Empire Company Limited

Good morning, ladies and gentlemen. Welcome to Empire First Quarter 2026 conference call. At this time, online is in a 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 Thursday, September 11, 2025. I would now like to turn the conference over to Katie Brine, Vice President of Investor Relations. Please go ahead.

Thank you, Ludi. Good morning 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 empireco.ca. There is a short summary document outlining the points of our quarter available on our website. Joining me on the call this morning are Michael Medline, President and Chief Executive Officer, Costa Befanas, Chief Financial Officer, and Pierre St. Laurent, Chief Operating 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.

Thanks, Katie, and good morning, everyone. Fiscal 26 is off to a solid start. EPS was 91 cents. The core business, which excludes other income and share of earnings from equity investments, improved 14.3% over last year. And while our results on same-store sales are a little softer than we've gotten used to, with our strong bottom-line result this quarter, we are very encouraged with what we can do on this front with a stronger top line. I'm going to keep this short. Today we're going to focus on two topics, our results and market trends during Q1 and then the current environment. First are results and market trends. Sales, excluding fuel, grew 2.6% this quarter, with same-store sales growth of 1.9%. There are some good one-time reasons for our same-store sales comp. Last year, there were a few anomalous events that worked in our favor and drove new customers into our stores. Foremost was the boycott campaign against Loblaws last year. Another competitor in the West experienced a cyber event, which led to service disruptions and supply shortages for a period of time. And finally, there was a nearly one-month-long LCBO strike, which meant more customers purchased beer and wine in our stores. We were cycling these one-time events in Q1, and while they were all relatively contained events, collectively they had an impact on our same-store sales comp this quarter. And two, on our Q4 call, we noted that we were happy when we moved into June and began to see warmer weather patterns. Q1 started with an unseasonably cold May, as many of you will remember. In fact, Toronto saw its coldest May in the last 50 years. Typically, May marks the start of the summer season, specifically the start of barbecue season and outdoor eating, which drives purchases in fresh and prepared foods. That unusual May weather dampened sales, especially in full service. Our same store sales were supported by continued growth in both full service and discount. Consumer sentiment is showing improvement and we are encouraged to see basket size continuing to improve. Gross margin continues to improve driven by disciplined execution and targeted efficiencies in our stores. Margin improvement of 63 basis points again underlines how good our execution has become. This continues to be driven by several smaller but meaningful changes. For example, we are using very advanced analytics to provide us better granularity on inventory data, and this in turn allows us to be more efficient controlling and managing our inventory, and is another lever to reduce shrink. Onto our current environment. CPI food inflation purchased from stores was 3.1% this quarter. Internally, we were way below the CPI number. So tonnage was relatively flat this quarter. Given the approach we took to managing tariffs, which was to protect customers by ensuring that reactionary or unnecessary costs were not accepted and passed on, this comes as no surprise to us. Given the removal of some Canadian retaliatory tariffs, products in our stores that were subject to tariffs will no longer bear this additional cost. As we discussed before, we took a very hard stance on not accepting the vast majority of tariff-related cost increases, which has now proven to be the right approach for our customers and for Canadians. We've also been very accurate in predicting inflationary patterns over the last few years, the most accurate, I might say, and that has been helpful for us. Last September, we stated our expectations were 2% to 4%, and that, in fact, has proven to be the case. Other than typical fluctuations on a few commodity-linked products like coffee, we are not seeing anything out of the ordinary. Even with the recent development on the removal of some Canadian retaliatory tariffs, we continue to see Canadian product sales continue to outpace U.S. product sales. However, over the last few months, the buy Canadian sentiment has moderated slightly from previous highs seen earlier in the year. The silver lining in all of this is that we now have an increasingly diversified source of supply that will enable us to continue to be incredibly resilient for years to come. And through all of this, we strengthen and identify new and existing supply relationships that will be advantageous for us and our customers for the long term. And one last thing before I hand it over to Costa. Over the last year, there's been a lot of real estate activity in the market, I'm hearing, a significant uptick over prior years. This has created plenty of discussion around the right amount of growth for grocers. All I will say on this topic is that this remains a competitive market, and there is always room for us to grow. For our part, we will be opening about 20 new stores this year, two this quarter, and grow our square footage by about 1.5%. These bills are aimed at filling gaps in our network. We see opportunities to gain market share in areas where we do not have significant presence, and we do not greenlight new stores just because we can. We are disciplined and precise about growth, and the bar for new store approvals remains high. With that, I'll turn it over to Costa.