Companhia Siderurgica Nacional S.A.

Good morning, ladies and gentlemen, and welcome to the Loblaws, Inc. Third Quarter 2025 Results Conference Call. At this time, all lines are in listen-only mode. 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. This call is being recorded on Wednesday, November 12, 2025. I would now like to turn the conference over to Roy McDonald, Vice President, Investor Relations. Please go ahead.

Great. Thanks very much, Dani, and good morning, everybody. Welcome to the Loblaw Companies Limited Third Quarter 2025 Rebels Conference. As usual, I'm joined in the room this morning by Per Bank, our President and Chief Executive Officer, and Richard Dufresne, our Chief Financial Officer. So before we begin the call, I'll remind you that today's discussion will feature forward-looking statements which may include but are not limited to statements with respect to LABLA's anticipated future results. These statements are based on assumptions and reflect management's current expectations. As such, are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations. These risks and uncertainties are discussed in the company's materials filed with the Canadian Securities Regulators Any forward-looking statements speak only of the date they were made. The company disclaims any intent 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. Also, certain non-GAAP financial measures may be discussed or referred to today, so please refer to our annual reports and other materials filed with the Canadian Securities Regulators for a reconciliation of each of these measures to the most directly comparable gap financial measure. And with that, I'll turn the call over to Richard.

Thank you, Roy, and good morning, everyone. I'm pleased to report that we delivered another quarter of consistent financial and operational performance, reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service, and convenience to Canadians. Topline growth continues to be very strong, supported by the opening of 76 stores over the past 12 months, an increase in our retail square footage of 2%. On a consolidated basis, revenue grew by 4.6%, reaching $19.4 billion. Our drug retail business grew at 3.8%, and our food retail business grew at 4.8% in the quarter. Adjusted EBITDA increased by 7.2% to $2.2 billion, and margin improved by 20 basis points to 11.4%. Adjusted diluted net earnings per share grew by 11.3% to 69 cents, and on a gap basis, our net earnings per share increased by 4.8%. In food retail, we delivered higher sales, traffic, and basket growth, once again driving significant tonnage market share gains. Absolute sales outpaced same-store sales by 280 basis points at 4.8%, reflecting our new store growth, while our food same-store sales grew 2%. The impact from the stores we opened so far has been in line with expectations. We continue to see positive momentum across key categories in the right-hand side of our stores, notably in apparel, cosmetics, and H&E. That said, Edwin's from liquor specifically and tobacco and our exit from the optical business led to a net 30 basis point negative impact to same-store sale this quarter. Our Q3 internal CPI-like food inflation was lower than Canada's gross free CPI of 3.6%. Our average article price data, or AEP, which reflects our customers' actual basket mix and includes non-food items not included in the CPI basket, was also lower than CPI. Our lower internal inflation metrics demonstrate that Canadians who shop our stores are finding more value. Cost increase requests from large global vendors continue to trend well above historical levels. In response, we're pushing back harder than ever to ensure that any increases we accept are justified. Our hot discount banners continue to deliver strong sales growth based on consumers' ongoing focus on value. Momentum continues to build across the hard discount stores we added to our network through conversions and new builds, proving that our strategy is resonating very well with Canadians. We're also pleased with the momentum and strong performance in our conventional stores, which improve tonnage market share within their conventional sector. This quarter, we announced that Specsavers would be opening 111 locations within Loblaw stores to replace our Theodore and Pringle optical business. Exiting this business resulted in a $30 million adjusted charge this quarter. Going forward, we expect it to negatively impact food same-store sales by an approximate 20 basis points until we lap this transaction, while the exit from the Theodore and Pringle business, coupled with our new agreement with Specsavers, is expected to generate approximately $10 million in annual run rate earnings accretion. In drug retail, absolute sales increased 4.3%, excluding the impact of the sale of WellWise while same-store sales grew 4%. Pharmacy and healthcare services grew same-store sales by 5.9%, driven by broad strength in prescription and new healthcare services. Our specialty drug prescription growth continued to lead our pharmacy performance. Patients continued to respond positively to the convenience and expanded level of primary care we offer through our more than 1,800 pharmacies across the country, including our 209 in-store clinics. We're on track to reach our target of 250 in-store clinics opened across Canada by the end of this year. Our front store same-store sales continue to improve, growing 1.9%, reflecting the ongoing strength of our beauty category. This more than offset the impact from the exit of certain electronics category in the prior year, which will no longer be a headwind to same-store sales after the fourth quarter. We continue to be pleased with the underlying strength, profitability, and sales momentum of Shoppers Drug of Mark front store business. Online sales in the quarter increased by 18% across our retail businesses. Delivery continues to lead growth in the online grocery channel, and we continue to be pleased with our online sales penetration in both food and pharmacy. Our retail gross margin improved 20 basis points, led by drug retail, reflecting improvements in shrink in both drug and food. Food trading margins remain stable. Our SG&E rate as a percentage of sales was stable, with operating leverage from higher sales offsetting incremental costs related to the opening of new stores and the successful ramp-up of our new automated distribution facility in East Glenbury. This new DC continues to ramp up ahead of plan, costs remain lower than budgeted, and we are on track to ship significantly more cases than planned this year. We have begun fulfilling orders in our ambient section, which is ramping up a full quarter ahead of plan. We're making considerable progress on the construction of our second automated DC in South Caledon, Ontario. The project is on schedule. In the quarter, retail adjusted EBITDA grew 6.8%, and EBITDA margin increased by 20 basis points to 11.1%. PC financial revenue increased 5.5%, driven by higher sales in our mobile shop and higher insurance commission income. Our PC money spending and savings accounts are performing very well. Customer account deposits increased by $174 million in the quarter. This increase in deposits is evidence of strong customer engagement and helps us lower our bank's funding costs. The bank's adjusted earnings before tax increased by $13 million, or 36.1%, primarily driven by higher revenue, lower operating costs, and favorable impact from our ECL provisions. We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our loss provisioning with a strong and very well-capitalized balance sheet. Free cash flow from the retail segment was $325 million in the quarter, and in the quarter, we repurchased $450 million worth of common shares. Our balance sheet remains strong, and we continue to improve our key return metrics. Our return on equity is 24.8%, and our return on capital is 11.9%. Looking ahead to Q4, while it's still early in the quarter, we are confident our results will be in line with our financial framework. Reflecting our strong performance year-to-date, we now expect full-year adjusted EPS growth to increase slightly from high single digits into the low double digits, excluding the impact of the 53rd week. Our assets are well positioned, we are executing well, and we are investing for the future, all while delivering consistent operational and financial performance. I'll now turn the call over to Bear.

Thanks, Richard, and good morning, everyone. I'm really pleased with our third quarter performance. We continue to generate strong revenue growth through a combination of same-store sales strength and the positive impact of our strategic investment in new stores. This top-line growth of 4.6% allowed us to deliver 11.3% adjusted EPS growth this quarter and will help us support our long-term earnings expansion. As Richard discussed, we accomplished this while increasing our spending to support the opening and ramp up of our new stores, the accelerated transition to our new 1 million square foot DC, and the lapping of some real estate gains from last year. This is a clear demonstration of the strength of our business and our ability to deliver consistent financial results. With our broad footprint, we know many Canadians are looking for opportunities to get the most out of their budgets. in this challenging economic environment, and we believe it's our responsibility to deliver the quality, value, service, and convenience across every corner of our business. Every day we fight to earn our customers' business, whether that's through competitive pricing, meaningful promotions, through omnichannel service, or personalized rewards through our PC Optimum program. As a result, more Canadians shopped our stores, and we generated $857 million in additional revenue. In drug retail, we delivered another quarter of positive momentum in our front-store sales. Our perceived cosmetic continued to be very strong, supported by fragrance and derm categories. Beauty categories remained strong. In pharmacy and healthcare services, we saw ongoing strength in acute and chronic scripts, and in our specialty drug and new prescribing services categories continued to deliver strong double-digit growth. In drug retail, We are enhancing our omnichannel presence, offering our customers more choice and speed. We're growing delivery through skip and now Uber Eats and scaling our buy online, pick up from store network to cover 750 stores by early next year. This delivers even greater convenience, supporting shoppers, customers, promised to help make lives easier. Across the country, we have now opened 12 new pharmacies and 55 new pharmacy clinics this year, providing expanded scope of care service to Canadians. In food retail, same-store traffic was up and basket growth was positive. This contributed to tonnage market share gains. Our hard discount banners also continued to outperform same-store sales growth and drove the majority of our absolute growth. In the quarter, we opened 19 maxi and no-fill stores. With 16 of these being small-format stores, we are bringing hard discounts to underserved urban pockets as well as suburban communities. We see this as an investment to strengthen our position in what is a long-term consumer trend towards value. Similarly, we saw higher film store sales growth rates in our superstore banners. Within the right-hand side, we saw a strong growth from our general merchandise refresh, and we're also showing very positive results from the right-hand side-inspired refresh in our medium-sized stores. Turn to tariffs. Following the removal of Canadian counter tariffs in September, The related cost increases and corresponding T-labels were removed from our shelves as we sold through the inventory. During this time, we received a lot of positive feedback that our efforts were helping our customers make informed decisions. As always, from every challenge comes opportunity. More customers are discovering quality Made in Canada products. So we continue to support these customers and have now sourced and onboarded more than 200 new Canadian vendors since the start of this year. We actually believe that this is good for both our customers and good for Canadian producers and manufacturers, and good for the economy. Our digital sales growth remains very strong, and our weekly engaged users hit an all-time high as we continue to differentiate ourselves by enhancing customer experience with more personalization and choice. We are excited to have begun launching Uber Eats across our network. This provides customers with optionality across third-party delivery providers which already includes Skip, Instacart, and DoorDash. And some of you may have noticed something new on your last shop. Three of our GTA NoFill stores have implemented PCO Go. This is a new feature and is designed to provide a faster shopping experience, enabling customers to scan grocery as they shop with a real-time estimated total of the bill and streamlining their checkout process. Of course, this has only been less than a week, but we are seeing a 90% offset for the customers who have tried this new feature. So feel free to check it out. It's great. We are pleased with the strategic foundation that we have built and are excited about the opportunities that lie ahead. The strength and diversity of our business provides differentiation, unique growth opportunities, and allows us to deliver consistent operational and financial results. This provides the foundation to make substantial investments today and to accelerate our longer-term growth ambitions. Trade as a Service is a great example. Today we are leveraging our existing supply chain delivery infrastructure, enabling us to rent out our empty trucks as a return from the store delivery routes. Next year, this business is expected to generate more than $200 million in EBIT, delivering another year of more than 20% growth. Similarly, our advanced media business is expected to generate over 100 million in EBIT next year. So we're scaling this business with the rollout of more in-store digital screens in partnership with Stratocash. Customers like the immediacy and relevance of in-store screens. Whether it's a beauty tip, seasonal promotions, or a great product worth trying, the content feels personal and useful in the exact moment it matters. So advertisers value the ability to reach 4 million plus in-store shoppers every single day at the point of decision with measurable impact. A visual example of this growth opportunity is that you will start to see more screens with new content in our stores over the coming months. And we're very pleased with the strategic advantage our rich first-party data provides. It seems every week we're implementing a data-driven solution that allows us to better understand and serve our customers, improve operations, make smarter decisions, and deliver even more relevant offers. For example, we are now aggregating customer data to guide and optimize space planning for our store network. This initiative is driving a material sales lift, and it ensures each store better reflects the needs and preferences of its local customers. Our data assets will be a key differentiator for Loblaw's continued success and growth. These examples, plus our PC optimal loyalty program and our expanding e-commerce business support higher growth, higher margin business opportunities that should have a flywheel effect across everything that we do. This year and next will mark an important milestone in our future growth. We're well on our way in the construction of the second 1 million square foot DC in South Caledon, an identical twin to the East Grillingbury DC construction. that we are currently ramping up. We remain encouraged by the success of our new small format discount stores and the new clinic, Equip Pharmacist. And tomorrow, November 13th, we will be excitedly watching the new opening of our second T&T in the Seattle area. And by the end of next year, we expect to have another five T&T stores open in Washington and California. So our strategy remains anchored by unmatched core assets, excellence in retail operations, and consistent operational financial performance. So looking ahead, we are well positioned to serve the everyday needs of Canadians today and in the future. I'm excited about the launch of our Holiday Insiders last week. This has been a holiday tradition for more than 40 years in Canada. Our team and I do take great pride in showcasing innovative products crafted so Canadians can celebrate and share the spirit of the season with family and friends. I just invite you to try my personal favorite this year. I know it's probably always ice cream, so it's the Santa milk and cookie ice cream that has been received very well by our customers. I'd also like to call out the amazing generosity that happens every day in all of our grocery stores across the country. I'm very proud to share that each of our stores is partnered with at least one local school to help support the students with their access to nutritious food, removing a significant barrier to learning. This year, the PCA Children's Charity met its long-term goal of feeding one million Canadian children. Thanks to the support of our customers and colleagues, PCA Children's Charity is the nation's largest charitable direct-to-school food program, where 100% of all customer donation goes to feed the students in their own community. I'd like to thank all members of the Loblaw team for, once again, their tremendous efforts. Your passion and hard work are what allows us to consistently deliver the quality value and service that people in your community relies on every single day. Finally, I will close by letting you know that we have successfully completed the global search for the key role of president for Shoppers Rockmark. So I'm very pleased to announce the appointment of Gregors Vigdelsborg as president. Gregors will be joining us January 26th next year, following his transition from Matrix Group, where he's currently Group CEO, He will officially take up his responsibilities on March 16th after a thorough onboarding process. Mattress is a public trade health and beauty retailer with over 500 locations across Denmark, Sweden, Norway, and Finland. And Gregers is an exceptional leader and retailer with a proven track record in driving growth and performance, digital innovation, and relational excellence. Shoppers has a well-established strategy and leadership team. And I'm highly confident that Gregers will help take the organization to the next level. In making this announcement, I would also like to acknowledge the significant contribution of David Markwell, interim president of Shoppers and head of our technology and analytics group. David threw himself into this interim role with great energy and enthusiasm and has made a tremendous difference. He will, of course, support Gregor's transition until he starts his official accountabilities on March 16th and also continue his role as executive rights president technology and analytics, as well as supporting several key enterprise initiatives. Yes, that was the end of my script. I know it was long, but I just had so much I wanted to share with you. With that, I'll now open the floor for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star key followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star key followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, while we assemble the queue. Your first question comes from Irene Natel of RBC Capital Markets. Please go ahead.

Thanks, and good morning, everyone. A lot of great color there. Thank you. I was wondering if we could please just start with what you're seeing in terms of consumer behavior. Same-store sales growth of 2% in food was consistent with Q1, but admittedly a deceleration from the Q2 level. So just wondering below the surface, how should we be thinking about that, and how should we be thinking about the growth rate on a go-forward basis? Thank you.

Thank you. Good question. On consumer behavior, I would say that we are seeing more of the same. So our promo penetration stays high. It's higher than last year, but it's actually not higher than quarter two. Customers are still shopping more and more on hard discount, but we are not seeing it accelerating. So basically, we are seeing more of the same with regards to... to customer sentiment. At least that's what we see right now as we speak. Our food or our grocery, same-store sales number, just trust me, it's continued to be an important number for us, even though that more sales will be coming from our new stores and will help fuel our long-term performance. Also, I think it's important also to look at our same-store sales in a third of our business in shoppers, because there we saw the drop same-store sales at 3.8, and our front-store sales at 1.9, which was the best quarter in nine quarters. And adjusting for the electronics, then we're up at a 3% point of growth in front-store. So I think that's how I see it. So I'm pleased with our Q3 performance as we are heading into Q4. But maybe you have some more you would say, Richard, on this.

Yeah, Irene. So specifically, if you look at same-store sales in Q3, we need to go back to 2024. As you know, we hit some bumps in Q4 in the first half, towards the end of the first half. And so internally, we had to play some catch-up. to be able to recover over that bump. And so that led us to be somewhat more aggressive in the second half last year to be able to deliver on our market share objectives. So now we're comping through that. So that's simply us comping over what we did last year. Having said all that, I think what's key for us is if you look at our total food sales growth of 4.8%, And our internal inflation, which is less than 3%, the delta is essentially tonnage growth. So we've been gaining significant tonnage growth. We're on our way to deliver the best market share we've ever had on top of the best market share we had last year. So we feel very, very good about the business. But you're going to see this wonkiness in same-store sale for food for Q2 and Q4 this year.

And I think maybe I'll just add to that, Irene, that... how we see customers are changing and we saw it a bit in Q2 but also in Q3. If you look at meat, red meat market prices are increasing because of commodity prices increasing and then customers, they do understand how to navigate that because they're not just buying the same as they did last year. So they're buying more chicken as an example and you'll see the same in other categories If barriers goes up, then they'll buy the cheaper barriers or not buying barriers and buying something else. So that's how customers, they continue to navigate through inflation and keeping their costs low. And of course, as well, shifting to discount for some of our customers.

That's great. Thank you very, very much. And just switching to shoppers, can you talk to how we should think about The sustainability of that RX print as we lapped sort of, you know, year over year of continuous sort of, let's call it mid, higher mid single digit same store sales.

Yeah, the specialty drug category continues to grow quite significantly. We're going to see the introduction of generic drugs in that sector next year, which will affect the top line. But if we look historically on the introduction of generic drugs in general for our business, it's actually been a positive because we get more volume. And so that ends up generating more dollar profits for the organization.

Yeah, and maybe when the prices come down, we will see sales could increase as well. So what we know right now, it looks like we will continue the trend that we have seen in the past.

That's great. Thank you, and I'll be sure to try the Santa milk and cookie ice cream.

That's really good, Irene.

Okay. Your next question comes from Michael Van Alst of TD Cowan. Please go ahead.

Thank you. I just want to follow on some of Irene's questions. So you talked about market share gains in both discount and full service. And I think it's clear to a lot of people what you're doing in discount and how you're trying to gain share. But on the full service side, where you're not really adding stores, how are you gaining ton of share? What would you say is behind those gains?

Yeah, so just to be exact, when we say this every call, like the conventional channel share is going down, but we're doing better than our peers. And so we see that very clearly. So we're doing better than our peers in conventional, and obviously we're doing better than peers on discount.

Yeah, and we have a number of initiatives in our conventional business. So in our super stores, as you know, we are working on the right-hand side adding more brands into clothing and food. We are increasing our multicultural assortment. We're making a better shopping trip. We're working more with our digital offers. So we're doing a lot when it comes to our marketing, whether it's our patinos or Sears or Loblaw stores. There we are giving customers More value in the form of better service, better products, but also better pricing. So we're finding that sweet spot of combining value with the quality that we serve in our conventional banners.

Yeah, and net-net, just to be very clear, net-net we're gaining. When you add both of them together, we're gaining share.

Yeah, and we shouldn't forget TNT. We don't know about the share, but we know that if we're adding that, it's not in the Nielsen data, then it's even more because TNT is still a growth engine for us, both in Canada and, of course, what we're seeing in the U.S.

Okay, so conventional, I think we've heard in past quarters that conventional was growing a little bit. But it sounds like this quarter you're saying it isn't growing, but you're just... Oh, no, it's the same.

We've been saying the same thing, Michael. We've been saying the same thing.

Conventional channel... It's not growing with the same pace as the others.

But we're doing better than our peers.

Okay, but it's not growing at the same pace, but is it growing? No. Yes? Okay.

Yes. Yes, it's growing.

Okay.

Sales growth in market... are up, same store sale and market are growing, yes.

Okay, perfect. Thank you.

The next question comes from Mark Cardin of UPS. Please go ahead.

Good morning. Thanks so much for taking the question. So to start, you guys called out strengthen your superstore business. Was the contribution from these formats any bigger or smaller relative to last quarters? And then are you seeing many shifts in how consumers are shopping the stores? And just your thoughts in general on merchandising for the holiday. Thanks.

So, no, I think it's more of the same. And our super stores have a very, very strong position, especially in the West, where it's driving some significant sales. And the GM, so especially in the home. So toys, we're doing very well. home, and also clothing, and that's of course helping on our overall margin. So in general, Superstores is a good fit to us. And now we also, so our supermarket division, they combined our Atlantic Superstores and our Superstores in the West into one Superstore from coast to coast. So now we have 180 of those Superstores, which of course we'll try to get more of having those combined.

Okay, great. And then just on the drug retail side, what have your learnings been thus far from the shoppers locations that have offered some of the expanded health services capabilities? Have you found that it leads to higher spend in the front store as well, and just any quantification possible on the list? Thank you.

Yeah, overall they're doing better. And by end of this year, we will have met our target of having 250 shoppers drop mart with clinics. So, of course, right now it's mostly Alberta and it's Nova Scotia, and then we are seeing how much more we can do in other provinces as they open up for more scope. So we're really pleased with the performance we're seeing there, and, of course, it has a high level of impact on the rest of the business.

Great. Thanks so much. Good luck, guys.

Your next question comes from Mark Petri of CIBC. Please go ahead.

Yeah, thanks. Good morning. I just wanted to follow up maybe on competitive landscape just to clarify. Do you think the comment of gaining tonnage market share holds on a same-store basis, or would you say it's more stable there? And then second, I know CPI is noisy. So when you do your price benchmarking, would that suggest that Loblaw is an outlier with an internal inflation below CPI, or do you think that – that's essentially consistent across the industry.

I don't know what the others have, so I can't comment. But I can tell you from a market share perspective, year to date, we're gaining share and we're ahead of our plans for last year. And we're on our way to finish very strong. So, yes, we are. We are getting share.

I think on the market, for me, it stays very rational. It's a good competitive market to the benefit of customers here in Canada, but it also stays rational.

Yeah, okay. Thank you. And then on shoppers, also two questions. Just based on the behavior that you're seeing, how would you characterize consumer confidence? I know you called out strength and beauty. um, maybe just behavior within that category. If there's any, if there's any color and then second, you know, what is the impact been of your shift in your SME or approach on price and promo? Is there any, uh, adjustments to how you're positioning on that, uh, today?

I think the consumer sentiment, again, as I said before, it's, it's more of the same and we are seeing some, uh, some good growth in, in fragrance and, and in the derm category. So, so customers might not buy as many big electronic items, but, uh, But they definitely continue to buy fragrance and derm. So we're seeing a good, strong uplift, and that's helping our sales in Shabba's. We have not changed the way that we promote in Shabba's. We have lower prices. We started that November last year, and we continue to do so, but we have not really changed the way that we trade in Shabba's.

Yeah, business in Shabba's is pretty steady. Yeah. Steady as she goes.

Yeah. Okay. Fair enough. And then just last one, maybe just on by Canadian, I think last quarter you had commented that it accelerated from Q1. How would you characterize it as a factor in Q3? And what do you think the momentum is on that?

Yeah, no. So after the tariffs have gone, so we in Canada have moved the retaliatory tariffs, then prices on direct imported products from the US has gone down to normal. And, of course, we are seeing some customers who are going back to those products that they love now that they are much cheaper than they were, and that will have some impact on Canadian sales. Overall, Canadians just love to buy Canadian products, and that's also why we have added another 200 suppliers this year so far. So it's still up. But it's not up as much as it was before because of lowering prices of those products from the U.S.

Yeah, understood. Okay, appreciate all the comments. All the best.

Thank you.

Our next question comes from John Zamparo of Scotiabank. Please go ahead.

Thank you. Good morning. I wanted to ask about private label penetration, and I wonder if you could share the delta of growth rates in private label versus national brands in Q3 compared to recent quarters, and is there any change in terms of response you're seeing from national brands to try to support tonnage growth?

For us, we like growth both in national brands and in control brands, so we like growing with both. Right now, we're seeing that Our no-name, especially in our discount division, is growing ahead of everything else, so customers are seeking the good choices that we have in no-name. Overall, we don't see any big significant shift to control brand or to the big national brands, but no doubt that the big players, the big national brands, they need more volume. So that might change over time. But for now, and also what we see right now, is that it's more of the same with a little bit of favorability to our no-name. Plus, right now that we're in the middle of our insider loans, that's doing incredibly well for us.

Okay, thank you. And I wanted to ask also about e-commerce growth. It remains elevated today. um i i wonder how you think about this and if you could talk about the evolution of profitability from these sales because it's good to see the sales growth and uh market share but margins are lower on these sales so i wonder how margins are evolving as uh as this business grows yeah so if i can just talk about the market and return maybe a little bit on on the profit but but overall overall we are we're getting miles here and we have a

a market share in online food that are way above our overall market share and with having added Uber I think two weeks ago, we are seeing a really, really good uplift there. And what we are really pleased about is that the penetration of customers shopping online food is increasing a lot in our hard discount stores. It's up a lot, so we are giving access to online food to many more Canadians. And they can access a hard discount where they get more value for their money. And just one overall for the profit before I give it to you, Richard, is that we don't have our own trucks. So a man and a van is very, very expensive. And since we use the delivery services, actually margin is okay for us. It's not as good as if it wasn't online, but it's still very, very good. And also customers who shop online, they also tend to shop more in our stores. Overall, it's good for us. So we are pleased, and it was an 18% uplift in online sales. It's a big part of our business. And we do expect that that kind of growth levels would continue into next year.

Yeah, so the additional drag on earnings is minimal. Because essentially the fastest growing segment for us is PC Express, which means we pick and store and we have a third party deliver to a home. So we're not paying for the delivery. So the impact on earnings is not that significant anymore. So we feel really good about growing this as fast as we can.

And when we are into loyalty and online and digital, I just want to state that last Last quarter, I talked about AI for the tool we had for district managers, and many, many companies, they do a good talking about AI, but due to the excellent team that we have, we're actually delivering, because that tool now is out in 43 districts, and in quarter one, it will probably be out in our entire store network. So we have a lot of great use cases within this.

Thanks very much. I'll pass it on.

The next question comes from Vishal Sreehar of National Bank. Please go ahead.

Hi. Thanks for taking my questions. With respect to your real estate program, I know off the top you indicated that it was in line with expectations. But as you look at your various projects, is there anything that's within the projects, whether shoppers or the small format no-fails, that's coming in better than expected and maybe you'd like to tweak going forward and accelerate one and de-emphasize another?

I think everything is going pretty well, Michel. I think what is clearly very successful is small format urban. Shoppers continue to click along. Each one we open is doing really well. And as we said in the past, like outside urban areas, we're going to go with a slightly larger box. And the few we've opened this year, we're very happy with. So, so far, so good. The top metric we're focused on is sales. And so far, when we look at the sales of these stores, we're happy.

Okay. With respect to industry square footage growth, your materials indicated that it was up. Do you have a sense of how quickly Loblaw is growing versus the industry? Are you all in line or are you going a little bit quicker?

Just a little bit. Like we said, 2% over the last five months. In food, it's less than 2%. So we've been playing catch-up, and I was actually looking at this figure this week, like our square-footed share in Canada is not yet back to the level that we were in 2019. So we've been playing a bit of catch-up. We're going to catch up to that next year. So for us, it's pretty sensible, and so far we feel good about all the stores we've opened, and as long as that continues, we'll keep going.

And many of the new stores we're opening, they are about 10, 15, 17,000 square foot, where previously we might have opened them at 40, 50,000. So yes, we're opening more, but less square foot, and of course also less sales. So that's also a big difference. So don't only look at, and I know that you don't, at the numbers.

Thank you for that. With respect to e-commerce growth, still very strong. and obviously we're putting CapEx dollars in new stores. Do you anticipate the e-commerce growth to taper at some point, or do you anticipate this accelerated growth in e-com to continue for several years?

I think your guess is as good as mine, but if I can just look at other countries, I think probably that's the best measurement of guessing where it's going to land. I think overall in Canada, penetration of e-com in food, it's... It's about 4% about that number. We are higher than that. Would it end up being 8 or 10? I don't know. In the UK right now, after many years where everyone really went for online food, it's about 11. In Germany and France, it stays about 4 or 5%. US, I'm not aware of the number. So we predict that growth level of whatever, 15% as an industry over the next few years. And at some point, yes, it is going to take off because so many customers, they want to do both. They also want to go down. They want to touch their produce. They want to look at what they buy. They want to get the experience going to stores. So I think seven, eight years ago, I think we all in our industry thought that there was no need to build new stores. But there definitely is because Customers, they want to shop, and many customers, they're not good at planning, and you also need to be good at planning to shop online.

One thing I would add, Michel, is a phenomenon that's definitely affecting the top-line growth of everybody is the advent of the new gig players. All the gig players are filling up their channels, whether it's Uber, the Instacart, Skip the dishes. So as everybody sort of fills up their channel, it's going to lead to higher growth. Once that's all filled, like I think you're going to get to a more normal growth. We don't know what that number is yet. We'll figure it out probably two years from now. Thank you.

Your next question comes from Chris Lee of Desjardins. Please go ahead.

Oh, thank you. Good morning, everyone. It sounds like there's a lot of interesting and exciting developments within your advanced media business. If I heard you correctly, I think you're targeting like 100 million of EBIT next year. I'm just wondering, are you able to share what is the level right now in this year in the advanced media business?

Yeah, it's lower than $100 million. How much lower? We said we would mention it when it reaches that number. So it starts with a nine, okay? And that's all I'll say.

I think over time also the Stratocats deal will help us generate more income there. But that's going to be rolled out over the next year. So all the screens in all our stores.

Okay, that's helpful. And then just you mentioned about Ozambic and Wegovy becoming generic. I guess it's no secret that we're hearing in the media reports that there has been some delays from Health Canada in terms of approving applications by the generic drug manufacturers. Are you guys seeing that as well? And do you have a sense of when generic will be available on the shelves?

Yeah, no, we've heard the same thing as you. We know they're coming. Maybe not early 26, but maybe mid-2026. So that's all we know. We know as much as you do, probably.

Yeah, but we agree either way. And what we think about is our customers. When it goes generic, it's going to be so much cheaper for many, many customers. And so many customers now, they will have access to that drug, which is good for us, good for customers, and good for healthcare in Canada. So we hope it comes sooner than later.

And then when you mentioned earlier that obviously you get the lifting volumes, which makes a lot of sense, is that good in terms of more dollars from volumes? Is that good for the top line as well as the bottom line?

Yeah, so that's still to be seen. So our prediction would be that we're going to see... So even though that it's going to be significantly cheaper, then we will sell more. So that's the best guess. So right now, the best guess would be that we will still have a good top-line growth. And then on the dollar, we'll be fine. Got it. Okay.

And another question, just maybe on the supply chain. On the East Gouldenbury DC, is it still on track to be fully ramped up by middle of next year. And I know it's a bit of an earnings drag right now for you, but as the ramp is complete, is this fair to assume that that headwind will turn into a tailwind for you in the back half of the year? Yep. Yeah, okay.

Yeah, mid-26, like the ambient section, which is the last section that we've opened, we started fulfilling orders a few weeks ago. So as I said in my remarks, we're a full head of ramp up. So by mid-2026, we should be... We should be well on our way and we should start to get benefits from East Glenbury for sure. And I'm surprised at how much progress we've done at Caledon. Like, let's not forget, we started construction on that one in January. Steel is up. We're going to be finishing directing steel by the end of winter. And it's going to be fully enclosed, I think, by the summer. So that's also progressing well and on plan. And that one will open in 2018.

Okay. And my last question is just maybe on TNT. Obviously, you guys are planning to convert that Loblaw at Empress Walk in North York to a TNT, which I think makes a lot of sense given the demographics there. My question is, as you look to potentially double the footprint of TNT in Canada over the longer term, do you expect store conversion to play a bigger role than in the past in terms of how you're opening up new TNTs?

No, I think there's the odd and sod store that could become TNT and Empress Walk is one. I think most of the growth will come from Greenfield site.

Yeah, so overall, I think that's the same for all across our network. We have not planned for a lot of conversions. There might be a few here and there. That makes sense. But overall, that's not a big part of our strategy. Okay, that's helpful.

Thanks very much.

Thank you.

As a reminder, if you wish to ask a question, please press star one. Your next question is from Etienne Ricard, please. Oh, from BMO Capital Markets. Please go ahead.

Thank you and good morning. So revenue growth from new stores continues to accelerate, given that openings appear to be weighted to the second half of this year. Should we expect this growth to accelerate further over the next few quarters?

Good question. So what I'll say is if you look at the two-year stacked growth of absolute revenue for Q3, which is 6.1, which is like 4.6 plus 1.5, we expect that the two-year stacked growth of revenue for Q4 will be in line with the two-year stacked growth of Q3. which will answer your questions because it reflects the timing of new stores.

Yeah, and we opened a lot of new stores last year.

We opened a lot of new stores in Q4 last year. We're opening a lot of new stores in Q4 this year. So that's going to be the best guide because you'll see if you go back that in Q3 of last year, our absolute sales were up 1.5, and in Q4 they were up 2.9 because of new stores. So you're going to see a similar phenomena in Q4. Hope that's helpful.

Yeah, that's helpful. Thank you. And as you continue to open the new small format, no frills, I'm curious, are these stores giving you new read-throughs or maybe customer data that would be additive to the retail media business?

To me, it's more of the same, like one more box with one more stream of data with one more opportunity to put screens? So the answer is yes, but it would be probably similar type data that we get in any of our discount stores across the country.

Yeah, so we have so much data already now that we're working on utilizing even better, and our team is doing an incredible good job of doing exactly that.

Great. Thank you very much.

Thank you.

There are no further questions at this time. I will now turn the call back over to Roy McDonald. Please continue.

Thanks, Danny. And thank you, everybody, for your time this morning. If you've got any follow-up questions, drop me a line. And mark your calendar for Wednesday, the 25th of February, what we will be reporting our Q4 and full year 25 results. Have a great day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your