Empire Company Limited

Good morning, ladies and gentlemen, and welcome to the Empire Company third quarter fiscal 2026 conference call. At this time, all lines are in assembly 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, March 12, 2026. I would now like to turn the conference over to Katie Bryan, Vice President, Investor Relations. 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. 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 Saint-Laurent, President and Chief Executive Officer, Costa Bufanis, Chief Financial Officer, and Luc Larchavec, 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. 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.

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 third quarter 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 grow of 2%. Same-store sales were driven by strong performance in full service. We also saw positive performance in our discounts, both financially and versus the market. We continue to see healthy customer metrics across all banners with increasing basket size and customer traffic over here. 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 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. 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 points of gross margin improvement annually, and we are trending well on this metric in fiscal 2026, gaining 18 basis points here today. 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. 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 continues 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 72 cents this quarter versus 62 cents last year. with core business results improved by 8.8%. 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 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 to welcome Shell Canada into ScenePlus program. 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 May 26th. We will continue to explore opportunities to bring new partners into the ScenePlus program, 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. Loyalty is one of the many ways that we are continuing to elevate our value proposition. Throughout 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. Another area where we are meaningfully advancing is e-commerce. During this quarter, we reassessed expected performance across our Guala network and announced action to improve near-term earnings and increased customer choice. This includes the closure of the Calgary Customer Fulfillment Centre and expanding third-party partnerships through a new national agreement with DoorDash, which is now live across all of our back. As a result, we recorded a $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 $95 million annualized operating income beginning in the fourth quarter. We expect approximately two-thirds of this will hit the bottom line with the remainder reinvested in strategic growth initiatives. Operationally, e-commerce sales grew 10.3% year-over-year. driven by continued 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. And lastly, a brief highlight on our retail media business. Empire Media+. Since launching in November 2024, revenues have grown approximately 50%. We are seeing strong momentum in the supplier, increasing annual commitment, and effective measurement capabilities that are driving repeat, spend, 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 nine new stores and completed two conversions here today. We expect to open seven stores in the fourth quarter, with four of them in discount. 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. We continue to be strategic and disciplined in how we allocate capital and plan to direct more towards new store growth. Now we are out of the transformation and see plenty of white space to capture. These are just few concrete examples on how our four obsession are translating into action today. And we look forward to sharing more about our new strategic plan on the fourth quarter call. Moving on 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. The new structure is designed to create clear accountability, strengthen collaboration, and accelerate performance across our four focus areas. Sandra Sanders and our chief marketing officer will retire in July. 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 under Luc Lachavec, who I have appointed as the Chief Customer Officer. Luc has more than 25 years of experience across buying, marketing, category management, and multibanner merchandising. 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, while continuing to lead the technology and transformation during the transition. Julia has more than 20 years of retail experience in Canada and U.S., spanning strategy, merchandising, and in both full service and discount segments. 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 Belmont, founder of FarmBoy, will serve as Executive Advisor on our retail and store operation, reporting directly to me. GL is a gifted operator who built FarmBoy from the ground up to 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. Gustave Afanis 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. 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 Gustave.