Q3 2026 Empire Co Ltd Earnings Call

March 12, 2026

Operator 2: Good morning, ladies and gentlemen, and welcome to the Empire Company Q3 Fiscal 2026 Conference Call. At this time, all lines will be in listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, 12 March 2026. I would now like to turn the conference over to Katie Brine, Vice President, Investor Relations. Please go ahead.

Operator: Good morning, ladies and gentlemen, and welcome to the Empire Company Q3 Fiscal 2026 Conference Call. At this time, all lines will be in listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, 12 March 2026. I would now like to turn the conference over to Katie Brine, Vice President, Investor Relations. Please go ahead.

Speaker #2: Following the presentation, we'll 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 #2: This call is being recorded on Thursday, March 12, 2026. I would now like to turn the conference over to Katie Brine, Vice President, Investor Relations.

Speaker #2: Please go ahead. Thank you, Julie. Good morning, and thank you for joining us today for Empire's third-quarter fiscal 2026 conference call. Today, we will provide summary comments on our results and then open the call for questions.

Katie Brine: Thank you, Julie. Good morning, and thank you for joining us today for Empire's Q3 fiscal 2026 conference call. Today, we'll provide summary comments on our results and then open the call for questions. This call is being recorded, and the audio recording will be available on the company's website at empireco.ca. There is a short summary document outlining the points of our quarter available on our website as well. Joining me on the call this morning are Pierre St-Laurent, President and Chief Executive Officer, Costa Pefanis, Chief Financial Officer, and Luc L'Archevêque, Chief Customer Officer. Before we begin, I would like to remind you that today's discussion includes forward-looking statements. We caution that these statements are based on management's assumptions and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #2: This call is being recorded, and the audio recording will be available on the company's website at empireco.ca. There is a short summary document outlining the points of our quarter available on our website as well.

Speaker #2: Joining me on the call this morning are Pierre Saint-Laurent, President and Chief Executive Officer; Costa Pefanis, Chief Financial Officer; and Luc Larchevec, Chief Customer Officer.

Speaker #2: Before we begin, I would like to remind you that today's discussion includes forward-looking statements. We caution that these statements are based on management's assumptions and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #2: I refer you to our news release and MD&A for more information on these assumptions and risk factors. With that, I will now turn the call over to Pierre.

Katie Brine: I refer you to our news release in MD&A for more information on these assumptions and risk factors. With that, I will now turn the call over to Pierre.

Speaker #3: Thanks, Katie. Good morning, everyone. Our Q3 financial results were solid. This was supported by healthy performance, across all of our formats. And strong cost management.

Pierre St-Laurent: Thanks, Katie. Good morning, everyone. Our Q3 financial results were solid. This was supported by healthy performance across all of our formats and strong cost management. Beyond the financials, we executed several important strategic moves in Q3, including the update related to our e-commerce business, as well as the recent announced executive leadership changes. These actions reflect our focus on delivering immediate results. This is also positioning us well to advance our strategy and deliver against our long-term financial framework. I will focus on three topics today. First, our Q3 performance and market trends. Second, an update on our strategic priorities, and third, our new executive leadership structure. Starting with Q3 results, food sales grew 3% this quarter, with food same-store sales grew up 2%. Same-store sales were driven by strong performance in full service.

Speaker #3: Beyond the financials, we executed several important strategic moves in Q3, including the update related to our e-commerce business, as well as the recent announced executive leadership changes.

Speaker #3: These actions reflect our focus on delivering immediate results; this is also positioning us well to advance our strategy and deliver against our long-term financial framework.

Speaker #3: I will focus on three topics today. First, our third-quarter performance and market trends. Second, an update on our strategic priorities. And third, our new executive leadership structure.

Speaker #3: Starting with Q3 results, food sales grew 3% this quarter, with food same-store sales growth of 2%. Same-store sales were driven by strong performance in full service.

Speaker #3: We also saw positive performance in our discount, both financially and versus the market. We continue to see healthy customer metrics across all banners, with increasing basket size and customer traffic year over year.

Pierre St-Laurent: We also saw positive performance in our discount, both financially and versus the market. We continue to see healthy customer metrics across all banners, with increasing basket size and customer traffic year-over-year. All of our formats are performing well and contributing to the top line. This confirms that customers are seeing value across all our banners. Looking at market trends, we continue to closely monitor food inflation. While a reported CPI for food purchase from stores was 4.8% this quarter, our internal food inflation remained below CPI. As a reminder, when looking at CPI in December and January, these months were artificially higher given the impact of the last year tax break. Based on our internal and market measures, the CPI rate is approximately 150 basis points lower when we had adjusted for this one-time impact.

Speaker #3: All of our formats are performing well and contributing to the top line. This confirms that customers are seeing value across all our banners. Looking at market trends, we continue to closely monitor food inflation.

Speaker #3: While reported CPI for food purchased from stores was 4.8% this quarter, our internal food inflation remained below CPI. As a reminder, when looking at CPI in December and January, these months were artificially higher given the impact of the last year tax break.

Speaker #3: Based on our internal and market measures, the CPI rate is approximately 150 basis points lower when we have adjusted for this one-time impact. Overall, inflation remained generally stable, and we are continuing to actively manage supplier cost increase to protect customer value.

Pierre St-Laurent: Overall, inflation remained generally stable, and we are continuing to actively manage supplier cost increase to protect customer value. Turning to margin, our total company gross margin was flat. When excluding fuel, we experienced 25 basis point decline. This figure requires additional context as it was driven mainly by some non-recurring minor items and business mix impacts. We continue to expect to achieve 10 to 20 basis point of gross margin improvement annually, and we are trending well on this metric in fiscal 2026, gaining 18 basis points year-to-date. We continue to manage margin closely and have opportunities ahead to continue experiencing gains. The current margin rate is much stronger than it was when we announced the transformation in 2017. We continue to leverage the tools and capabilities we have developed since then to maintain stronger margin control.

Speaker #3: Turning to margin, our total company gross margin was flat. When excluding fuel, we experienced 25 basis points decline. This figure requires additional context as it was driven mainly by some non-recurring minor items and business mix impacts.

Speaker #3: We continue to expect to achieve 10 to 20 basis points of gross margin improvement annually, and we are trending well on this metric in fiscal 2026, gaining 18 basis points year to date.

Speaker #3: We continue to manage margin closely and have opportunities ahead to continue experiencing gains. The current margin rate is much stronger than it was when we announced the transformation in 2017.

Speaker #3: We continue to leverage the tools and capabilities we have developed since then to maintain stronger margin control. We also continue to improve advanced technology across the business.

Pierre St-Laurent: We also continue to improve advanced technologies across the business, supported by a comprehensive and disciplined approach to data and AI. This is not new. There has been accelerated focus and investment in the past 18 months, driven by a strong partnership between the business and technology teams. We have already seen successes across supply chain, marketing, merchandising, and national sourcing, while meaningful opportunities ahead to continue to leverage these technologies. Our SG&A cost discipline continue to improve. This reflects tighter cost control across the organization. As well, we simplified the business and began to realize the full potential of the investment we've made over the past several years. Costa will provide more details on this shortly. Overall, we delivered EPS of CAD 0.72 this quarter versus CAD 0.62 last year, with core business results improved by 8.8%.

Speaker #3: Supported by a comprehensive and disciplined approach to data and AI. This is not new. There has been accelerated focus and investment in the past 18 months driven by a strong partnership between the business and technology teams.

Speaker #3: We have already seen successes across supply chain, marketing, merchandising, and national sourcing, while there are meaningful opportunities ahead to continue to leverage these technologies. On SG&A, cost discipline continues to improve.

Speaker #3: This reflects tighter cost control across the organization. As well, we simplified the business and began to realize a full potential of the investment we've made over the past several years.

Speaker #3: Costa will provide more details on this shortly. Overall, we delivered EPS of $0.72 this quarter versus $0.62 last year, with core business results improved by 8.8%.

Speaker #3: This reflects the healthy performance we are channels. As well as the increased focus on cost discipline throughout the organization. Moving on our strategic priorities.

Pierre St-Laurent: This reflects the healthy performance we are seeing across all formats and channels, as well as the increased focus on cost discipline throughout the organization. Moving on to our strategic priorities. I shared previously that we have four obsessions that anchor our strategy: customers, stores, growth, and cost control, all enabled by our talented people. These obsessions are the lens through which we will drive the business going forward, as well as make decisions on our priorities and capital allocation. With the new leadership team now in place, we are finalizing our strategy, and we will share more details in our Q4 calls in June. For today, I will share highlights on a few key initiatives that impact our four priority areas. First, an update on our loyalty program. This quarter, we were very pleased to announce and welcome Shell Canada into Scene+ program.

Speaker #3: I shared previously that we have four obsessions that anchor our strategy: customers, stores, growth, and cost control. All are enabled by our talented people. These obsessions are the lens through which we will drive the business going forward.

Speaker #3: As well as make decisions on our priorities and capital allocation. With the new leadership team now in place, we are finalizing our strategy and we will share more details in our Q4 calls in June.

Speaker #3: For today, I will share highlights on a few key initiatives that impact our four priority areas. First, an update on our loyalty program. This quarter, we were very pleased to announce and welcome Shell Canada into the Scene+ program.

Speaker #3: Fuel has been the most requested category to add to our loyalty program. And this partnership provides substantial opportunity to gain new members and increase share of wallet for existing members.

Pierre St-Laurent: Fuel has been the most requested category to add to our loyalty program, and this partnership provides substantial opportunity to gain new members and increase share of wallet for existing members. The rollout began in Alberta this month and will extend to the rest of Canada on 26 May. We will continue to explore opportunities to bring new partners into the Scene+ program, but we'll be selective and ensure every partner adds value to our customers. Shell Canada is an outstanding example of this, and we are very pleased they have joined us. Loyalty is one of the many ways that we are continuing to elevate our value proposition. Through our own brand assortment, value size, product offering, verified price program, member pricing, commitment to quality, and commitment to great in-store and online experiences, we continue to increase our focus on value as part of our day-to-day operation.

Speaker #3: The rollout began in Alberta this month and will extend to the rest of Canada on May 26th. We will continue to explore opportunities to bring new partners into the Scene+ program.

Speaker #3: But we'll be selective and ensure every partner has value to our customers. Shell Canada is an outstanding example of this, and we are very pleased they have joined us.

Speaker #3: Loyalty is one of the many ways that we are continuing to elevate our value proposition. Throughout on-brand assortment, value size, product offering, verified price program, member pricing, commitment to quality, and commitment to great in-store and online experiences, we continue to increase our focus on value as part of our day-to-day operation.

Speaker #3: Another area where we are meaningfully advancing is e-commerce. During this quarter, we reassessed expected performance across our Voila network and announced action to improve near-term earnings and increase customer choice.

Pierre St-Laurent: Another area where we are meaningfully advancing is e-commerce. During this quarter, we reassessed expected performance across our Voilà network and announced action to improve near-term earnings and increase customer choice. This includes the closure of the Calgary Customer Fulfillment Center and expanding third-party partnerships through a new national agreement with DoorDash, which is now live across all of our banners. As a result, we recorded a CAD 746 million impairment in the restructuring charges in this quarter. While this impacted reported earnings, it resets the cost structure and sharpens our focus on profitable growth. These actions are expected to deliver approximately CAD 95 million annualized operating income beginning in Q4. We expect approximately two-thirds of it, of this will hit the bottom line, with the remainder reinvested in strategic growth initiatives.

Speaker #3: This includes the closure of the Calgary customer fulfillment center and expanding third-party partnerships through a new national agreement with DoorDash, which is now live, across all of our back.

Speaker #3: As a result, we recorded a 746 million dollar impairment in restructuring charges in this quarter. While this impacted reported earnings, it resets the cost structure and sharpens our focus on profitable growth.

Speaker #3: These actions are expected to deliver approximately 95 million annualized operating income beginning in the fourth quarter. We expect approximately two-thirds of it of this will hit the bottom line, with the remainder reinvested in strategic growth initiatives.

Speaker #3: Operationally, e-commerce sales grew 10.3% year over year. Driven by continued Voila growth and third-party partnership. We are continuing to focus on this business and recent actions.

Pierre St-Laurent: Operationally, e-commerce sales grew 10.3% year-over-year, driven by continued Voilà growth and third-party partnership. We are continuing focusing on this business and recent actions. We expect sustained improvement in our e-commerce financial performance beginning in Q4 and accelerating into the next fiscal year. Lastly, a brief highlight on our retail media business. Empire Media Plus, since launching in November 2024, revenues have grown approximately 50%. We are seeing strong momentum in the supplier, increasing annual commitment, and effective measurement capability that are driving repeatSpend and larger campaigns. We expect this to be a growth, attractive engine in the coming years with a significant opportunity ahead of us. On top of this, we continue to drive growth through our store network. We have opened 9 new stores and completed two conversion year-to-date.

Speaker #3: We expect sustained improvement in our e-commerce financial performance beginning in Q4 and accelerating into the next fiscal year. And lastly, a brief highlight on our retail media business.

Speaker #3: Empire Media Plus, since launching in November 2024, revenues have grown approximately 50%. We are seeing strong momentum in the supplier, increasing annual commitment and effective measurement capability that are driving repeat spend and larger campaigns.

Speaker #3: We expect this to be a growth-attractive engine in the coming years, with a significant opportunity ahead of us. On top of this, we continue to drive growth through our store network.

Speaker #3: We have opened nine new stores and completed two conversions year to date. We expect to open seven stores in the fourth quarter, with four of them in discount.

Pierre St-Laurent: We expect to open 7 stores in Q4, with 4 of them in discount. We plan to open more than 20 new stores in fiscal 2027, mostly through new stores as part of the broader real estate strategy. We continue to be strategic and disciplined in how we allocate capital and plan to direct more towards new store growth, now that we are out of the transformation and see plenty of white space to capture. These are just few concrete examples on how our four obsessions are translating into action today, and we look forward to sharing more about our new strategic plan on the Q4 call. Moving on to my third topic, our new organizational structure. As you may have noticed, we have aligned the executive leadership team's roles around our four obsessions.

Speaker #3: And we plan to open more than 20 new stores in fiscal 2027, mostly through new stores as part of the broader real estate strategy.

Speaker #3: We continue to be strategic and disciplined in how we allocate capital. And plan to direct more towards new store growth. Now Now we are out of the transformation and see plenty of white space to capture.

Speaker #3: These are just a few concrete examples on how our four obsessions are translating into action today. And we look forward to sharing more about our new strategic plan on the fourth quarter call.

Speaker #3: Moving on to my third topic, our new organizational structure. As you may have noticed, we have aligned the executive leadership team's roles around our four obsessions.

Speaker #3: The new structure is designed to create clear accountability, strengthen collaboration, and accelerate performance across our four focus areas. Sandra Sanderson, our Chief Marketing Officer, will retire in July.

Pierre St-Laurent: The new structure is designed to create clear accountability, strengthen collaboration, and accelerate performance across our four focus areas. Sandra Sanderson, our Chief Marketing Officer, will retire in July, and I want to thank her for significant contribution to Empire. With that change, we took the opportunity to bring marketing and merchandising together under Luc L'Archevêque, who I have appointed as the Chief Customer Officer. Luc L'Archevêque has more than 25 years of experience across buying, marketing, category management, and multi-banner merchandising. Under his leadership, we will strengthen how we connect and engage with our customers. Julia Knox has been appointed Chief Retail Officer with end-to-end accountability across stores and supply chain while continuing to lead the technology and transformation during the transition. Julia has more than 20 years of retail experience in Canada and US, spanning strategy, merchandising, and in both full-service and discount segments.

Speaker #3: And I want to thank her for her significant contribution to Empire. With that change, we took the opportunity to bring marketing and merchandising together.

Speaker #3: Under Luc Lachavec, we have who I have appointed as the Chief Customer Officer. Luc has more than 25 years of experience across buying, marketing, carrier management, and multi-banner merchandising.

Speaker #3: Under his leadership, we will strengthen how we connect and engage with our customers. Julia Knox has been appointed Chief Retail Officer, with hand-to-hand accountability across stores and supply chain.

Speaker #3: While continuing to lead the technology and transformation during the transition, Julia has more than 20 years of retail experience in Canada and the US, spanning strategy and merchandising, in both full-service and discount segments.

Speaker #3: She will remain in her technology role for the next 12 months, focused on advancing critical IT projects. We will hire a new Chief Technology and Transformation Leader and transition that role over the next 12 months.

Pierre St-Laurent: She will remain in her technology role for the next 12 months, focused on advancing critical IT projects. We will hire a new Chief Technology and Transformation leader and transition that role over the next 12 months. In the interim, Jean-Louis Bellemare, founder of Farm Boy, will serve as Executive Advisor on our retail and store operation, reporting directly to me. J.L. is a gifted operator who built Farm Boy from the ground up, took it into one of the most well-loved banner with strong NPS scores, impressive same-store sales growth, and strong control on margin and cost. He has an outstanding track record, and we are excited to see what he unlocks at Empire. Doug Nathanson has expanded his responsibility as General Counsel and Chief Pharmacy and Development Officer, reflecting increasing strategic importance of pharmacy in our company.

Speaker #3: In the interim, Jean-Louis Belmar, founder of Farm Boy, will serve as executive advisor on our retail and store operation, reporting directly to me. JL is a gifted operator who built Farm Boy from the ground up, turning it into one of the most well-loved banners, with strong NPS scores, impressive same-store sales growth, and strong control on margin and cost.

Speaker #3: He has an outstanding track record, and we are excited to see what he unlocks at Empire. Doug Nathanson, as expanded, is responsible as general counsel and chief pharmacy and development officer, reflecting the increasing strategic importance of pharmacy in our company.

Speaker #3: Christopher Fanis continues as Chief Financial Officer, and Sandra Pasquini continues as Chief Human Resources Officer. To close out, I'm pleased with our Q3 results and see significant opportunity ahead of us.

Pierre St-Laurent: Constantine Pefanis continues as Chief Financial Officer, and Sandra Pasquini continues as Chief Human Resources Officer. To close out, I'm pleased with our Q3 result and see significant opportunity ahead of us. We remain focused on providing value for customers, simplifying the business, and driving profitable growth while executing against our long-term financial framework. With that, I'll turn it over to Constantine Pefanis.

Speaker #3: We remain focused on providing value for customers, simplifying the business, and driving profitable growth, while executing against our long-term financial framework. With that, I'll turn it over to Costa.

Speaker #2: Thanks, Peter. Good morning, everyone. I'll start with a review of our third-quarter financial performance focusing on adjusted results, and then I'll touch on capital allocation and our outlook.

Constantine Pefanis: Thanks, Pierre. Good morning, everyone. I'll start with a review of our Q3 financial performance, focusing on adjusted results, and then I'll touch on capital allocation and our outlook. In the Q3, we delivered adjusted EPS of CAD 0.72, representing year-over-year growth of 16.1%. When you look behind the headline results, the increase was driven by three key factors, solid operating performance in the core retail business, higher contribution from other income and share of equity earnings, and continued benefits from share repurchases. When we exclude real estate-related income in both periods, adjusted EPS increased by nearly 9% for approximately CAD 0.05, which speaks to the continuing strength of our underlying core operations. Our adjusted results exclude the CAD 746 million impairment charge related to our e-commerce update.

Speaker #2: In the third quarter, we delivered adjusted EPS of $0.72, representing year-over-year growth of 16.1%. When you look behind the headline results, the increase was driven by three key factors.

Speaker #2: Solid operating performance in the core retail business, higher contribution from other income and share of equity earnings, and continued benefits from share repurchases. When we exclude real estate-related income in both periods, adjusted EPS increased by nearly 9% for approximately 5 cents.

Speaker #2: Which speaks to the continuing strength of our underlying core operations. Our adjusted results exclude the $746 million impairment charge related to our e-commerce update.

Speaker #2: This included the impairment of right-of-use assets and property and equipment, as well as direct costs associated with the closure of our CFC in Calgary, such as severance, one-time contract termination payments, and decommissioning costs.

Constantine Pefanis: This included the impairment of right-of-use assets and property and equipment, as well as direct costs associated with the closure of our CFC in Calgary, such as severance, one-time contract termination payments, and decommissioning costs. As we begin the next chapter in reshaping our e-commerce strategy, our focus remains on driving sales volume and further improvements in our active CFCs while expanding our immediacy offering with the addition of DoorDash. Turning to the top line, food same-store sales increased 2% in Q3. Our two-year stack continued to climb sequentially to 4.6%. Food sales for the quarter increased by 3%, reflecting positive growth in the business, especially at our full service banners. Total company gross margin this quarter was flat.

Speaker #2: As we begin the next chapter in reshaping our e-commerce strategy, our focus remains on driving sales volume and further improvements in our active CFCs.

Speaker #2: While expanding our immediacy offering with the addition of DoorDash. Turning to the top line, food same-store sales increased 2% in the third quarter. Our two-year stack continued to climb sequentially to 4.6%.

Speaker #2: Food sales for the quarter increased by 3%, reflecting positive growth in the business, especially at our full-service banners. Total company gross margin this quarter was flat, excluding fuel.

Constantine Pefanis: Excluding fuel, it decreased by 25 basis points versus last year. This was mostly driven by non-recurring minor items in our business unit mix, predominantly from higher wholesale sales. If we exclude the impact of the non-recurring minor impacts and higher wholesale sales, gross margin excluding fuel would have grown marginally versus last year. As Pierre mentioned, we have delivered significant gross margin expansion over recent years. Looking ahead, we continue to expect annual gross margin expansion in the range of 10 to 20 basis points, supported by disciplined execution and ongoing initiatives such as inventory control, shrink improvement, space productivity, private label penetration, and promotional optimization. In Q3, adjusted SG&A dollars, excluding depreciation and amortization, increased by 1.6% over prior year, largely reflecting business expansion and continued investments in stores, technology, and key projects. We did see a sequential decline in our SG&A dollars.

Speaker #2: It decreased by 25 basis points versus last year. This was mostly driven by non-recurring minor items in our business unit mix, predominantly from higher wholesale sales.

Speaker #2: If we exclude the impact of the non-recurring minor impacts, and higher wholesale sales, gross margin excluding fuel, would have grown marginally versus last year.

Speaker #2: As Pierre mentioned, we have delivered significant gross margin expansion over recent years. Looking ahead, we continue to expect annual gross margin expansion in the range of 10 to 20 basis points.

Speaker #2: Supported by disciplined execution, and ongoing initiatives such as inventory control, shrink improvement, space productivity, private label penetration, and promotional optimization. In Q3, adjusted SG&A dollars excluding depreciation and amortization increased by 1.6% over prior year.

Speaker #2: Largely reflecting business expansion and continued investments in stores, technology, and key projects. We did see a sequential decline in our SG&A dollars. What stands out this quarter is that SG&A as a percentage of sales decreased versus last year.

Constantine Pefanis: What stands out this quarter is that SG&A, as a percentage of sales, decreased versus last year, as total sales grew at a faster rate than SG&A. This reflected better cost optimization, particularly around technology, real estate, and marketing expenses. Our focus on growing the business more profitably and optimizing cost is beginning to deliver results. As I've said previously, we continue to expect this past Q1 to represent the high-water mark for SG&A dollars this fiscal year. However, improvement will not always manifest in a straight line. In the quarters ahead, we'll start to benefit from the CAD 95 million in annualized benefits announced as part of our e-commerce update. Approximately one-third of these benefits was identified to be reinvested into strategic initiatives to accelerate our growth engines.

Speaker #2: As total sales grew at a faster rate than SG&A, this reflected better cost optimization, particularly around technology, real estate, and marketing expenses. Our focus on growing the business more profitably delivered results.

Speaker #2: As I've said previously, we continue to expect this past Q1 to represent the high watermark for SG&A dollars this fiscal year. However, improvement will not always manifest in a straight line.

Speaker #2: In the quarters ahead, we'll start to benefit from the 95 million in annualized benefits announced as part of our e-commerce update. Approximately one-third of these benefits was identified to be reinvested into strategic initiatives to accelerate our growth engines.

Speaker #2: We expect to achieve about $15 million of these largely cash benefits in Q4, with full run rate achieved in fiscal 2027. A portion of Q4 benefits were captured as part of our cost reduction strategies we discussed earlier this year.

Constantine Pefanis: We expect to achieve about CAD 50 million of these largely cash benefits in Q4, with full run rate achieved in fiscal 2027. A portion of Q4 benefits were captured as part of our cost reduction strategies we discussed earlier this year. Contributions from other income and equity earnings totaled CAD 29 million, largely in line with the guidance we provided in Q2. We continue to expect this real estate earnings stream to come in at the lower end of our fiscal 2026 guidance of CAD 120 million to 140 million, with Q4 representing approximately one-third of the annual amount. Subsequent to the quarter, we announced the sale leaseback transaction with Crombie REIT, which is already included with the aforementioned Q4 expectations. Transactions like this aren't an annual occurrence. This transaction has been in our plans for some time.

Speaker #2: Contributions from other income and equity earnings total 29 million. Largely in line with the guidance we provided in Q2. We continue to expect this real estate earning stream to come in at the lower end of our fiscal 2026 guidance of 120 million to 140 million.

Speaker #2: With Q4 representing approximately one-third of the annual amount. Subsequent to the quarter, we announced the sales leaseback transaction with Cromby Reed which has already included with the aforementioned Q4 expectations.

Speaker #2: Transactions like this aren't an annual occurrence. This transaction has been in our plans for some time. It makes sense. For both Empire and Cromby.

Constantine Pefanis: It makes sense for both Empire and Crombie REIT. With respect to capital allocation, our Q3 CapEx totaled CAD 239 million, reflecting investment in store renovations, new stores, advanced analytic technology, and other technology systems. We remain on track for CapEx of approximately CAD 850 million in fiscal 2026. In addition, on a year-to-date basis, we have repurchased about 6.6 million shares for consideration of CAD 330 million. We expect to complete CAD 400 million in share repurchases this fiscal year. In closing, we're pleased with the update we made to our e-commerce business. While these actions added some noise to reported results this quarter, we are pleased with how our teammates drove good results in our core food business. We continue to execute well against the financial framework.

Speaker #2: With respect to capital allocation, our Q3 CapEx totaled $239 million, reflecting investments in store renovations, new stores, advanced analytic technology, and other technology systems.

Speaker #2: We remain on track for CapEx of approximately $850 million in fiscal 2026. In addition, on a year-to-date basis, we have repurchased about 6.6 million shares for consideration of $330 million.

Speaker #2: We expect to complete 400 million dollars in share repurchases this fiscal year. In closing, we're pleased with the update we made to our e-commerce business.

Speaker #2: While these actions added some noise to reported results this quarter, we are pleased with how our team meets drove good results in our core food business.

Speaker #2: We continue to execute well against the financial framework. And as Pierre mentioned earlier, we have many growth levers to deliver consistent, solid returns for shareholders over the quarters and years ahead.

Constantine Pefanis: As Pierre mentioned earlier, we have many growth levers to deliver consistent, solid returns for shareholders over the quarters and years ahead. With that, I'll turn it back to Katie.

Speaker #2: With that, I'll turn it back to Katie.

Speaker #1: Thank you, Costa. Julie, you may open the line for questions at this time.

Katie Brine: Thank you, Costa. Julie, you may open the line for questions at this time.

Speaker #3: Thank you, ladies and gentlemen. If you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, please press star two.

Operator 2: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, please press star two. One moment please, for your first question. Your first question comes from Vishal Shreedhar from National Bank. Please go ahead.

Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, please press star two. One moment please, for your first question. Your first question comes from Vishal Shreedhar from National Bank. Please go ahead.

Speaker #3: One moment, please, for your first question. Your first question comes from Vishal Sridhar from National Bank. Please go ahead.

Speaker #4: Hi. Thanks for taking my questions. I was hoping, Costa, you could give me some details on these cost initiatives that you're taking that are bearing fruit, and how you can tell us what they are and how we should anticipate them to manifest.

Vishal Shreedhar: Hi. Thanks for taking my questions. I was hoping, Costa, you could give me some details on these cost initiatives that you're taking that are bearing fruit and how you can tell us what they are and how we should anticipate them to manifest, and if you could actually quantify that would be helpful for us.

Speaker #4: And if you could actually quantify that, that would be helpful for us.

Speaker #5: Yeah, thanks, Vishal. I'll start by saying that we're happy with our cost control in Q3. I won't be giving you specifics in terms of amounts.

Constantine Pefanis: Yeah. Thanks, Vishal. I'll start by saying that we're happy with our cost control in Q3. I won't be giving you specifics in terms of amounts, but since I started with Empire, the conversations that we've been having internally is how to simplify our store operations. With that's driven cost optimization strategies that have continued around how we spend in our IT areas, our marketing dollars, and our supply chain. As we continue to press on these initiatives, we will continue to see improvements as we deploy certain things in our stores. The overriding guiding principle is how we make the lives of our teammates simpler in order to be able to serve the value that our customers expect.

Speaker #5: But since I started with Empire, the conversations that we've been having internally are about how to simplify our store operations. With that, that's driven cost optimization strategies that have continued around how we spend in our IT areas.

Speaker #5: Our marketing dollars and our supply chain. As we continue to press on these initiatives, we will continue to see improvements. As we deploy certain things in our stores, but the overriding guiding principle is how we make the lives of our teammates simpler in order to be able to serve the value that our customers expect.

Vishal Shreedhar: Thank you for that. Just want to get color on Empire Media. How large is that business currently, and what tactics are you using within the media business, and how should we think about the contribution of that going forward?

Speaker #4: Thank you for that. And just one to get color on Empire Media: how large is that business currently, and what tactics are you using within the media business?

Speaker #4: And how should we think about the contribution of that going forward?

Pierre St-Laurent: As I said, we did start this journey in 2024, so it's fairly new. As I said also, we are seeing good traction right now. We made good investment on retail media over the last year and 18 months. Most of the investment is behind us, and now we're focusing on growing that business, and we're seeing a very fast pace considering that it's new. Again, it's a growth engine for us. I won't disclose the size, obviously, 'cause it's confidential, but we see it's a growth opportunity for us. Now investment is behind us and we're driving growth. Every month we're seeing good repeat in investment from suppliers, which is a good sign, and larger campaigns. That's a good sign, and we are seeing improvement quarter-over-quarter.

Speaker #6: As I said, we did start this journey in 2024, so it's fairly new. As I said also, we are seeing good traction right now.

Speaker #6: We have a good we made good investment on retail media. Over the last year, an 18 months, most of the investment is behind us.

Speaker #6: And now we're focusing on growing that business, and we're seeing a very fast pace considering that it's new. But again, it's a growth engine for us.

Speaker #6: I want to disclose the size, obviously, because it's confidential. But we see it's a growth opportunity for us. And now investment is behind us, and we're driving growth.

Speaker #6: And every month, we're seeing good repeat in investment from suppliers, which is a good sign. And larger campaigns. So that's a good sign. And we are seeing improvement quarter to quarter.

Pierre St-Laurent: I hope we will capture the full value of this new segment of growth and revenue in the next years and in the future.

Speaker #6: And I hope we will capture the full value of this new segment of growth and revenue in the next years and in the future.

Vishal Shreedhar: Thank you.

Speaker #4: Thank you.

Operator 2: Your next question comes from Irene Nattel from RBC Capital Markets. Please go ahead.

Operator: Your next question comes from Irene Nattel from RBC Capital Markets. Please go ahead.

Speaker #3: Your next question comes from Arin Natel from RBC Capital Market. Please go ahead.

Irene Nattel: Thanks, and good morning. I'd actually like to dig in a little bit on the answer to the last question around SG&A. I guess more fundamentally, you mentioned that you're trying to simplify store operations, but you highlighted IT, marketing dollars, supply chain. These are all kind of very fundamental to how the business operates. Can you walk through kind of where you see the biggest buckets of opportunity and what kinds of things you might be targeting here? Thank you.

Speaker #7: Thanks and good morning. I don't actually like to dig in a little bit on the answer to the last question. Around SG&A, but I guess more fundamentally, you mentioned that you're trying to simplify store operations, but you highlighted IT, marketing dollars, supply chain.

Speaker #7: These are all kind of very fundamental to how the business operates. Can you walk through where you see the biggest buckets of opportunity, and what kinds of things you might be targeting here?

Pierre St-Laurent: That's a very good question, and you're absolutely right. These areas are fundamental in retail. I said previously that in the last years, we made significant investment in different area of the business, in tools, in technology, in people. As I said that before, that's my priority, to extract the full value of the investment we've made in the past. Now, by focusing on the business less than on a transformation, our appetite is to capture the full benefit of all the investment we've made. We've made investment in all of those area. We made investment in marketing, we made investment in supply chain, we made investment at store level to simplify stores life, and now we're going after the benefit. Without compromising the experience in stores, without compromising our teammates' experience. This is fundamental for us.

Speaker #7: Thank you.

Speaker #5: Yeah, it's a very good question, and you're absolutely right. These are really our fundamentals in retail. I said previously that in the last years, we made significant investment in different areas of the business.

Speaker #5: In tools, in technology, in people. So, as I said that before, that's my priority—to extract the full value of the investment we've made in the past.

Speaker #5: And now, by focusing on the business, less than on a transformation, our appetite is to capture the full benefit of all the investment we've made.

Speaker #5: So we've made investment in all of those areas. We made investment in marketing. We made investment in supply chain. We made investment at store level to simplify stores' life.

Speaker #5: And now we're going after the benefit. Without compromising the experience in stores, without compromising our teammates' experience, this is fundamental for us in our four-op session.

Pierre St-Laurent: In our core obsession, customers and stores are the two main priorities, and we'll make their life easier. We provide more value to customers. All those things are the basics in retail, and we believe that focusing on it, there's a lot of value to extract.

Speaker #5: Customers and stores are the two main priorities, and we'll make their lives easier. We'll provide more value to customers, so all those things are the basics in retail.

Speaker #5: And we believe that, by focusing on it, there's a lot of value to extract.

Irene Nattel: Thank you. Would you be able to give us some examples of, you know, some of the changes that you've made, and how you see the results flowing through, and perhaps, you know, what inning are we in terms of all of this, and how are we on the outside going to be able to see how this manifests in the performance of the business?

Speaker #7: Thank you. Would you be able to give us some examples of some of the changes that you've made, and how you see the results flowing through?

Speaker #7: And perhaps what inning are we in terms of all of this? And how are we on the outside going to be able to see how this manifests in the performance of the business?

Pierre St-Laurent: There's a lot of little things that we did implement in stores to simplify their life. We call that quick action initiatives to simplify their life. It's small details, but at scale it's sometimes bigger than we thought. A good example is electronic shelf label. Investment we've made in electronic shelf label simplifies stores life, and accuracy is way better. We see immediate benefit by implementing that. This is an example to simplify their life on Thursday morning when it's time to change the merchandising plan, and that's very, very efficient. There's savings immediately there without impacting our teammates. It's the opposite. We simplify their life. He loves it. There's other feature than just the tag, the price tag that we're looking at right now.

Speaker #5: There’s a lot of little things that we did implement in stores to simplify their life. We call that quick action initiatives to simplify their life.

Speaker #5: It's small details, but at scale, it's sometimes it's bigger than we thought. A good example is electronic shelf label. So the investment we've made in electronic shelf label simplifies stores' life.

Speaker #5: Accuracy is way better. We see immediate benefit by implementing that. So this is an example to simplify their life on Thursday morning when it's time to change the merchandising plan.

Speaker #5: And that's very, very efficient. And there's savings immediately there. Without impacting our teammates—it's the opposite. We simplify their life. They love it. So there's other features than just the price tag that we're looking at right now.

Pierre St-Laurent: Again, we made the investment already, so we don't have to invest more money to activate those features. That's an example. I think we spoke many times about the investment we've made in merchandising. We did not grow the margin 28 quarters in a row without any investment. I think the merchandising team is having way better tools now to do their job every day. We continue to see opportunities to make some gains, but we're in very good control on how we manage our margin, how we're investing to provide value to customer. I think our customers are seeing that value right now based on the results we have in all our formats. It's many small little things that are driving benefits right now. Supply chain is the same thing.

Speaker #5: And again, we made the investment already, so we don't have to invest more money to activate those features. That's an example. I think we spoke many times about the investment we've made in merchandising.

Speaker #5: So, we did not grow the margin 28 quarters in a row without any investment. I think the merchandising team has way better tools now to do their job every day.

Speaker #5: They continue to see opportunities to make some gains. But we're in very good control on how we manage our margin—how we invest to provide value to customers.

Speaker #5: And I think customers are seeing that value right now based on the results we have—in all our formats. So it's many small, little things that are driving benefit right now.

Pierre St-Laurent: I spoke about some investment in technology that giving better visibility, better accuracy, better on-time deliveries. This is impacting the entire chain from the supply chain to the store operation. Stores having visibility on where is their truck. This is more efficient to plan the labor in stores. There's many little things.

Speaker #5: Supply chain is the same thing. I spoke about some investment in technology that's giving better visibility, better accuracy, better on-time deliveries. And this is impacting the entire chain from the supply chain to the store operation.

Speaker #5: Stores are having visibility of where is their truck. And this is more efficient to plan the labor in stores. So there's many little things I already gave you too much.

Chris Li: I already gave you too much, for competitive reason, but we're very pleased with the investment we've made, and we continue to see value to capture ahead of us.

Pierre St-Laurent: I already gave you too much, for competitive reason, but we're very pleased with the investment we've made, and we continue to see value to capture ahead of us.

Speaker #5: For competitive reasons, but we're very pleased with the investment we've made. And we continue to see value to capture ahead of us.

Pierre St-Laurent: Very much appreciated, and never, ever too much. Thank you.

Irene Nattel: Very much appreciated, and never, ever too much. Thank you.

Speaker #7: Very much appreciated, and never, ever too much. Thank you.

Operator 2: Your next question comes from Mark Petrie from CIBC World Markets. Please go ahead.

Operator: Your next question comes from Mark Petrie from CIBC World Markets. Please go ahead.

Speaker #3: Your next question comes from Mark Petrie from CIBC World Markets. Please go ahead.

Mark Petrie: Yeah. Thanks, and good morning. I'm gonna ask again on the OpEx, actually. I guess just specifically with regards to Voilà and the CAD 95 million of savings, you stated that you have targeted one-third to be reinvested. You're also saying that, you know, the focus is harvesting the benefits from previous investments. Could you just talk about the sort of specific areas that you see opportunities to invest and also how you came up with that, you know, one-third versus two-thirds? Then where on the P&L should we expect to see the two-thirds showing up?

Speaker #8: Yeah, thanks, and good morning. I'm going to ask again on the OPEX, actually. And I guess, just specifically with regards to BOLA and the $95 million of savings, you stated that you have targeted one-third to be reinvested.

Speaker #8: But you're also saying that the focus is harvesting the benefits from previous investments. So could you just talk about the sort of specific areas that you see opportunities to invest, and also how you came up with that one-third versus two-thirds?

Speaker #8: And then where on the P&L should we expect to see the two-thirds showing up?

Constantine Pefanis: Yeah. Good morning, Mark. I think the way that we're looking at it is, as we looked at our e-commerce strategy, we are looking at how we're going to be evolving that. Today, we're not gonna be spending too much time talking about our strategy. We're gonna reserve that for our next call. When we look at the way we've modeled that out for our fiscal 2027, it's gonna be a ramp in terms of the way that we're gonna see the benefit on our OpEx reduction, how we continue to build on that strategy, in order for us to be able to grow the top line. You know, there are many things that we wanna continue to press on, and that's why we refer as reinvestment in our strategic initiatives.

Speaker #5: Yeah. Good morning, Mark. I think the way that we're looking at it is, as we looked at our e-commerce strategy, we are looking at how we're going to be evolving that.

Speaker #5: And today, we're not going to be spending too much time talking about our strategy. We're going to reserve that for our next call. But when we look at the way we've modeled that out for our fiscal 2027, it's going to be a ramp in terms of the way that we're going to see the benefit on our OPEX reduction.

Speaker #5: How we continue to build on that strategy, in order for us to be able to grow the top line. There are many things that we want to continue to press on.

Speaker #5: And that's why we referred as reinvestment in our strategic initiatives. But I think as we look at Q4 specifically, the 15 million dollars that will allow us to have an improvement on SG&A even a portion of that when we contemplated where these cost reductions are going to come from in earlier quarters, we always knew that we would reinvest some of these benefits and I think that as we continue to discuss, how we're going to grow the top line the impact that we're going to have in our ability to become more efficient across the company as Pierre mentioned will definitely have a benefit overall.

Constantine Pefanis: I think as we look at Q4 specifically, the CAD 15 million that will allow us to have an improvement on SG&A, even a portion of that, you know, when we contemplated where these cost reductions were gonna come from, in earlier quarters, we always knew that we would reinvest some of these benefits. I think that as we continue to discuss how we're gonna grow the top line, the impact that we're gonna have in our ability to become more efficient across the company, as Pierre mentioned, will definitely have a benefit overall. This isn't something that's gonna manifest in a linear fashion, but it's definitely gonna be a wrap as we go into fiscal 2027.

Speaker #5: So, this isn't something that's going to manifest in a linear fashion, but it's definitely going to be a ramp as we go into fiscal 2027.

Mark Petrie: Okay, great. The two-thirds of the 95 is mostly gonna show up in SG&A?

Speaker #8: Okay. Great. So the two-thirds of the 95 is mostly going to show up in SG&A. Yeah. Okay. Thanks. And then could you just I know you're saying minor and non-recurring, but could you just give us some color on what those items were in gross margin and when you say non-recurring, does that mean they were isolated to Q3 and so we should expect Q4 to be more like the normalized rate?

Constantine Pefanis: Correct.

Mark Petrie: Yeah. Okay. Thanks. Then, I know you're saying minor and non-recurring, but could you just give us some color on what those items were in gross margin? You know, when you say non-recurring, does that mean like they were isolated to Q3, and so we should expect Q4 to be more like the normalized rate, right? Which I think you said was marginally positive.

Speaker #8: Which I think you said was marginally positive.

Constantine Pefanis: Yeah, exactly, Mark. Yeah. We'll have a more normalized rate, which is positive, but in terms of the one-time minor impacts, I think you should take that offline with Katie.

Speaker #5: Yeah, exactly, Mark. Yeah, we'll have a more normalized rate, which is positive. But in terms of the one-time minor impacts, I think you should take that offline with Katie.

Mark Petrie: Okay, fair enough. Appreciate the comments. All the best.

Speaker #8: Okay. Fair enough. Appreciate the comments. All the best.

Constantine Pefanis: Thank you.

Operator 2: Your next question comes from Chris Li from Desjardins. Please go ahead.

Operator: Your next question comes from Chris Li from Desjardins. Please go ahead.

Speaker #5: Thank you.

Speaker #3: Your next question comes from Chris Lee from Desjardins. Please go ahead.

Chris Li: Hi. Good morning, everyone. I know you have sort of covered that in the opening remarks, Pierre, but I wanted to just ask you, given that the macro environment obviously remains very dynamic, what are you seeing in terms of the consumer behavior? Maybe a similar question in terms of what are you seeing in terms of the current competitive environment? Thank you.

Speaker #9: Hi. Good morning, everyone. I know you have sort of covered that in the opening remarks, Pierre, but I wanted to just ask you, given the macro environment obviously remains very dynamic, what are you seeing in terms of the consumer behavior and also maybe a similar question in terms of what are you seeing in terms of the current competitive environment?

Speaker #9: Thank you.

Pierre St-Laurent: It's a good question. Couple of things. Pretty stable to previous quarters in term of what we're seeing in the market. Customer continue to looking for value, and I think our results are showing that we're doing really good there in all formats. It's our day-to-day operation to provide value to customers. We know that customer are looking for value, and I think our promotional, our offering is more and more relevant. This is why we are seeing very good improvement, especially in our full service business. As I said, in Q3, we had stronger same-store sales in full service and in discount. This is not a surprise for us. This was expected. I said that before.

Speaker #5: It's a good question. So a couple of things. So pretty stable to previous quarters in terms of what we're seeing in the market. Customers continue to look for value.

Speaker #5: And I think our results are showing that we're doing really good there in all formats. It's our day-to-day operation to provide value to customers.

Speaker #5: So we know that customers are looking for value. And I think our promotional, our offering is more and more relevant. And this is why we are seeing very good improvement, especially in our full-service business.

Speaker #5: As I said, in Q3, we had stronger same-store sales in full-service than in discount. And this is not a surprise for us. This was expected.

Pierre St-Laurent: The reason why it's that simple, so the full-service stores in 2017 and the full-service stores today, very different. I gave a couple of examples of things that we did over the last years and most recently to provide more value to customers, and I think we have good results with that. That means that customers are seeing that value in our stores. That's the thing. Promotionally, no major changes. The same promo penetration, pretty stable TPR. But again, we have to stay focused on staying relevant for customers, and the value-seeking approach we have right now is paying off. Other than that, I don't see any major things. I think competition is very disciplined on promotional and things like that, but no major changes.

Speaker #5: I said that before. And the reason why it's that simple so the full-service stores in 2017 and the full-service stores today are very different.

Speaker #5: And I gave a couple of examples of things that we did over the last years. And most recently, to provide more value to customers, and I think we have good results with that.

Speaker #5: That means that customers are seeing that value in our stores. So that's the thing. Promotionally, no major changes. The same promo penetration. Pretty stable TPR.

Speaker #5: But again, we have to stay focused on we have to stay relevant for customers and the value-seeking approach we have right now is paying off.

Speaker #5: But other than that, I don't see any major things in competition is very disciplined. On promotional and things like that. But no major changes.

Pierre St-Laurent: We are seeing, obviously, inflation pressure, but it's highly isolated in few categories. We have good plan to mitigate that. We have good plan to offer alternative to customers to mitigate with inflation, and I think, again, we're doing well on that.

Speaker #5: We are seeing obviously inflation pressure, but it's highly isolated in few categories. We have good plans to mitigate that. We have good plans to offer alternatives to customers to mitigate with inflation.

Speaker #5: And I think, again, we're doing well on that.

Chris Li: Perfect. Thank you very much. I have maybe a couple of questions for Costa. First one is, I know you plan to provide us with more details on F27 when you report Q4 results in June. I just wanna ask you, just at a high level, do you believe for F27 you can perhaps exceed your financial framework of 8% to 11% EPS growth next year with some of these incremental benefits from the Voilà Alberta closure?

Speaker #9: Perfect. Thank you very much. And I have maybe a couple of questions for Costa. First one is I know you plan to provide us with more details on F27 when you report Q4 results in June.

Speaker #9: But I just want to ask you, just at a high level, do you believe for F'27 you can perhaps exceed your financial framework of 8 to 11 percent EPS growth next year, with some of these incremental benefits from the AVOLA Alberta closure?

Constantine Pefanis: I think, it's important that, you know, we speak more to these details when we're ready to talk about our strategy. At a very high level, that's the expectation, is that the reason why we looked at our e-commerce operation the way we did was to have the benefit of reductions in OpEx. That allows us room to reinvest in the business so that we can focus on growing the business.

Speaker #5: Yeah. I think it's important that we speak more to these details when we're ready to talk about our strategy. But at a very high level, that's the expectation is that the reason why we looked at our e-commerce operation the way we did was to have the benefit of reductions in OPEX.

Speaker #5: That allows us room to reinvest in the business so that we can focus on growing the business.

Chris Li: Okay, that's great. My last question, just also on Voilà. When would a decision be made on the Vancouver CFC?

Speaker #9: Okay. That's great. And then my last question just also on AVOLA. When would a decision be made on the Vancouver CFC?

Constantine Pefanis: I think what we're saying is that we've just put a pause on that. That's what we're continuing to say. Not much else to add at that point. Again, you know, as we talk about our refreshed e-commerce strategy in the quarters ahead, that will provide you additional color around that.

Speaker #5: I think what we're saying is that we've just put a pause on that. And that's what we're continuing to say. Not much else to add at that point.

Speaker #5: But again, as we talk about our refreshed e-commerce strategy in the quarters ahead, that will provide you additional color around that.

Chris Li: Okay, great. Thanks very much. Yeah, all the best.

Speaker #9: Okay, great. Thanks very much. And yeah, all the best.

Operator 2: Your next question comes from Michael Van Aelst from TD Cowen. Please go ahead.

Operator: Your next question comes from Michael Van Aelst from TD Cowen. Please go ahead.

Speaker #3: Your next question comes from Michael Van Helst from TD Cowan. Please go ahead.

Michael Van Aelst: Hi, good morning. You covered a lot of it, but I just wanted to touch back on the competitive environment versus the gross margin performance. You know, you've had 2 or 8 straight quarters of very strong gross margin expansion, and this quarter it was relatively flat, excluding the wholesale and non-recurring. And you've also talked about providing more value and full service, which can come in many ways, but I guess it could also come through better value, better, you know, better promotions, things like that. Is it? You know, have you just run through the gamut of most your gross margin expansion initiatives and now you're at a more normal pace, or are we seeing at least some level of promotional intensity in pickup or competitive activity pickup?

Speaker #10: Hi. Good morning. You covered a lot of it, but I just wanted to touch back on the competitive environment versus the gross margin performance.

Speaker #10: You've had two or eight straight quarters of very strong gross margin expansion and this quarter it was relatively flat excluding the wholesale and non-recurring.

Speaker #10: And you've also talked about providing more value in full service, which can come in many ways, but I guess it could also come through better value, better promotions, things like that.

Speaker #10: So is it are you just running have you just run through the gamut of most of your gross margin expansion initiatives and now you're at a more normal pace?

Speaker #10: Or are we seeing at least some level of promotional intensity pick up, or competitive activity pick up?

Pierre St-Laurent: As I said, the promo penetration hasn't changed. Remains stable. It's a lot of one-time things in Q3. As I said, year to date, we are in the guidance we gave you so far year to date with 18 BPS margin improvement. In our radar, in our planning, we continue to believe we can have gains in gross margin by 10 to 20 BPS. We're very confident to deliver on it. We have a lot of initiatives, but this has nothing to do with promo penetration. Very, very important. We're talking about optimization, we're talking about assortment, and again, the value is not one-dimensional price. It's multiple things that drive value for customers. Customers have different filter to see value in our store.

Speaker #5: As I said, the promo penetration hasn't changed. It remains stable. It's a lot of one-timers things in Q3. As I said, year to date, we are in the guidance we gave you at so far year to date with we are 18 BPS margin improvement in our radar, in our planning.

Speaker #5: We continue to believe we can have gains in gross margin by 10 to 20 BPS. We're very confident to deliver on it. We have a lot of initiatives, but this has nothing to do with promo penetration.

Speaker #5: Very important. We're talking about optimization. We're talking about assortment. And again, the value—it's not one-dimensional. It's multiple things that drive value for customers.

Speaker #5: Customers have different filters. You see value in our store. They're all different. And we have to focus on all elements of the value equation, including the price.

Pierre St-Laurent: They're all different, and we have to focus on all element of the value equation, including the price. I think we have been able to demonstrate value through all five key elements of the value equation. Nothing to do with promo penetration. Confident to deliver on our framework and our guidance we gave to you, and we see opportunity ahead of us to improve it.

Speaker #5: But I think we have been able to demonstrate value through all five key elements of the value equation. So nothing to do with promo penetration.

Speaker #5: Confident to deliver on our framework and our guidance we gave to you. And we see opportunity ahead of us to improve it.

Michael Van Aelst: Okay, good to hear. Just a clarification on the OpEx benefits from the cost optimization program. It sounds like those benefits are gonna ramp up through 2027. Is this a multi-year initiative where we're gonna see this be a tailwind for, you know, 2, 3 years? Is this more so, you know, 18 months, and then you've captured most of it?

Speaker #10: Okay. Good to hear. And then just a clarification on the OPEX. Benefits from the cost optimization program. So it sounds like those benefits are going to ramp up through 2027.

Speaker #10: Is this a multi-year initiative where we're going to see this be a tailwind for two, three years? Or is this more so 18 months and then you've captured most of it?

Constantine Pefanis: Yeah, Michael, I think the way we look at it is that we're constantly looking for us to optimize our cost structure, very important. Again, as we focus on growing our business, we will see, you know, leverage improve, especially as Pierre mentions, our focus on realizing the benefits of initiatives that we currently have in play. You know, as we've talked at length about our e-commerce change, you know, that's part of the philosophy, is that how do we change our business in order to have the benefit over multiple years, you know, growing our top line and having cost optimization is the goal.

Speaker #5: Yeah, Michael, I think the way we look at it is that A, we're constantly looking for us to optimize our cost structure. Very important.

Speaker #5: But again, as we focus on growing our business, we will see leverage improve especially as Pierre mentions our focus on realizing the benefits of initiatives that we currently have in play.

Speaker #5: But as you as we talk that length about our e-commerce change, that's part of the philosophy is that how do we change our business in order to have the benefit over multiple years?

Speaker #5: Growing our top line and having cost optimization as the goal.

Pierre St-Laurent: Top line will grow faster than the expenses. This is our focus. We have a CAD 33 billion company, and there's a lot of opportunity for us to get the operating leverage, and this is exactly what we're going to do. Again, transformation is behind us. Our focus is running the business. It's something, it's a long-term strategy, and we believe there's a lot of potential.

Speaker #10: Top line will grow faster than the expenses. This is our focus. We have for 33 billion company, and there's a lot of opportunity for us to get the overthink leverage.

Speaker #10: And this is exactly what we're going to do. And again, transformation is behind us. Our focus is driving the business. So it's something it's a long-term strategy, and we believe there's a lot of potential.

Michael Van Aelst: Perfect. Thank you.

Speaker #10: Perfect. Thank you.

Operator 2: Your next question comes from John Zamparo from Scotiabank. Please go ahead.

Operator: Your next question comes from John Zamparo from Scotiabank. Please go ahead.

Speaker #3: Your next question comes from John Zamporo from Scotiabank. Please go ahead.

John Zamparo: Thank you. Good morning. A couple of clarifications and then one question. On the gross margin, you'd said it was up marginally, I think was the term. Is that excluding both the wholesale customer mix and all of those one-time items that you're referring to?

Speaker #10: Thank you. Good morning. A couple of clarifications, and then one question. On the gross margin, you’d said it was up marginally—I think that was the term.

Speaker #10: Is that excluding both the wholesale customer mix and all of those one-time items that you're referring to?

Pierre St-Laurent: Absolutely.

John Zamparo: Okay. On the one-third of the CAD 95 million from the Alberta CFC to be reinvested, is the reinvestment solely going to Empire's e-commerce strategy, or is it some of it allocated to different parts of the business?

Speaker #5: Absolutely.

Speaker #10: Okay. And then on the one-third of the 95 million dollars from the Alberta CFC to be reinvested, is the reinvestment solely going to Empire's e-commerce strategy, or is it some of it allocated to different parts of the business?

Pierre St-Laurent: Yeah, John, it's allocated to different parts of the business. It's how do we take costs out of one part of the business to get the benefit across multiple parts.

Constantine Pefanis: Yeah, John, it's allocated to different parts of the business. It's how do we take costs out of one part of the business to get the benefit across multiple parts.

Speaker #5: Yeah, John, it's allocated to different parts of the business. It's, how do we take costs out of one part of the business to get the benefit across multiple parts?

John Zamparo: Okay, understood. Then my question's on store growth across the industry, not specific to Empire, but we've heard from some of your peers that the increase in square footage is having somewhat of an impact, at least. I wonder if you'd agree with that, and are there any pockets of the country where you're seeing relatively more competitive behavior?

Speaker #10: Okay. Understood. And then my question's on store growth across the industry, not specific to Empire, but we've heard from some of your peers that the increase in square footage is having somewhat of an impact, at least.

Speaker #10: I wonder if you'd agree with that. And are there any pockets of the country where you're seeing relatively more competitive behavior?

Pierre St-Laurent: I won't comment on other strategy. One thing I can tell you, it's as I said previously, transformation is behind us. We have many area of the business, we have growth opportunity, we are underdeveloped, and we'll go after that. Discount is one example. Pharmacy is another example. Retail media is another example. Now we're focusing on growth, and we will allocate capital with discipline. That's very important. We're looking for profitable growth, and we will deliver on it. We see opportunity everywhere, so it's different. White spaces are market by market, and this is our approach in real estate. In some market, we see opportunity in discount. In some other opportunity, we're seeing opportunity with full service stores. In some other markets, we see opportunity to grow the pharmacy business.

Speaker #5: I won't comment on other strategy. One thing I can tell you—it's as I said previously—transformation is behind us. We have many areas of the business.

Speaker #5: We have growth opportunity. We are underdeveloped, and we'll go after that. Discount is one example. Pharmacies is another example. Retail media is another example.

Speaker #5: So now we're focusing on growth. And we will allocate capital with discipline. That's very important. We're looking for profitable growth. And we will deliver on it.

Speaker #5: So we see opportunity everywhere. So it's different. White spaces are market by market. And this is our approach in real estate. In some markets, we see opportunity in discount.

Speaker #5: In some other opportunities, we're seeing opportunity with full-service stores. In some other markets, we see opportunity to grow the pharmacy business. So this will be addressed market by market, but we see plenty of opportunity for growth in the future for us if we allocate our capital smartly going forward.

Pierre St-Laurent: This will be addressed market by market, but we see plenty of opportunity for growth in the future for us if we allocate our capital smartly going forward.

John Zamparo: Okay. That's all for me. Thank you very much.

Speaker #10: Okay. That's all for me. Thank you very much.

Operator 2: Your next question comes from Étienne Ricard from BMO Capital Markets. Please go ahead.

Operator: Your next question comes from Étienne Ricard from BMO Capital Markets. Please go ahead.

Speaker #3: Your next question comes from Etienne Ricard from BMO Capital Markets. Please go ahead.

Étienne Ricard: Thank you, and good morning. To circle back on the new leadership appointments, how do you expect these changes to impact the reporting structure to you, Pierre, and ultimately, your decision-making capabilities?

Speaker #11: Thank you, and good morning. To circle back on the new leadership appointments, how do you expect these changes to impact the reporting structure to UPI?

Speaker #11: And ultimately, your decision-making capabilities?

Pierre St-Laurent: That's a good question. First of all the moves we've made are all internal. That's the good news. People are under my team. They know the business really well. They know the company really well. They know the culture really well. I don't see any major disruption by this change. It's the opposite. Since we did announce it, a lot of energy and I saw a lot of energy in the organization. I've got very good feedback at the store level. For store level, it's clear who's accountable for what. This is so important. They know who they have to talk to if there's something related to customers or to stores. The accountability is very, very clear, and the structure is aligned on the strategy.

Speaker #5: That's a good question. First of all, all the move we've made are all internal. So that's the good news. People are under my team.

Speaker #5: They know the business really well. They know the company really well. They know the culture really well. So I don't see any major disruption by this change.

Speaker #5: It's the opposite. Since we did announce it, a lot of energy I saw a lot of energy in the organization. I've got very good feedback at the store level.

Speaker #5: For store level, it's clear who's accountable for what. And this is so important. They know who they have to talk to if there's something related to customers or to stores.

Speaker #5: So the accountability is very, very clear. And the structure is aligned on the strategy. And I spoke about my four obsessions. And the structure is aligned on it.

Pierre St-Laurent: I spoke about my four obsessions, and the structure is aligned on it. I think we will accelerate things by having clear accountability. We saw opportunity to combine functions, to have a one lens to see our customers, and the Chief Customer Officer is responsible to focus on customers from multiple channel. This is key for us because we have to be aligned. We have to make sure that it's, we're not replicating things for nothing. We're looking for simplification, optimization, and clear accountability. I'm very pleased. It's, again, we have very strong people internally. We have a strong succession plan. We send a really good signals internally with the confidence we have in our people. Energy is very high right now, and I'm very pleased to see that.

Speaker #5: So I think we will accelerate things by having clear accountability. We saw opportunity to combine functions to have one lens to see at customers.

Speaker #5: And the Chief Customer Officer is responsible to focus on customers from multiple channels. And this is key for us because we have to be aligned.

Speaker #5: We have to make sure that it's we're not replicating things for nothing. We're looking for simplification, optimization, and clear accountability. So I'm very pleased.

Speaker #5: It's, again, we have very strong people internally. We have a strong succession plan. We send a really, really good signals internally with the confidence we have in our people.

Pierre St-Laurent: We have 130,000 teammates across the country, and if the energy is there across the board, we'll have good results.

Speaker #5: So, energy is very high right now, and I'm very pleased to see that. We have 130,000 teammates across the country, and if the energy is there across the board, we'll have good results.

Étienne Ricard: I believe your Chief Customer Officer is on the line. What are some key focus areas in terms of the marketing strategy and the customer outreach approach?

Speaker #11: I believe your chief customer officer is on the line. What are some key focus areas in terms of the marketing strategy and the customer outreach approach?

Pierre St-Laurent: Yeah. Thank you for asking that. I will ask him to answer the question. I trust him 100 percent on his answer.

Speaker #5: Yeah. Thank you for asking. I will ask him to answer the question. I trust him 100% on his answer.

Luc L'Archevêque: Hi, everyone. Don't expect a massive transformation. All the things that we are working on right now are the right ones. We bring customer value. We're focused on the needs of the customers. Just expect from us to leverage more what we have today and be a little bolder on how we go to market.

Speaker #12: Hi, everyone. Don't expect a massive transformation. All the things that we are working on right now are the right ones. We bring customer value.

Speaker #12: We're focused on the needs of the customers. Just expect from us to leverage more what we have today and be a little bolder on how we go to market.

Étienne Ricard: Thank you, team.

Pierre St-Laurent: Thank you.

Luc L'Archevêque: You're welcome.

Speaker #11: Thank you, Tim.

Operator 2: Your next question comes from Irene Nattel from RBC Capital Markets. Please go ahead.

Operator: Your next question comes from Irene Nattel from RBC Capital Markets. Please go ahead.

Speaker #12: You're welcome.

Speaker #3: Your next question comes from Arin Natel from RBC Capital Market. Please go ahead.

Irene Nattel: Thanks, and thank you for taking the follow-up call. We've now heard the word pharmacy twice on this call, and that's probably two times more than we've heard it on any call in a really long time. Can you talk a little bit more about what you know, what you're thinking about pharmacy? Is this sort of more standalone under the Lawtons banner? Is this more adding pharmacies to food stores? Yeah, please.

Speaker #13: Thanks, and thank you for taking the follow-up call. We've now heard the word 'pharmacy' twice on this call, and that's probably two times more than we've heard it on any call in a really long time.

Speaker #13: So, can you talk a little bit more about what you're thinking about pharmacy? Is this sort of more standalone under Lawton's banner? Is this more adding pharmacies to food stores?

Pierre St-Laurent: Okay, a good question. We did focus on the core in the last seven, eight years. Pharmacy was not our primary focus. In the change I made in the structure, I intentionally bring pharmacy at the executive leadership team, because we believe that putting a bit more focus and love in this business has benefit to capture, and to your point, in efficiencies, in focus, in relevancy with customers, and in growth. We see potential growth, we have an interesting baseline, and we can build on it. We see the opportunity, but I see a lot of opportunity personally. We will grow in a profitable way, and there's a lot of optimization we see.

Speaker #13: Yeah, please.

Speaker #5: Okay, good question. So, we did focus on the core. In the last seven or eight years, pharmacy was not our primary focus. And in the change I made in the structure, I intentionally brought pharmacy onto the executive leadership team.

Speaker #5: Because we believe that putting a bit more focus and love in this business has benefited the capture. And to your point, inefficiencies, in focus, in relevancy with customers, and in growth.

Speaker #5: And we see potential growth. We have an interesting baseline, and we can build on it. So we'll see the opportunity, but I see a lot of opportunity personally.

Speaker #5: But again, we will grow on a profitable way. And there's a lot of optimization we see. And Doug Nathanson, our new chief pharmacy officer, spent the week in with the pharmacy team last week, and he came with a lot of exciting ideas to grow and improve profitability of this business.

Pierre St-Laurent: Doug Nathanson, our new Chief Pharmacy Officer, spend the week with the pharmacy team last week, and he came with a lot of exciting ideas to grow and improve profitability of this business.

Irene Nattel: Again, just to sort of come back to a question. When you talk about grow, are you talking about sort of you mentioned within new stores. Would this be, do you see growth potential for the Lawtons banner?

Speaker #13: So again, just to sort of come back to the question, when you talk about grow, are you talking about sort of and you mentioned within new stores.

Speaker #13: So would this be do you see growth potential for the Lawton's banner?

Pierre St-Laurent: I see growth everywhere, my 34 years in the business, but I will give a little more time to Doug. He has been appointed 2 weeks ago. In Q4, I think we'll have more to share in terms of strategy for the entire stuff we're looking at in terms of where we see growth, where we see potential in the future. I can tell you that pharmacy will be a component of it. Stay tuned until Q4.

Speaker #5: I see growth everywhere. My 34 years in the business. But I will give a little more time to Doug. There's been appointed two weeks ago.

Speaker #5: And in Q4, I think we'll have more to share in terms of strategy for the entire stuff we're looking at in terms of where we see growth, where we see potential in the future.

Speaker #5: But I can't tell you that pharmacy will be a component of it. So stay tuned until Q4.

Irene Nattel: Thank you.

Operator 2: Your next question comes from Vishal Shreedhar from National Bank. Please go ahead.

Operator: Your next question comes from Vishal Shreedhar from National Bank. Please go ahead.

Speaker #13: Thank you.

Speaker #3: Your next question comes from Vishal Sridhar from National Bank. Please go ahead.

Vishal Shreedhar: Hi. Thanks for taking my follow-up. Relating to growth, Pierre, how does this new management team think about acquisitions, and what kind of areas should we think about acquisitions in, if it's a focus?

Speaker #14: Hi. Thanks for taking my follow-up. Relating to growth, Pierre, how does this new management team think about acquisitions and what kind of areas should we think about acquisitions in if it's a focus?

Pierre St-Laurent: It's market by market opportunity. We have a very strong balance sheet. Again, we will use that capacity diligently with discipline. We're always open for growth. Again, transformation is behind us. We did invest a lot of money to fix the business. The business is solid right now, and it's our intention, the leadership team, to grow that business, on this strong foundation. Small and large acquisition. I like growth. I've been involved in real estate many years in my career. I'm passionate about growth. In our business, if we don't grow, we decline. To get the operating leverage on all the investment we've made in the past. We strongly believe in potential on many different fronts. We gave many examples this morning on media, retail media, on discount, in pharmacy, in full service, in optimization, in M&A.

Speaker #5: It's a market-by-market opportunity. And we have a very strong balance sheet. But again, we will use that capacity diligently, with discipline. So we're always open for growth.

Speaker #5: Again, transformation is behind us. We did invest a lot of money to fix the business. The business is solid right now. And it's our intention, the leadership team, to grow that business on this strong foundation.

Speaker #5: So small and large acquisition. I like growth. I've been involved in real estate many years in my career. I'm passionate about growth. And in our business, if we don't grow, we decline.

Speaker #5: So to get the overthink leverage on all the investment we've made in the past. So we strongly believe in potential. On many different fronts, we gave many examples.

Speaker #5: This morning on media, retail media, on discount, and pharmacy, and full service, and optimization, and M&As. So again, the focus is on driving the business—it's no more on the transformation.

Pierre St-Laurent: Again, the focus is on driving the business, no more on the transformation.

Vishal Shreedhar: Thank you.

Operator 2: Your next question comes from Chris Li from Desjardins. Please go ahead.

Operator: Your next question comes from Chris Li from Desjardins. Please go ahead.

Speaker #14: Thank you.

Speaker #3: Your next question comes from Chris Lee from Desjardins. Please go ahead.

Chris Li: Oh, thank you. Just maybe a quick clarification question. Constantine Pefanis, when you mentioned two-thirds of those, Voilà savings will be in SG&A, I think, like, depreciation is part of SG&A, I believe. Can you share with us, like, how much of that would be more like cash expense versus non-cash?

Speaker #14: Oh, thank you. Just maybe a quick clarification question. Costa, when you mentioned two-thirds of those voilà savings will be in SG&A, I think depreciation is part of SG&A, I believe.

Speaker #14: So, can you share with us how much of that would be more like cash expense versus non-cash?

David Brown: Yeah, largely cash.

Constantine Pefanis: Yeah, largely cash.

Chris Li: Largely cash. Okay. Thank you.

Speaker #5: Yeah, largely cash.

Speaker #14: Large cash. Okay. Thank you.

Operator 2: There are no further questions at this time. I will turn the call over back to Katie for closing remarks.

Operator: There are no further questions at this time. I will turn the call over back to Katie for closing remarks.

Speaker #3: And there are no further questions at this time. I will turn the call over back to Katie for closing remarks.

Katie Brine: Thank you, Julie. We appreciate your continued interest in Empire. If there are any unanswered questions, please contact me, and we look forward to having you join us for our Q4 fiscal call on 18 June. Thank you.

Speaker #15: Thank you, Julie. We appreciate your continued interest in EMPIRE. If there are any unanswered questions, please contact me. And we look forward to having you join us for our fourth-quarter fiscal call on June 18th.

Operator 2: Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.

Operator: Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.

Speaker #15: Thank you.

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