Empire Company Limited

Good afternoon, ladies and gentlemen, and welcome to the Empire Company Limited first quarter 2023 conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during the conference you require immediate assistance, please press star zero for the operator. A reminder that today's call is being recorded Thursday, September 15, 2022. And I would now like to turn the conference over to Katie Brine, Vice President, Treasury, Investor Relations, ESG Finance. Please go ahead, Katie.

Thank you, Michelle. Good afternoon and thank you all for joining us for our first quarter conference call. Today we will 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 empirecove.ca. There is a short summary document outlining the points of our quarter available on our website. Joining me on the call this afternoon are Michael Medline, President and Chief Executive Officer, Matt Rindell, Chief Financial Officer, Pierre Saint Laurent, Chief Operating Officer, and Michael Vells, Chief Development Officer. Today's discussion includes forward-looking statements. We caution that such statements are based on management's assumptions and beliefs and are subject to uncertainties and other factors that could cause actual results to differ materially. I refer you to our news release and MD&A for more information on these assumptions and factors. I will now turn the call over to Michael Medline.

Thank you, Katie. Good morning, or afternoon, I guess, everyone. Turning to our business right away, fiscal 23 is off to a strong start. And this quarter we saw a return to positive same-store sales, significantly increased gross margin expansion, and we generated a great deal of excitement around the launch of ScenePlus in Atlantic Canada. Our full service and discount banners are performing well and we continue to be pleased with our performance in e-commerce. Our results this quarter reflect the strong momentum of our business and the ability of our team to consistently perform and deliver. I'm gonna keep my comments short and to the point as our first quarter results speak for themselves that this was a very clean quarter. Today I'll focus on three topics. Our Q1 results and key market trends, our recently launched loyalty program, SEEN+, and the release of our sustainable business report. First, our results and market trends. Our sales grew 4.1% this quarter. We achieved positive same-store sales growth of 0.4%, which was 260 basis points higher than last year and 280 basis points better than last quarter. It is fair to say that we are seeing some better same-store sales momentum as we begin fiscal 23. Same-store sales improved throughout the quarter and were much stronger once we no longer comped last year's COVID restrictions later in the quarter. We also saw customers continue to return to more pre-pandemic shopping behaviors, resulting in higher transaction counts and smaller but still strong basket sizes versus the prior year. As you would expect, the industry is seeing some shift to discount, some shift to discount. In our case, Freshco is performing very well and putting up the best results in its history. That being said, we are also pleased to see that our full-service stores are performing better than we had anticipated in this inflationary environment. They are now satisfying many needs of the value-seeking customer through strong promotions, better personalized offers, great quality of service, and an excellent assortment of own brand's products. In particular, our own brand's portfolio is on fire and delivering immense value to customers. And in Q1, our own brand sales increased 9.5% year over year. You can hear the Pictou County train going by if you listen carefully, I hope. Importantly, we are protecting our full service market share and seeing strong momentum across our banners. If we can perform at this level during an inflationary period, then we believe we are very well placed when inflation returns to more normal levels. And while it is too early to definitively say that inflation has peaked, we are seeing some encouraging signs, including the fact that the number and rate of cost increases from our suppliers is decreasing. Empire's gross margin was strong this quarter. Our gross margin rate, excluding fuel, grew by 63 basis points. These margins were achieved despite the inflationary pressures we faced. This is largely due to our Horizon initiatives with promotional optimization and own brands. The improvements in margin also reflect the enhanced discipline and new tools we built over the past five years through Sunrise and Horizon. With our strong sales and margin performance, we delivered EPS of 71 cents this quarter. With that, I'll now turn to our SIEM Plus launch. As you probably know, on August 11th, we launched our new ScenePlus loyalty program in Atlantic Canada. This was the culmination of a lot of hard work, and I am so impressed by the efforts of our leaders, but especially by our teammates in store to effectuate a near flawless implementation. Although we are only about 30 days into our decades-long journey, we could not be more pleased with the early traction. Our teams are now focused on preparing for the launch of SeamPlus in Western Canada next week. This is a great start, but we are in the early innings of our journey to thrill customers and unlock the power of personalization through loyalty. We knew that SeamPlus was a great loyalty program with strong recognition among Canadian consumers, and unsurprisingly, we've seen a lot of interest from potential new partners. We'll be choosy with any new partners. Their brand will have to strongly resonate with Canadian consumers. Now for our sustainable business report. In August, as part of our ESG efforts, we released our fiscal 22 report, which included our new climate action plan. This year, we set science-based emissions reductions targets in support of Canada's transition to a low-carbon economy. These targets are only one important way that we are progressing on our journey to be a leader in climate and ESG in Canada. ESG has been on our agenda for many years and we continue to make progress in areas such as removing plastics and waste from the business, expanding our efforts to cultivate an inclusive workplace for all, growing our community investments, and embedding sustainable business mandates within our performance management goals. While there's more to be done, our management team and the board are pleased with the commitments we've made to ESG and the progress made over the last few years. And with that, over to Matt.