than conventional.

Richard Dufresne: An example.

Richard Dufresne: <unk>, Canada data shows that coffee prices rose 11% in March.

Richard Dufresne: That said the recently introduced terrorism and counter terrorism did not impact food inflation in Q1.

Richard Dufresne: Tariff related impacts are only showing up and shelf prices are not only showing up on shelf presence and we continue to work with vendors to adapt to attempt to mitigate Louisville.

Our hard discount banner same store sales performance continues to outperform our conventional stores.

Richard Dufresne: Demonstrating the ongoing consumer focus on value.

Richard Dufresne: While the gap between hard discount than conventional stabilized the growth in hard discount continues to be significantly higher than conventional.

Richard Dufresne: As we mentioned last quarter, in 2024, we added 58 hard discount stores to our network through conversions and new builds. These stores continue to resonate very well with Canadians, driving double-digit growth in absolute sales and tonnage growth in the quarter. We are also pleased with the performance in our conventional stores and see same-store sales strengthening. T&T delivered strong sales growth in Q1. In drug retail, absolute sales increased 4.4% and same store sales grew 3.8%. Pharmacy and Healthcare Services grew same store sales by 6.4% this quarter, driven by broad strength in prescription and new healthcare services.

Richard Dufresne: As we mentioned last quarter and 2024, we added 58, or just kind of thoughts or net worth through conversions and new build these stores continue to resonate very well with Canadians driving double digit growth in absolute sales and tonnage growth in the quarter.

Richard Dufresne: We are also pleased with the performance in our conventional stores and see same store sales strength strengthening TMT.

Richard Dufresne: PMT delivered strong sales growth in Q1.

Richard Dufresne: In drug retail absolute sales increased four 4% and same store sales grew three 8% pharmacy and health care services grew same store sales by six 4% this quarter driven by broad strength in prescription new health care services.

Richard Dufresne: Our specialty acute and chronic prescription growth led our pharmacy numbers. Patients continue to respond very positively to the convenience and expanded level of primary care we offer through our more than 1,800 pharmacies across the country, including our 163 in-store Our front store same-sore sale grew 0.9%, reflecting the strength of our beauty category and the extended cold and flu season. This was partially offset by the exit of certain items in the electronics category. We remain pleased by the underlying strength, profitability, and sales momentum of Shoppers Drug Mart front store business. Online sales in the quarter increased by 17.4% across our retail business.

Richard Dufresne: Our specialty acute and chronic prescription growth, let our pharmacy numbers.

Richard Dufresne: <unk> continued to respond very positively to the convenience and expanded level of primary care, we offer who own more than 1800 pharmacies across the country, including our 163 and sort of cleanup.

Richard Dufresne: Yes.

Richard Dufresne: Our front store same store sales grew <unk>, 9%, reflecting the strength of our beauty category and the extended cold and flu season.

Richard Dufresne: This was partially offset by the exit of certain items in the electronics category. We remain pleased by the underlying strength profitability and sales momentum of shoppers drug Mart front store business.

Richard Dufresne: Online sales in the quarter increased by 17, 4% across our retail businesses.

Richard Dufresne: Delivery continues to lead growth in the online grocery channel and we remain pleased with our online sales penetration in both food and pharmacy. Our retail gross margin was stable at 31.5%. slide decline was driven by sales Nick and had many small puts and Our SG&E rate as a percentage of sales improved by 10 basis points primarily due to the operating leverage from the ISLs, partially offset by incremental costs related to the opening of new stores and the opening of our new automated distribution facility in East Willembreg. Speaking of our new DC, we began migrating operations in Q1.

Richard Dufresne: Liberty continues to lead growth in the online grocery channel and we remain pleased with our online sales penetration in both food and pharmacy.

Richard Dufresne: Our retail gross margin was stable at 31, 5%.

Richard Dufresne: The slight decline was driven by sales mix and have many small puts and takes.

Richard Dufresne: Our SG&A rate as a percentage of sales improved by 10 basis points, primarily due to the operating leverage from higher sales, partially offset by incremental costs related to the opening of new stores and the opening of our new automated distribution facility and he's gonna Murray.

Richard Dufresne: Speaking of our new DC, we began migrating operations in Q1, although still in early days of our transition we are off to a strong start and are ahead of plan and remain very confident.

Richard Dufresne: Although still in early days of our transition, we are off to a strong start and are ahead of plan and remain very confident. We expect to run at about 40% capacity by year-end. Retail Adjusted EBITDA increased by $59 million, yielding a margin of 10.9%. PC Financial's revenue increased 3.3% driven by higher sales in our mobile shop and higher interchanging. The bank's adjusted earnings before tax decreased by $14 million or 31.8%, lapping the benefits associated with the renewal of a long-term agreement with MasterCard and partially offset by higher revenue and positive year-over-year impact to the ECL provision.

Richard Dufresne: We expect to run at about 40% capacity by year end.

Richard Dufresne: Retail adjusted EBITDA increased by $59 million, yielding a margin of 10, 9%.

Richard Dufresne: Do you see financials revenue increased three 3% driven by higher sales in our mobile shop and higher interchange income.

Richard Dufresne: Adjusted earnings before tax decreased by $14 million or 31, 8%.

Richard Dufresne: The benefits associated with the renewal of a long term agreement with Mastercard, and partially offset by higher revenue and positive year over year and back to the ECL provisions.

Richard Dufresne: We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our provisioning with a strong and very well capitalized balance. On a consolidated basis, adjusted EBITDA increased by 3% to $1.6 billion. Free cash flow used in the retail segment was $264 million, reflecting the typical seasonal outflow in Q1.

Richard Dufresne: We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our provisioning with a strong and very well capitalized balance sheet.

Richard Dufresne: On a consolidated basis, adjusted EBITDA increased by 3% to $1 6 billion.

Richard Dufresne: So using the retail segment was $264 million, reflecting the typical seasonal outflow in Q1 in.

Richard Dufresne: In the quarter, we repurchased $4,857 million worth of common share and announced a 10% dividend increase, our 14th consecutive annual increase. Our balance sheet remains strong and we continue to improve our key return metrics. Our return on equity sits at 24.4% and our return on capital at 11.4%. Looking ahead to Q2, we continue to build on the strength and momentum from our first quarter. Same-store sales in both food and drug retail are off to a strong start, as well as absolute sales growth. New stores are driving our top line.

Richard Dufresne: In the quarter, we repurchased 478 milk milk.

Richard Dufresne: $57 million worth of common shares and announced a 10% dividend increase our 14th consecutive annual increase.

Richard Dufresne: Our balance sheet remains strong and we continue to improve our key return metrics are return on equity of 24, 4% on a return on capital at 11, 8%.

Richard Dufresne: Looking ahead to Q2, we continued to build on the strength and momentum from our first quarter same store sales in both food and drug retail are off to a strong start as well as absolute sales growth new stores are driving our topline.

Richard Dufresne: Our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep delivering value to our customers and strong performance to our show.

Richard Dufresne: Our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep delivering value to our customers and strong performance to our shareholders.

Per Bank: I will now turn the call over to Per.

Paul: Now I'll turn the call over to Paul.

Per Bank: Thank you, Richard, and good morning, everyone. I'm pleased to report a strong first quarter and a solid start to the year. We delivered revenue growth of 4.1 percent, which reflects our strategic investment in new stores and banner conversions. This top-line growth will help future same-store sales growth and our long-term earning growth. We delivered adjusted EPS growth of 9.3% in a quarter, which is in the middle of our financial framework, while we at the same time increased our spend, renting new stores and our new million square foot DC. That said, our everyday focus remains on providing quality, value, service and convenience for our customers.

Paul: Thank you Richard and good morning, everyone.

Paul: I'm pleased to report a strong first quarter and a solid start to the year.

Paul: We delivered revenue growth of four 1%, which reflect our subset strategic investments in new stores and banner conversions those topline growth, but help Q2 same store sales growth and our long term earnings growth.

Paul: We delivered adjusted EPS growth of nine 3% in the quarter, which is in the middle of our financial framework why we at the same time increased our spend ramping new stores and our new million square foot D. C. That's it.

Paul: Everyday focus remains on providing quality value service and convenience for our customers.

Per Bank: Our efforts are resonating with our customer base. as evidenced by higher tonnage and basket sizes and stable traffic, all contributing to growing market share. We are very pleased with our Q1 market share performance. We achieved growth in tonnage share on the back of a very strong market share growth in Q1 last year, positioning us very well for the balance of the year. This is especially helped by continuing strong performance of our hard discount banners and our e-commerce sales. We continue to prioritize, to understand, and to address our customer needs. Particularly regarding inflationary pressures and the current trade uncertainty.

Paul: Our efforts are resonating with our customer base is.

Paul: As evidenced by higher tonnage and plasticizers and stable traffic all contribution to growing market share.

Paul: We're very pleased with our Q1 margin performance, we achieved growth in China on the back of a very strong market growth in quarter, one last year positioning us very well for the balance of the year. This is especially helped by continuing strong performance.

Speaker Change: Hot to stomp on us and our e-commerce sales.

Paul: We continue to prioritize to understand and to address our customer needs.

Paul: Regarding inflationary pressures and the current uncertainty.

Per Bank: Canadians have faced significant affordability headwinds over the past two years and we understand these challenges. We are working diligently to keep prices as low as possible as tariffs begin to impact prices in the second quarter. We are actively collaborating with our suppliers to mitigate the impact of these terrorists wherever possible. We remain committed to supporting Canada. We recognize that Canadians care deeply about the region of the product they purchase. And we continue to actually seek out Canadian growers and manufacturers for the products we sell. As always, we are committed to transparency regarding pricing and the application of tariffs, including what they are applied to and how they impact the shopping experience.

Paul: Canadians have faced significant affordability headwinds over the past few years and we understand these challenges we are working diligently to keep prices as low as possible post harvest begin to impact prices in the second quarter.

Paul: We are actively collaborating with our suppliers to mitigate the impact of these tariffs wherever possible.

Paul: We remain committed to supporting Canada.

Paul: We recognize the Canadians care deeply about the region after product purchase.

Paul: And we continue to actually seek out Canadian growers and manufacturers for the products. We sell as always we are committed to transparency regarding pricing and the application of tariffs, including what they applied to and how they impact the shopping experience.

Per Bank: We have implemented a T-symbol to clearly indicate products that have had a direct imposed tariff impacting the price. When tariffs are removed, they will be promptly removed from the price of the product. Additionally, we continue to leverage our scale to lower prices for our customers. As previously mentioned, we have joined a large European buying group to lower purchasing costs on select commodities and control brand products. Our digital business continues to deliver strong growth. Our digital sales led by PC Express delivery. We are continuously enhancing the customer experience and differentiating ourselves by offering a choice and speed of service.

Paul: We have implemented a T symbol to clearly indicate products they ever had a direct and post tariff impacting the price and.

Paul: Tariffs are removed and we promptly removed from the price of the products.

Paul: Additionally, we continued to deliver on.

Paul: All of our scale to lower prices for our customers as soon as I mentioned, we have joined the large European buying group to lower purchasing cost on select commodities uncontrolled brand products.

Paul: It is our business continues to deliver strong growth against the sales lift by PC Express delivery.

We are continuously enhancing the customer experience and demonstrating our shelf by offering a choice and speed of service more customers are recognizing the value of PC optimum.

Per Bank: More customers are recognizing the value of PC Optimum as our digital engagement continues to grow driven by personalized PC offers, member-only pricing, and gamification initiatives. Our investments in the future remain a priority as we continue to reinvest in the business to support growth and ongoing consistent financial performance. During the first quarter, we opened heart discount banners in five new communities. We also opened four new pharmacies with expanded clinics. Additionally, we opened our second TNT supermarket in downtown Toronto. as a proud Canadian company with more than 2,800 locations and 220,000 colleagues. We provide life's everyday essentials to Canadian families from coast to coast.

Paul: This is an engagement continues to grow driven by personal IPG offers.

Speaker Change: Remember only pricing and give me give me education initiatives.

Our investment in our future remain a priority as we continue to reinvest in the business to support growth and ongoing consistent financial performance.

During the first quarter, we opened hottest don't Pan out and find new communities. We also opened four new pharmacies with expanded clinics.

Speaker Change: We opened our second TMT supermarket in downtown Toronto.

Speaker Change: As a proud Canadian company with more than 2800 locations and 220000 colleagues.

Speaker Change: We provide lives every day since its Canadian families from coast to coast.

Per Bank: We firmly believe that our prosperity is directly linked to the prosperity of the communities we serve. Today we released our 2024 Live Life Well report, showcasing our progress relatively to the two key pillars that underpin the company's commitment to Canada's prosperity, fighting climate change and advancing social equity. This report is built upon the early release of Priority 2024 ESG disclosures, and that was released in February 2025. Together, these two reports demonstrate the company's commitment to providing timely and relevant information for our stakeholders. As we enter Quarter 2, we remain very confident in our 2025 outlook.

Speaker Change: We firmly believe that our prosperity is directly linked to the prosperity of the communities. We serve today, we released our 2024 live life well report showcasing our progress relatively to the two key pillars that underpin the company's commitment to candidates for Surjit.

Speaker Change: Fighting climate change and advancing shows with equity.

Speaker Change: This will build upon the early release of priority 2020 for ESG.

Speaker Change: Socials and that was released in February 25 to get all these two reports demonstrate the company's commitment to providing timely and relevant information for all our stakeholders.

Speaker Change: As we enter quarter two we remain very confident in our 2025 outlook. We have a strong portfolio of businesses that are all well positioned to meet the everyday needs of Canadians and successfully navigate the macro uncertainty caused by tariffs.

Per Bank: We have a strong portfolio of businesses that are all well-positioned to meet the everyday needs of Canadians and successfully navigate the macro-uncertainty caused by terrorism.

Speaker Change: I would like to conclude by expressing my sincere gratitude to all our colleagues for their dedication and unwavering focus on our customers.

Per Bank: I would like to conclude my expression with my sincere gratitude to all our colleagues for their dedication and unvarying focus on our customers.

Per Bank: Thank you. Thank you, Per.

Speaker Change: Thank you per operator, if you'd please introduce the Q&A process.

Unknown Executive: Operator, if you'd please introduce the Q&A process. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. And should you wish to cancel your request, please press star 4 by the 2. If you're using a speakerphone, just lift the handset before pressing any key. One moment, please, for your first question.

Speaker Change: Thanks.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question is best Star followed by the one on your telephone keypad and you wish to cancel your request. Please press star fall part of June.

Speaker Change: If you're using a speaker phone lift your handset before pressing any tier one woman. Thanks for your first question.

Your first question.

Irene Nattel: Your first question comes from the line of Irene Nattel from RBC, please go ahead. Thanks, and good morning, everyone. It looks like the momentum you had at the end of 24 is continuing into 25.

Speaker Change: Comes from the line of Amy Natal from RBC. Please go ahead.

Amy Natal: Thanks, and good morning, everyone and it looks like the momentum you had at the end of 'twenty four is continuing into 'twenty side can you talk a little bit.

Per Bank: Can you talk a little bit about consumer behavior, what you're seeing promotional penetration, private label trade down, where you think you're winning the customers and also the role of the new stores in some of the momentum? Yeah, let me start, Irene, and then I'll hand it over to Richard. So, on the consumer health, so at the moment, we are much more positive than we were just four to six weeks ago, because the indirect tariffs now will be supported from the government, at least for the next six months. And that's why we're able to mitigate these price increases.

Amy Natal: Consumer behavior, what you're seeing promotional penetration private label trade down where you think you're winning the customers and also the role of the new stores and some of the momentum.

Amy Natal: Yeah, Let me Yeah, let me start arena, and then I'll hand, it over to Richard So on the consumer health.

Speaker Change: So at the moment, we are we are much more positive than that than we were just four two or four to six weeks ago, because the indirect cherish.

Now we'll be supported from from the governance at least for Florida, but the next step in the next six months and that's why we are able to mitigate these are these price increases we still believe it's tough for Canadian so providing value in all aspects of our business is so important whether it's value from a hot discount or its value.

Per Bank: We still believe it's for Canadians. So, providing value in all aspects of our business is so important, whether it's value from a hard discount or it's value in service and great quality products from our conventional business. We do believe we provide value wherever we are. Of course, it does not change the fact that food costs have increased material over the past two years. So, many Canadians are still under increased pressure. But we feel good also for the second half. To buy more into the promotion, to buy more into the control brand, to shifting more into the hard discount, we are seeing that what we saw in quarter 4 is continuing, so no material change in the patterns for our customers.

Speaker Change: And serves and great quality products from our conventional business. We do believe we provide a value wherever we are we are.

Speaker Change: Of course, it does not change the fact that food costs have increased materially over the past two years. So many Canadians are still are still under under increased pressure, but but we are we feel are we see good answer for for the second half and when it comes to <unk>.

Speaker Change: To buying more internal promotions to buying more into sort of control brand so shifting more into the hot discount.

Speaker Change: We're seeing that what we saw in.

Speaker Change: In quarter four is continuing so so no material change in the pattern. So if a customer they are still they are still seeking value wherever they can but it's not that's not a lot of change to this year.

Per Bank: They are still seeking value wherever they can, but there's not a lot of change to them.

Richard Dufresne: Yeah, and What I would add, Irene, is when you look at our sales now, we're benefiting from the 50 stores we've opened last year, so those are adding to our sales growth that we see this year. We've opened 10 stores in Q1, 10 stores are going to open in Q2, so that's also helping. And so we're seeing top-line growth accelerate, and we're also seeing momentum in our same store sales, both in shoppers and in food, both of which are continuing to increase following the end of Q1. So we feel our business has momentum and that should continue as the year progresses.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: What I would add Irene is when you look now at our sales now we're benefiting from the 50 stores. We've opened last year. So that was our are adding to our to our sales growth that we see this year. We've opened we opened 10 stores in Q1 10 stores go I'm going to open in Q2. So that's that's also.

Speaker Change: That's also helping and so we're seeing like a <unk>.

Speaker Change: Top line growth accelerate and we're all seeing also seeing momentum in our on our same store sales both in shoppers and in food both of which are are continuing to to increase following the end of Q1. So we feel we feel our business.

Speaker Change: Has momentum and that should continue as the year progresses.

Unknown Executive: That's great. Thank you.

Speaker Change: That's great. Thank you.

Irene Nattel: And we pay a lot of attention, obviously, to no frills and maxi. I saw you're going to be opening a maxi in New Brunswick.

Speaker Change: And we pay a lot of attention obviously to start yet.

Speaker Change: And no frills and maxi.

Speaker Change: I wish I saw you're going to be opening a maxine new brands or Eric can you talk about expansion plans for the banner also TNT and any update you have on the no frills Pi I'm sorry, the no named pilot.

Per Bank: Can you talk about expansion plans for the banner? Also, TNT and any update you have on the no frills pile? Sorry, the no name pile. For now, we have planned 50 new hard discount stores in 2025, and it's a mix between no-fills and maxis. So we are focusing on our hard discount banners. TNT, we've only opened one in Canada this year, the one that we have opened already, and then we're opening another one in the second half of the year in the US. So for us, it's important that we go where the customers want us to go.

Speaker Change: So for now we have planned 50, 50, new hard discount stores and 20 to 25 and <unk>.

Speaker Change: It's a mix between <unk> and <unk>.

Speaker Change: And in Mexico. So we are focusing on the on our hottest go on Spanish TMT. We've only opened one in one in Canada. This year the ones that we have opened already and then be opening another one in the second half of the year and.

Speaker Change: In the U S. So for US it's important that we go where the customers want us to go so the customers they are increasingly asking us to.

Per Bank: So the customers, they are increasingly asking us to to open more hard discount stores. So wherever we open, whether it's a small hard discount or it's a big one, it doesn't really matter, then we are seeing great success with the new store opening. We just had two last week, and they are already here the first week doing very, very well. And we have not opened that many stores over the last five to ten years. So Canadians, they are underserved with hard discounts. That's why we're opening more stores. But in my perspective, and where I'm coming from, it's actually not a lot.

Speaker Change: To open more hyperscale installed so wherever we open what I would say small harvest <unk> big one it doesn't really matter than we have seen great success with the new so we just had two two last week and they are they already here. The first week doing do you wherever you go and we have not opened that many still once over the last five to 10 years. So.

Speaker Change: Canadians are underserved with Hyperscale and that's why that's why we're opening more stores, but in my perspective, and where I'm coming from is it's actually not a lot I know that we get the question that Oh 15 years old and it's a lot, but it's not because in.

Per Bank: I know there we get the question that, oh, 50 new stores, it's a lot.

Per Bank: But it's not, because in the In the future's growth, it's still limited, but I think it is important that we shape our business to reflect what our customers need. So if we can get the high discount up to more than 25% of our total sales, that would be a good place to be in. Yeah, and specifically on Carrequette, this is exactly responding to what customers want.

Speaker Change: In the fourth of its growth.

Speaker Change: Its still there its still limited, but I think it is important that we shape our business to reflect what our customers need. So if we can get the hard discount up to more than 20% of 25% of our total sales that would be a good place to a $2 billion and on specific Leon cabinet get.

Speaker Change: This is exactly responding to what customers want like are we at we found an opportunity to open a discount store and get it get and when you look at the.

Per Bank: We found an opportunity to open a discount store in Carrequette, and when you look at the mix of the population there, it's very much French-speaking, so they associate themselves more with maxi, so that's why we decided to put a maxi. There's no plans to go maxi all over the Atlantic, but in this instance, it made sense. So again, being very focused on customers.

Speaker Change: Mix of the population there, it's very much French speaking in it so the associate themselves more with <unk>. So that's why we decided to put a vaccine there's no plans to like go Maxi all over our Atlantic but in this instance, it made sense, so again very being very focused on customers.

Richard Dufresne: On Square Footage Growth, I just want to be very clear. When you look at what we have in plans this year, we're talking about 80 stores, but it's only 1.8% Square Footage Growth, and in terms of if you were to split it food and discount, in food, it's like 1.6. Shoppers, it's likely over 2, so this is very much in line with historical patterns. And when you look at our Square Footage share, still as of today, we have not reached back the number we were in 2019. So we feel we're just going where customers are asking us to go, and when you look at the sales performance of our new discount stores in the areas that we're operating, it's just giving us more confidence that what we're doing makes sense and that we should be continuing.

Speaker Change: On square footage growth I, just wanted to be very clear when you look at what we haven't planned this year, though we're talking about 80 80 stores, but it's only one 8% square footage growth and it's in terms of if you were to split it food and discounts like in food, it's like $1 six like shoppers at slightly over two so so this is very much in.

Speaker Change: Line with historical patterns and when you look at our square footage sure still as of today, we have not reached back that number we were in 2009 2019. So so we're not that we feel we're just going where our customers are asking us to go and when you look at the sales performance of our new discount stores in the areas that we're operating.

Speaker Change: Just giving us more confidence in what we're doing makes sense and that we should be continuing.

Mark Petrie: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of Smart factory.

Mark Petrie: And your next question comes from the line of Mark Petrie from CIBC. Please go ahead.

Speaker Change: Please go ahead.

Speaker Change: Okay.

Mark Petrie: Good morning. Thanks. Just to follow up on the food same store sales. I'm curious if there's any Mark and then the rest. And then we have we have seen a quite quite a significant uptick in our in our superstores over the last quarter. And, and they're doing they're doing very, very well as well. So I think that's, that's the two things to to call out. I don't want to do anything. Yeah, the only other thing on that, that market is that we're actually seeing improvements in all of our businesses, even in conventional we're seeing same store sale accelerate too.

Speaker Change: Yes. Good morning, Thanks, just to follow up on the food same store sales I'm curious if there's any dip.

Speaker Change: Difference sort of across geographies or.

Speaker Change: Or even formats superstore versus hard discount if those were if there was anything notable to call out with regards to the performance there.

Speaker Change: I think it's a little bit more more like we've seen over the last last quarter. So so heartless gown as having a significantly higher same store sales then.

Speaker Change: And then the rest and then we have we have seen.

Speaker Change: Quite quite a significant uptick in our superstores over the last quarter.

Speaker Change: And they're doing it they're doing very very well as well. So I think that's that did two things to call out I don't know what else.

Speaker Change: The only other thing I'd add to that market and that we're actually seeing improvement in all of our businesses. Even in the conventional were seeing same store sale accelerate too. So so so all of our business are performing.

Mark Petrie: So, so, so no, all of business are performing.

Speaker Change: Yeah understood, Okay, and and you referred to the strong start for Q2 trends to date.

Mark Petrie: Yeah, understood. Okay, and you refer to the strong start for Q2 trends to date. Just hoping you can expand on that a little bit. You're lapping a lower figure in Q2 last year. I know there was some noise in that period. Is there a reason why a two-year stacked same-store sales is not a good way to look at 2025? Or how should we think about some of the noise? Yeah, I don't know about the two-year stack, Mark. I've not looked at the two-year stack, but I can tell you in absolute terms, same-store sales, we're only one period in Q2 is running ahead of what we delivered in Q1 in both food and drug, and so we're pleased.

Speaker Change: I'm, just hoping you can expand on that a little bit you're lapping a lower figure in Q2 last year I know there was some noise in that period.

Speaker Change: Is there a reason why a two year stack same store sales is not a good way to look at 2025 or how should we think about some of them I don't know about the two year stack Mark I have not looked at the two year stack, but I can tell you in absolute debt terms same store sales like we're only one period in Q2 is a is running ahead of what we.

Speaker Change: We delivered in Q1 in Butler.

Speaker Change: In both food and drug and so or so so we're pleased with like we don't know what's coming ahead look like Theres a lot of stuff a handler, so but we're off to a we're off to a good start and there's more stores coming so that will also help so we.

Mark Petrie: But we don't know what's coming ahead. There's a lot of stuff ahead, but we're off to a good start. And there's more stores coming, so that will also help. So we feel good about our outlook for the outlook for Q2. Still, the majority of the new stores are coming in the second half, so yeah, very promising for Q2, another 10 stores, but 60 new stores will be coming in the second half.

Speaker Change: Feel good about our outlook for the rest of the year and and.

Speaker Change: Yes, I'll leave it that is still the majority of the new stores are coming in the second half. So yeah very promising for quarter, two an auto 10 stores, but 60, new stores will be coming in in the second half.

Mark Petrie: Yeah, understood.

Speaker Change: Yeah understood. Okay. It all Skus I'll squeeze one more in just on shoppers I know you've called out beauty and OTC as drivers of growth I'm, hoping you could just expand on what you've seen in the beauty category in trends, you've seen within subcategories or price points that might highlight any shift in consumer behavior.

Mark Petrie: Okay, and I'll squeeze, I'll squeeze one more in just on shoppers. I know you called out beauty and OTC as drivers of growth. I'm hoping you could just expand on what you've seen in the beauty category and trends you've seen within subcategories or price points that might highlight any shift in consumer markets. Thank you. So on my paper here, I have that HABA is up, so that's driving the growth, skin care is driving the growth, shampoo, conditioner is driving the growth, and deodorant and antiperspirant is driving the growth. So that should be very, very specific, OTC is up, cosmetics, so precise cosmetic is still continuing to do well.

Speaker Change: So.

Speaker Change: And my favorite Yeah, I have that Havas is up so that's where I'm the growth skin care is rounded growth shampoo conditioner is driving the growth there and then.

Speaker Change: And to your pet to experience is starting to grow so that should be very very specific OTC is a is up cosmetics. So persists cosmetic is still continuing to do well. So the servicing theyre doing so any superdrug and of course, all pharmacy pharmacies is almost well so that's another positive.

Mark Petrie: So the shoppers team, they are doing a super job, and of course our pharmacy is up as well. So that's on the positive. On the more slow side, that's of course food, and that's why we last year lowered 400 prices to be more relevant for our customers.

Speaker Change: Yeah.

Speaker Change: On the more like slow side, that's a quarter of course food and that's why we lost year lowered our 400 prices to be more relevant for our customers.

Speaker Change: Yeah understood. Okay. Thanks for the color all the best.

Mark Petrie: Understood. Okay. Thanks for the color. All the best.

Speaker Change: Thank you and your next question comes from the line of.

Unknown Executive: Thank you.

Tamy Chen: And your next question comes from the line of Tamy Chen from BMO Capital Markets. Please go ahead. Hi, good morning. Thanks for the questions. I was curious, Richard, your comment around your conventional banner, even there, the same store sales, you are seeing strengthening or accelerating. And I'm just curious, because you've talked a lot about the momentum in your discount. What do you think is driving, I guess, this recent strengthening in even your conventional banners, the same store sales?

Chen: <unk> Chen from BMO capital markets. Please go ahead.

Chen: Hi, good morning, Thanks for the questions.

Speaker Change: Just curious I looked through your comment around your conventional banner even there.

Speaker Change: Strengthening our accelerating them and I'm just curious if you could talk a lot about the momentum in your discount and what do you think is.

Speaker Change: It's driving I guess this recent strengthening and using a conventional banner same store sales.

Speaker Change: Yeah.

Richard Dufresne: I think a lot of the initiatives that we implemented last year that Frank Gambioli did, so he for example chose to add a lot of multicultural products and that's one of the drivers for the conventional business. He saw that early on when he took over this business and that's of course starting to give us a lot of extra sales at the moment. So think about that we did a lot of change last year and then when we are lapping like this now it just works better and better. So that's definitely one driver. Yeah, the only thing I'd add is, if you go into a conventional store, you'll see more signage on value.

Speaker Change: I think a lot of the needs of students that we that we implemented last year that that Frank can be all he did so he for example chose to.

Speaker Change: A lot of our multi cultural products and that's one of the drivers for the conventional business.

Speaker Change: He saw that early on when he took over this business and.

Speaker Change: And that's of course, starting to give us a lot of acres saves at the moment. So the thing about that we did a lot of change last year and then when we are lapping lapping like this now it just works better and better. So that's that's definitely one driver.

Speaker Change: Yeah. The only thing I'd add is if you go into a conventional stores youll see more signage on value gap.

Richard Dufresne: Like, it feels more value when you when you go into our stores now. And I think that's also having a... Exactly. I think we're trying to find the right balance between giving customers value and still... be really adamant to to keep the quality and service that we have in our conventional business because for us that's also value. It's not only cheap prices and hard discounts. That's also value to continue to give our customers that service. Okay, got it.

Speaker Change: It feels more value when you when you go into our stores now and I think that's also having a.

Speaker Change: Exactly I think that we're trying to find the right balance between.

Speaker Change: Giving customers value and still.

Speaker Change: Be really adamant too.

Speaker Change: To keep the quality and service that we have in our conventional business because for US. That's also that's also value is not only <unk>.

Speaker Change: <unk> prices and hot discount that's all that's also value to continue to.

Speaker Change: To give our customers that service.

Speaker Change: Okay got it and on the debt.

Richard Dufresne: And on the smaller format, No Frills, that you've opened so far and you're continuing to do this year, the traction that the ones you've opened so far have had, I'm also wondering, you know, given that they continue to perform and ramp up well, who or where do you think you're taking this, you know, share or wallet spend from when you put one of these format stores into an area? First of all, it's not a significant amount. So even opening 50 stores, it's not like massive. So I think we take it from everywhere, whether it's... It's just a smaller source and a bigger source.

Speaker Change: The smaller format no felt that that you've opened so far and you're continuing to do this year and see the traction that you've opened so far have had.

Speaker Change: I'm also wondering you know.

Speaker Change: Given that that they continue to perform and laptops Wow.

Speaker Change: Or where do you think you're taking there.

Speaker Change: Share of wallet spend when you put one of these format stores into an area.

Speaker Change: First of all it's not a significant amount so even opening 50 stores. So its not like massive so so I think we take it from everywhere where it is.

Speaker Change: It's the smallest doors are the biggest stores and of course, if we built close to ourselves we have a small impact that's calculated in Ohio, when we build new source of course, we normally try to stay away from our own but even seeing close to one of our own stores. It's actually just give more footfall to two.

Richard Dufresne: And of course, if we build close to ourselves, we have a small impact. That's calculated in our IRR when we build new stores. Of course, we normally try to stay away from our own. But even staying close to one of our own stores, it actually just gives more footfall to the area. So I think it's a little bit from everyone. It's definitely not something that's concerning us. Got it.

Speaker Change: To the area. So I think it's a little bit from from everyone. It's definitely not something that's concerning concerning us.

Richard Dufresne: Got it and if I can just squeeze one last one is on the gross margin Richard could you give us an update on shrink either progress there like in food are we all recover there and then in shoppers I think there's still some work there so.

Richard Dufresne: And if I can just squeeze in one last one is on the gross margin, Richard, could you give us an update on shrink, your progress there? Like in food, are we all recovered there? And then in shoppers, I think there's still some work there. So are you still trying different solutions to find what's most effective? Or do you feel you've found the solution and you just now need to implement it across the shoppers network? Thanks.

Speaker Change: Are you still trying to guess right.

Speaker Change: Felicia.

Speaker Change: Fine.

Speaker Change: Or do you feel you found a solution.

Speaker Change: No need to implement it across the shoppers network. Thanks.

Richard Dufresne: Yeah, two points here. The first one is on food. Most of the benefits have been achieved, but we're still seeing some. Like in Q1, we still had food shrink improved, and so we were very happy with that. We're starting to gain traction in shoppers, and there's many initiatives that are being put in place right now, which gives us a lot of confidence that over the next few quarters, you're going to start to see some meaningful movement on that. So there's a lot of work to be done in shoppers. We are doing the work, and we are hopeful that we're going to start to see the benefits as the year progresses.

Speaker Change: Yes.

Speaker Change: Two points here in the first one is on food most of the benefit have been have been achieved but we're still seeing some like in Q1.

Speaker Change: We still had food shrink improve and so we were very happy with that and we're starting to gain traction and choppers and there's many initiatives that have been that are being put in place right now, which gives us a lot of confidence that over the next few quarters, you're going to start to see meaningful movement on that so so the there's a lot of.

Speaker Change: Work to be done in shoppers, we are doing the work and we are hopeful that we're going to start to see to see to see the benefits as the year progresses, but overall on gross margin the message I want to leave you with is that.

Richard Dufresne: But overall on gross margin, the message I want to leave you with is that we still feel good about our gross margin. We told you that we expect gross margin to be stable for the whole year, and we feel very confident about that as of today. I think it's also important to stress that instead of increasing the gross margin, we can invest back in prices, so we stay competitive.

Speaker Change: We still feel good about our gross margin. We told you that we expect gross margins to be stable for the whole year and we feel very confident about that is as of today. I think it's also important to stress that instead of increasing the moved the gross margin we can invest back in prices. So we stay competitive.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of Michael Daniela. Thank you to Cowen. Please go ahead.

Michael Van Elst: And your next question comes from the line of Michael Van Elst from TD Cowen. Please go ahead. Thank you. So, I just wanted to follow up on the gross margin comment. So, it's good to hear that you're still expected to be stable for the year. Can you give us a little bit more color, though, as to why it was down in Q1? And is that tied to adding value or giving more value to the consumer? Or is it like the discount mix? What is it? Yeah, so if you were to look at the charts that we look on this, you would see there's a lot of puts and takes, and they're all pretty small.

Michael Daniela: Thank you. So I just wanted to follow up on the gross margin comment that so it's good to hear that you're you're saying you still expect it to be stable for the year can you give us like a little bit more color there as to why it was down.

Michael Daniela: In Q1, and is that is that tied to adding value or giving more value to the consumer or and or is it like.

Michael Daniela: The discount match, what it what is it.

Michael Daniela: Yes. So if you were to look at our at the.

Michael Daniela: In the chart that we look on this law you would see there's a lot of puts and takes and they're all pretty small but the bottom line is we still saw some that some benefit and shrink okay. So that that helps.

Richard Dufresne: But the bottom line is, we still saw some benefit in shrink. So that helped. There was some small investment in shoppers. We've talked about that over the last few quarters. So that's continuing in the quarter. And lastly, we cycled our best quarter last year. If you go back to Q1 of last year, we had strong top line, strong gross margin everywhere. So when we lapped it, there were some benefits that we had in gross margin that did not show up this quarter. And so that's all in all. So that's why for me, when we see stable, we feel very good because that's what we expect.

Michael Daniela: Some small investment in shoppers again, we've talked about that over the last few quarters. So that's continuing in the quarter and lastly, as we cycled our best quarter last year like if you. If you go back to Q1 of last year, we had strong top line strong gross margin everywhere. So when we lap it in like there were some benefits that we had in gross margin that did not show up this quarter.

Michael Daniela: So that's all in all so that's why for me when we say stable we feel very good because that's what we expect and we are we are we see that for the rest of it and we can never minus a quarter, whereas plus minus 10 bps auspices stapler that windows on.

Richard Dufresne: And we see that for the rest of the year. And we can never manage a quarter where it's plus minus 10 bps. For us, this is stable. Yeah, we're in the zone now. Right. Okay.

Michael Daniela: Right.

Michael Daniela: Okay.

Richard Dufresne: The price investments that you made, you talked about the 400 items and food items. Is that also happening in other categories within the front store? This is primarily where we do price investments in shoppers. Over and above that, it's promotions where we invest in, and all the personalized offers to our customers, so the digital offers that we have. And else, it's a little bit more of the same in the other banners.

Price investments that you made you talked about the 400 items in food items as there is that also happening in other categories within the front store.

Michael Daniela: This is primarily why we do price investments and shove us over and above that it's it's promotions, where we invest in and all.

Michael Daniela: All the personalized offers to our customers. So so the digital offers that we have.

Michael Daniela: <unk>.

Michael Daniela: It's a little bit more of the same in your other banners.

Speaker Change: Okay, and I wanted to touch on ask about Jeff <unk> said departure, it's obviously, it's a big loss.

Richard Dufresne: And I wanted to touch on, ask about Jeff Leger's departure. It's obviously, it's a big loss, but the strategies are, I'm sure, already in place. We've seen them, you've seen you rolling them out, and it doesn't seem like that's gonna change at all.

Speaker Change: But the strategies or I'm sure are already in place we've seen them senior role I got married and it doesn't seem like that's going to change at all.

Per Bank: But I wonder. how this his departure might affect more kind of the short term shoppers ability to adapt to the consumer market changes over the course of 2025.

Speaker Change: But I wonder.

Speaker Change: How.

Speaker Change: His departure might affect more kind of a short term shopper's ability to adapt to the consumer market changes over the course of 2025 and <unk> and whether.

Per Bank: And, and whether you know that that Thank you very much for that question and we have been very pleased with GS's performance over the past 17 years. in Shoppers. But because he has done a great job, he has also left a great management team and a team that both Richard and I, we know very well and they are doing a good job. So there will be no change in strategy, no change in delivery. So we feel very, very confident with Shoppers also going forward with it without Jeff.

Speaker Change: That might be a risk for the numbers.

Speaker Change: No. Thank you very much for that question and we have been very pleased with it.

Speaker Change: <unk> performance over the past 17 years.

Speaker Change: And each of us, but because he has done a great job. He is also a list of great Great management team and a team that both written and I, we know very well and they are doing a good job. So there'll be no change in strategy no change in delivery. So we feel very confident with the with shovels.

Speaker Change: Also going forward with it we don't get.

Per Bank: And we have initiated a global search. We are looking for the best possible president out there, but we are also looking internally. And it's always in situations like this, maybe a new president can unlock more value, new opportunities to the benefit of our patient customers and our shareholders. So I'm very confident that we can continue to do well in Shoppers. We have some very, very good plans and we can and will develop that business going forward as well. So all good, but great credit to Jeff, what he has done for us over the last 17 years.

Speaker Change: And we are we have initiated a global search we're looking for for the best possible precedent out there, but we're also looking at looking internally.

Speaker Change: And as always.

Speaker Change: Situations like this maybe.

Speaker Change: Our new President Ken can unlock.

Speaker Change: More value new opportunities to the benefit of.

Speaker Change: Of our patients customers and our shareholders. So so I'm very confident that we can continue to do well and shovels. We have some very very good plants, and we can and will develop.

Speaker Change: That business growing going forward as well so so all good but a great credit to <unk>.

Speaker Change: What he has done for us over the last the last <unk>.

Per Bank: And he was entitled to retirement and that's why he retired. So good luck to him.

Speaker Change: 17 years, and he was entitled to retirement and Thats why he retires. So good luck to him okay.

Richard Dufresne: And Michael, I want to add, we have visibility into Q2. And, and so we feel good about the trajectory for shoppers in Q2. And the tougher part of the year for us was the first half. So as we get into the second half, we feel even better. So we feel good about our ability to deliver our numbers in shoppers in 2020. Great.

Michael Daniela: Okay, and Michael I want to add we have visibility into Q2 and and so we feel good about the trajectory for shoppers in Q2, and the tougher part of the year for US was the first half so so as we get into second half.

Speaker Change: We feel that Shelley.

Speaker Change: So we feel good about our ability to deliver our numbers and shoppers in 2025.

Speaker Change: Okay, Great and just quickly on the buy Canada movement.

Per Bank: And just quickly on the Buy Canada movement. I mean, you're definitely seeing it in your stores by the sounds of it. But do you think your banners are getting more traffic? Some of the US banners? Or is it more just product? I think it's really, really hard to tell, but we're definitely seeing some momentum. So whether that's coming from customers shifting from one banner to the other, or whether it's just because they're buying more and more Canadian, it's hard to say.

Speaker Change: I used to I mean, you're definitely seeing it in your storage by the sounds of it but do you think your banners or getting more traffic.

Speaker Change: Some of the U S banners or is it more just product specific.

Speaker Change: I think it's really really hard to tell but we're definitely seeing some momentum so whether that's coming from customers shifting from from one balance or the other whether it's just because they are buying more and more Canadian it's.

Speaker Change: It's hard to it's hard to say.

Speaker Change: Alright, thank you.

Speaker Change: Yes.

Speaker Change: Thank you and your next question comes from the line of Mike <unk> from UBS. Please go ahead.

Mark Carden: And your next question comes from the line of Mark Carden from UBS. Please go ahead. Good morning. Thanks so much for taking the questions.

Speaker Change: Good morning, Thanks, so much for taking the questions. So to start with the continued Hudson Bay closures are you guys expecting to see many opportunities to add prestige cosmetics and additional shoppers stores are experiencing market share gains on that front.

Mark Carden: So to start with the continued Hudson Bay closures, are you guys expecting to see many opportunities to add prestige cosmetics and additional shopper stores or experience other market share gains in that front? Yeah, I think we're continuing to look for opportunities. So we're working with the big vendors about that. So the more we can do with them, the better. And we have increased the number of stores with Prestige Beauty over the years, and that's an opportunity that we are still pursuing. So nothing really new there, but we are following the plan to increase, because as you know, it's good for customers, and it's also a margin-increaser with these types of business.

Speaker Change: Yes, I think we are continuing to look for opportunities. So so we're working with the big.

Speaker Change: The big vendors.

Speaker Change: About that so the more we can do with them and we have increased the number of stores with.

Speaker Change: Prestige beauty over the years and that's an opportunity that we thought we are still pursuing so so nothing really new there, but but we are following the plan to increase because as you know it's.

Speaker Change: It's good for us good for customers and it's also a margin accretive with these types of business and we are very competitive when you're talking about prestige beauty, because we have our optimum program than a lot of those.

Mark Carden: And we are very competitive when we're talking about Prestige Beauty, because we have our optimum program. Then a lot of those major retailers, they don't put any promotions out, because they simply don't allow that, if they can tell, because then they won't list the product with us. But because we have the 20 times a point and all the offers that we have, then we are really competitive in that area. So you're absolutely right. It's a good area for us to have. Great.

Speaker Change: Yes.

Speaker Change: Those major major retailers, they don't put any promotions out because they simply don't allow that if they can tell because then their own list of product with us, but because we have the 20 times a point.

Speaker Change: All the offers that we have can be really competitive in that area. So so you're absolutely right. It's a good area for us to have.

Speaker Change: That's great and then you're seeing some great initial momentum with TNT and the U S. How are you thinking about the tariff impact as it relates to your expansion in the country.

Per Bank: And then you're seeing some great initial momentum with TNT in the US. How are you thinking about the tariff impact as it relates to your expansion? Yeah, so we discussed that a lot, and we had a good discussion with Tina, and it won't have any impact. So the product that we are buying from China, selling in our stores, it's around 15 percent. And when this is set, it's 11 playing field. And our TNT business in the U.S. is so different from any of the other Asian grocers there that, yeah, it's just amazing how good a job that Tina and the team have done in the U.S.

Speaker Change: Yeah. So so we've discussed that a lot and we had a good discussion with the Regina and it won't have any impact so sort of product that we're buying from from China.

Speaker Change: Sitting in our stores, it's it's around 15%.

Speaker Change: And when this is said, it's 11, playing field and our team to abuse in the U S is so different from any of the other Asian grocers avid.

Speaker Change: Yeah, It's just amazing how.

Speaker Change: How good a job that team and the team have done in the U S. So a very good start and we are.

Per Bank: So a very, very good start, and we stay at our pilot, so we agreed seven stores for now. So that's what we're pursuing.

Speaker Change: We stay on our pilots we agreed seven seven installments for now so that's that's why we are pursuing.

Speaker Change: That's great. Thanks, so much good luck guys. Thank.

Mark Carden: Thanks so much. Good luck, guys. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of Janssen barrels from Scotiabank. Please go ahead.

Mark Carden: And your next question comes from the line of John Zamparo from Scotiabank. Please go ahead. Thank you. Good morning. I wonder if we could come back to the new smaller format, No Frills, and the performance you're seeing there. Is there anything you're learning along the way that you're willing to share? And then given how pleased you are with those stores, is it possible they become EBIT positive earlier than Yeah, I think as always, when you when you build 50 new stores, then you will have you know, 30-40% who are doing much better than expected and you have a few that's doing a little bit less as well as expected.

Janssen barrels: Thank you good morning, I Wonder if you could come back to the new smaller format no frills and the performance you're seeing there is there anything you're learning along the way that you're willing to share them and then given how pleased you are with those stores is it possible they become EBIT positive earlier than you had initially planned.

Speaker Change: Yeah, No I think as always when you are when you build 50, new stores than you would have.

Speaker Change: A third or 40% who are doing much better than expected and you have a few that's doing a little bit less as well as as I expected, but the majority of these stores.

Mark Carden: But the majority of these stores are living up to our expectations. So yeah, it could be that some of them are doing a little bit better, but you know, that's coming along. Yeah, we feel good. Like, we're not slowing down. Like, all the data points, we've opened one last week, again, that we can't believe the numbers again. So we're excited and we're continuing. Yeah, and trust me, if the new stores wouldn't be working, then I would not open one more store. So I'm only doing it when it's a creature for, or we're only doing it when it's a creature for our business.

Speaker Change: Living up to our expectations. So yeah. It could be that some of them are doing a little bit better but.

Speaker Change: But that's coming that's coming along.

Speaker Change: Yes, we feel good.

Speaker Change: We're not a we're not slowing down like are all the data points.

Speaker Change: We opened one last week again that we can believe the numbers again so so.

Speaker Change: We're excited and we're continuing in <unk>.

Speaker Change: Trust me, if the new stores wouldn't be working then I would not open one more store so I'm only doing it when its accretive for us.

Speaker Change: Well, we only doing it when its accretive off our business. So so the moment that we.

Mark Carden: So the moment that we see that it won't work, then of course, we will stop building new stores. Trust me, that will work the next five years because customers, they are asking for lower prices. They are asking for high discounts.

Speaker Change: See that it won't work then then of course, we will start building new stores, but.

Speaker Change: Trust me that will work the next five years because customers are they asking for that are asking for lower prices. They are super Hot Wisconsin.

Mark Carden: Okay, understood.

Speaker Change: Okay understood and then a follow up on consumer preferences and buying Canadian.

Mark Carden: And then the follow up on on consumer preferences and buying Canadian. You mentioned it's difficult to measure, but I wonder if it's different on. because he pivoted fairly quickly on communicating or emphasizing Canadian products to consumers within your econ business. So do you have a greater sense of or a greater ability to gauge what type of impact that has? No, that's a really, really relevant question because actually Lauren from our team, she looked at that last week. On our PCX, which, by the way, was growing very, very well, and we have the highest penetration since COVID in quarter one, we are more than double up of the customers buying Canadians on the e-com, because we have this swap to Canadian products, and a lot of customers, they are using it.

Speaker Change: You mentioned, it's difficult to measure, but I wonder if it's different on the E com business, because he pivoted fairly quickly on communicating.

Speaker Change: Our emphasizing Canadian products to consumers within your recon business. So do you have a greater sense of.

Speaker Change: The greater ability to gauge what type of impact that has on your food business within <unk>.

Speaker Change: No that's a really really rather than question because actually learn from from our team. She looked at that the last week.

Speaker Change: Sure.

Speaker Change: On our <unk>, which by the way was it was growing very very well and we have the highest penetration since since COVID-19 in quarter one.

Speaker Change: We are more than double off of the Kosmos buying Canadians on on the E com because we have this.

Speaker Change: Swapped two Canadian products and a lot of customers they are using it so.

Mark Carden: So the penetration of Canadian or the uplisting Canadian products is more than all installs, because it's so easier to navigate with the tools that we have, so more there. And I think in general, and you all know that, there's a big sentiment on buying more Canadian. And already this year, we have onboarded 30 new Canadian suppliers, and also looking into the tariff situation, we changed like just the PC meatball, we changed suppliers moving from U.S. to Canada. We already now resource six of our most popular citrus juice from the U.S. to Spain. Our most popular dips like hummus are Canadian-made with Canadian ingredients.

Speaker Change: So the penetration of Canadian or the uplifts in Canadian products has more than doubled in stores, because it's so easier to navigate with the tools that.

Speaker Change: That we have so more of that and I think I think in general.

Speaker Change: And you all know that there's a big debate sentiment on on.

Speaker Change: On buying more Canadian and already this year we have.

Speaker Change: We have on boarded 30, new Canadian the Canadian suppliers and also looking into the tariff situation would change like just the P. G meatball routine supplies moving from U S to Canada, we already in our resource six of our most popular skus in the U S. Two to Spain are most probably a dip like almost a Canadian made with our Canadian rigs.

Speaker Change: And so so we are doing a lot of a lot of that and if you look at our PC unknown in less than 4% of those products come from the you come from the U S and just anecdotally just before before this meeting I was down in the test kits and then I was observing that they're testing a lot of new new product every really really busy.

Mark Carden: So we are doing a lot of that, and if you look at our PC and no-name, less than 4% of those products come from the U.S. And just anecdotally, just before this meeting, I was down in the test kitchen, and I was observing that they are testing a lot of new products. They have been really, really busy to help mitigating the tariff situation, so we can buy less from the U.S. Okay, that's helpful. I'll pass it on. Thank you once again.

Speaker Change: To help mitigating mitigating.

Speaker Change: Mitigating this tariff situations, where we can buy less less from this from the U S.

Speaker Change: Okay. That's helpful I'll pass it on thank you.

Speaker Change: Thank you once again you have a question that is star any Wang <unk>.

Chris Lee: Should you have a question, that is star and 1. Your next question is from Chris Lee from Bay Jarden, please go ahead. Good morning, everyone. I'm just curious, you mentioned that your the right hand side decline was negligible in a quarter. I'm just wondering, is that just simply lapping the decline from last year? Or is this starting to reflect some of the enhancements that you've been doing in some of the stories? First of all, the enhancement is only being done in three test stores, which is, I think as a last, I'm doing very, very well.

Speaker Change: Your next question is from Chris <unk> from D. Jordan. Please go ahead.

Speaker Change: Good morning, everyone.

Speaker Change: Just curious you mentioned that you are the right hand side of the claim was negligible in the quarter I'm. Just wondering is that just simply lapping the decline from last year.

Speaker Change: Or is it starting to reflect some of the enhancements that you have.

Speaker Change: <unk> been doing in some of the stores.

Speaker Change: First of all the enhancement is only being done in <unk>, which is S.

Speaker Change: I think I said last time doing very well this year, we'll do another 20 or so.

Richard Dufresne: This year, we'll do another 20. So, I'm going out to the West in a few weeks to see how they're doing. So, so far, very good, but the new stores, you won't really see that before next year, but a good promising start. And of course, we're changing a little bit the way that we sell those products. So, over time, we hopefully would see that that is getting better and better. But apparel is doing better. Apparel is definitely, which was a drag last year, it's no longer Yeah, so what we did on Apparel, we took in a lot of the branded suppliers and that really do resonate well with our customer base.

Speaker Change: So I am going out to the rest of them in a few weeks to see how they're doing so so so far very good but but the new stores you won't really see that before 50 for next year, but a good good promising side and of course, we are changing the little bit the way that we sell those products so overtime.

Speaker Change: We hopefully would see that that is that is getting better and better and.

Speaker Change: But apparel is doing better apparel is definitely which was a drag last year, it's no longer a drag this year. So what we did on apparel.

Speaker Change: We took in a lot of the branded suppliers and that really do resonate well with our customer base and also customers who did not before buy into apparel, then are buying into it and by buying Brian sales are getting tours of.

Chris Lee: And also customers who did not before buy into Apparel, they are now buying into it and by buying brands, they're also getting curious of our geofresh offer. Okay. Well, that's great. Thanks for that. And it's just shifting to shoppers. You mentioned, you know, specialty drugs sales remain very strong. Is it fair to say that you guys are growing faster than the industry, partly because of all the pharmacy clinics that you're putting forth, so that it's getting more traffic into the store? Is that a statement? I don't think it's because... I don't know whether we're growing fast or not.

Speaker Change: Of our Joe fresh offer.

Speaker Change: Okay, well that's great thanks for that.

Speaker Change: And then just shifting to shoppers on you mentioned specialty drugs shelves remain very strong is it fair to say that you guys are growing faster than the industry, partly because of all the pharmacy clinics that you're putting portion of that is getting more traffic into the store.

Speaker Change: The.

Speaker Change: Stephen I don't think it's because I don't know, whether we are growing faster or not I don't think we have them. Obviously at a time that we are growing fast because the category is growing is growing a lot.

Chris Lee: I don't think we have a market share data on that. We are growing fast because the category is growing a lot. But on the pharmacy clinics, we still only have about 165 out of the 1,350 stores that we have. Yeah, Chris, we're growing fast. We've opened more than 20 shoppers last year, we'll open over 30, like 30 this And that's going to be the pace going forward. So that's going to allow us to continue to grow. Okay. And then just on Ozempic, I know there's only one drug, but it is a big drug, and potentially be coming to you next year.

Speaker Change: But.

Speaker Change: On the pharmacy clinics, we still only have about 165 out of the 1300 fish to start that we have.

Speaker Change: Yes, Chris we are growing fast we've opened more than 20 shopper last year. We opened overturn 30, this year and that's going to be the pace going forward. So that's going to allow us to continue to grow fast.

Speaker Change: Okay, and then just on <unk> I know, there's only one well, but it's a it is a big dragon with them potentially becoming change next year.

Chris Lee: What type of impact do you think that would have on your business overall? First of all, Chris, there's not only one drug. We only talk about one because that's what people remember. There's actually four. Okay. And so right now we're seeing like double digit growth, and we expect that to continue. And when drugs become generic, historically in shopper drug market, it's positive for us. So the price goes down, but the demand shoots up. So that's how we're thinking about it, but it's still early for us to see what's going to happen with that. But it's not as quick as they come.

Speaker Change: Type of impact do you think that would have on your business.

Speaker Change: Overall.

Speaker Change: First of all Chris there's not only one drug law, we only talk about one because that's what people remember theres actually a four okay.

Speaker Change: And and so right now we're seeing like double digit growth and we expect that to continue and when.

Speaker Change: When drugs become generic historically and shoppers drug market is positive for us. So the price goes down but demand shoots up so so that's how we're thinking about it but it's still early for us to.

Speaker Change: To see what's going to happen with that.

Speaker Change: But it's not a bonus.

Speaker Change: <unk>.

Chris Lee: It's not a worry. I discussed this with Jeff and actually he can see this as an opportunity as well. and presumably the gross profit dollars on generic or higher than branded. So the rate Okay.

Speaker Change: Not a worry.

Speaker Change: As I've discussed this with Jeff and actually you can see this as an opportunity as well so.

Speaker Change: And presumably the gross profit dollars on generic are higher than <unk>.

Speaker Change: Randy.

Speaker Change: So.

Speaker Change: Right yes.

Richard Dufresne: And then my last question is just on depreciation. It was a bit lower than at least my expectation. I know there are some puts and takes and we can take it offline if it's easier, but just want to see if the Q1 run rate is a good one for the rest of the year, or do you expect that to gradually pick up through the year? It's going to gradually pick up because we're ramping up East Glen Emory, but this is all part of our plan. It's all part of our outlook, so we feel very good about that, so it's all been taken care of.

Speaker Change: Got it Okay. And then last question is just on depreciation it was a bit lower than at least my expectation I know there are some puts and takes and we can take it offline if it's easier but just wanted to see if the Q1 run rate is a good one for the rest of the year or do you expect it to gradually pick up through the year is going to gradually pick up because because we're ramping up with them right.

Speaker Change: And so but this is all part of our plan and it's all part of our outlook. So so so here we feel we feel very good about that so that's all been taken care of like for me. The key message that I want to leave you with is that.

Richard Dufresne: Like, for me, the key message that I'm going to leave you with is that the ramp-up of RDC is on plan so far, all streams are on track, we're ramping up the fresh temperature zone now, there have been no surprises, and we remain ahead of budget, which is quite exciting to see so early in this process, so we feel very good about what's going on in East Gwinnipmery right now. Great. It's great to hear and best of luck. Thank you.

Speaker Change: Are the ramp up of our D. C is on plan. So far all streams are on track.

Speaker Change: We're ramping up the fresh temperatures on now there has been no surprises and we remain ahead of budget, which is quite quite exciting to see.

Speaker Change: So early in this process. So we feel very good about what's going on in each one of them right now.

Speaker Change: Great that's great to hear and thanks, a lot. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you and your next question comes from the line of Vishal Shah with higher from National Bank. Please go ahead.

Vishal Shreedhar: And your next question comes in the line of Vishal Shreedhar from National Bank. Please go ahead. Hi, thanks for taking my question.

Vishal Shah: Hi, Thanks for taking my question I wanted to get your thoughts on the joining of European buying group.

Richard Dufresne: I want to get your thoughts on the joining of a European buying group. When should we start seeing benefits and what is the materiality? Yeah, I think we are starting to see some benefit this year, but it will gradually become a benefit over the next few years because every year the buying group will take up a certain number of categories and then it works like that, that Arnold L. Hayes, us, Marathon, we all combine our volume and then we put a request for proposal out there and then Canadian suppliers can bid in and European suppliers can bid and it's meaningful on commodity.

Vishal Shah: When should we start seeing benefits and what is the materiality of that.

Vishal Shah: Yes, I think we are starting to see some benefit this year, but it will gradually become that become a benefit over the next few years because every year the buying Google will take up and certain number of categories and then it works like that that Oswald Hayes of marathon, we all.

Vishal Shah: Combined our volume and then we then.

Vishal Shah: We put a request for proposal out there and then Canadian suppliers can be then in European suppliers can bid and it's it's meaningful.

Vishal Shah: Commodity we don't want to talk about that in almost how much it is but that's definitely a good.

Richard Dufresne: We don't want to talk about the numbers, how much it is, but that's definitely a good thing. to think about it to a good way to for us to keep staying within our framework. So it is helping among other things.

Vishal Shah: To think about it too.

Vishal Shah: A good way to.

Vishal Shah: For us to keep staying within our framework. So it is it is helping among other things yeah.

Richard Dufresne: Okay, and when do we expect that to hit run rate? Like how long? But it's hitting already now. We have a few categories already now where we're seeing some cheaper prices because of that.

Vishal Shah: Okay, and when do we expect that to hit run rate like how long will that take.

Vishal Shah: But it's it's hitting our already now we have a we have a few categories already know where we are seeing see some cheaper prices because of that.

Vishal Shah: I see okay, and just switching gears here to SG&A.

Richard Dufresne: And just switching gears here to SG&A, it was a little better than we would have otherwise anticipated. I know there's the pressure from the DC, which I think you indicated could be a headwind on rate, Richard, for the year. Just wondering how we should expect SG&A to unfold through the course of the year, and what in particular helped the rate become favorable this year? Yeah. So we've been telling the street that we would see stability in SG&A rate this year. And we're very happy to show that we did a little bit better than that despite the extra cost from ramping up East Willimbury and new stores.

Vishal Shah: It was a little better than we would have otherwise anticipated.

Speaker Change: I know, there's the pressure from the D C, which I think you've indicated could be.

Speaker Change: Headwind on great Richard for the year, just wondering how we should expect SG&A transport through the course of the year and what in particular helped the rate stayed with US yeah. So so we've been telling the street that we would see stability in SG&A rate for the year and we're very happy to show that we did a little bit better than that dispatch.

Speaker Change: Right.

Speaker Change: The extra cost from ramping up is William Murray and new stores and so we feel good about the rest of the year on that on that metric. So expect to see more of the same for the year as we ramp up that D C.

Richard Dufresne: And so we feel good about the rest of the year on that metric. So expect to see more of the same for the year as we ramp up that DC.

Okay, and with respect to the new stores when do you start anniversarying. It. So it's not a hit to your profit and it actually starts becoming accretive on a run rate basis. It takes a few years for the store to breakeven, okay, but like obviously year, one you get there.

Richard Dufresne: And with respect to the new stores, when do you start anniversarying it so it's not a hit to your profit and it actually starts becoming accretive on a run rate basis? It takes a few years for the store to break even, but obviously year one you get the startup cost of a store, which are significant. But our plan is made to absorb all of these and still deliver a framework. And again, we feel good about that based on what we've done so far in Q1. I think that is an important point, Richard, because our strategy to keep on being in our framework is to grow sales.

Speaker Change: You get the startup cost of our star, which are significant so but our plan is made to absorb all of these and still deliver a framework and again, we feel good about that based on what we've done so far in Q1, I think that is studies important quantitative because our strategy to keep on being in our framework is to grow sales.

Richard Dufresne: and then keep our margin flat so we can continue to be relevant and price competitive for our customers. So by growing the top line more than we have done in the past, then we get the quantum dollars to continue to deliver within our framework. So growing with hard discount, growing with choppers, keeping the cost low, and that's kind of very simply put how we see the future.

Speaker Change: And then keep keep our margin flat. So we can continue to be relevant and price competitive for our customers. So by growing the top line more than we've done in the past when we get the quantum dollars to continue.

Speaker Change: <unk> to deliver within our framework, so growing with hot discount growing with each other is keeping the cost low and thats kind of very simply put our how we see the future.

Per Bank: Okay, and with respect to the Buy Canada movement. Do you do anticipate that to be a trend that persists? Or do you think it's more a shorter term reaction to some of the headlines? and others. Thank you. I would hope it was something that would persist, but... you know, using my experience, maybe a third of it will stick. But else, customers, they are normally choosing, you know, price and quality. And if price and quality is best of a Canadian product, then they choose those. But if it's like a foreign product, then they will choose that.

Speaker Change: Okay and with respect to the by Canada movement do you do you anticipate that to be true.

Speaker Change: Send that persists or do you think it's more a shorter term reaction to some of the headlines that a merger it earlier in the year.

Speaker Change: Yes, I would hope it was something that would persist but.

Speaker Change: Usually my experience, maybe a third of it will stick.

Speaker Change: But but else customer they are normally choosing.

Speaker Change: Price and quality and a phrase in quality as best of our Canadian province to those but if it's like a fund front product then they will choose that right now they prefer Canadian product I would say surprises all most of the say Mike.

Per Bank: Right now, they prefer Canadian product. And I would say if the price is almost the same, like up to 5% different, then customers, they buy Canadian. So I hope it sticks. It might stick a little bit more because we are onboarding. As I said before, we are onboarding another 30 new Canadian suppliers this year. And by mitigating some of it from the U.S. to others, then I think we will be supporting the Canadian society more than we have done in the past. So actually, at least that's good for something with the tariffs. Probably also the only thing that's good.

Speaker Change: Up to 5% different than customer they buy they buy Canadian so so I hope it sticks it might take a little bit more because we are onboarding as I said before we are onboarding in order of 30 30, new Canadian supply this year and by mitigating some of it from the U S to other than that I think we will be supporting the Canadian.

Speaker Change: The Canadian Society more than we have done in the past so actually is.

Speaker Change: At least that's good for something with the tariffs probably also the only thing it's good for them.

Speaker Change: Thank you.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Roy MacDonald: There are no further questions at this time. I will now hand the call back to Mr. Roy MacDonald for any closing remarks. Great, thanks everybody for your time this morning. Just reach out if you've got any follow-up questions and mark your calendars for Thursday, July 24th, when we'll be reporting our Q2 results. Have a great day, everybody. This concludes today's call. Thank you for participating. You may all disconnect.

Speaker Change: Further question at this time I will now hand, the call back to Mr. Macdonald for any closing remarks.

Speaker Change: Great. Thanks, everybody for your time this morning.

Speaker Change: Richard if you've got any follow up questions and Mark your calendars for Thursday July 24, we will be reporting our Q2 results have a great day everybody.

Speaker Change: This concludes today's call. Thank you for participating you may all disconnect.

Speaker Change: Yes.