Groupe Dynamite Inc.

Good morning, ladies and gentlemen, and welcome to Group Dynamite's second quarter fiscal 2026 results conference call. At this time, all lines are in listen-only mode, and the conference is being recorded. Following management's prepared remarks, there will be a question and answer session with financial analysts. If at any time during the call you require immediate assistance, please press star zero for the operator. On today's call are Andrew Lutfy, Chief Executive Officer and Chair of the Board, Stacie Beaver, President and Chief Operating Officer, and JP Lachance, Chief Financial Officer. This morning, Cote Dynamite released its financial results for the 13-week period ended August 1, 2026. The press release and related disclosure documents are available in the Investors section of the company's website at cotedynamite.com and on Cedar Plus. A replay of the webcast will be available shortly after the conclusion of the call. Before management begins, Please refer to slide two of Q2 2026 investor presentation for the company's full statement on forward-looking information and to the appendix for a reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures. The call will now be turned over to the Chief Executive Officer and Chair of the Board, Andrew Lutfy. Please go ahead.

Good morning, everyone, and thank you for joining us. Q2 was another strong quarter for Group Dynamite. We grew sales, expanded profitability, increased earnings and free cash flow, and raised all three guidance metrics. But more important than any single quarter is the trajectory behind it. For six consecutive years, we have progressively improved key brand and financial metrics across the business. That's not luck. There's no such thing as six years of overnight success. and importantly that performance has continued through very different economic environments. Supply chain disruptions, tariffs, geopolitical uncertainty and rapidly changing consumer behavior. That gives us increasing confidence that what we are seeing is not simply a period of strong performance. It's the result of a business model that has been deliberately built, tested and refined over many years. Our luxury-inspired business model is working, and the premiumization of our brands is strengthening. As we enter the second half, we will lap two of the strongest quarters in our history. We knew that when we built the plan. So our CQ2 is another proof point in a six-year progression and further validation that our model and our brands continue to strengthen. When we talk about our luxury-inspired business model, it starts with the deliberate premiumization of our brands. Garage and Dynamite are fundamentally two different brands than they were six years ago and even two years ago. We have elevated every customer touchpoint, the product, the confection, the categories we compete in, the real estate, and ultimately the entire brand experience. Our AUR has roughly doubled since 2019, and we're not charging twice as much for the same white T-shirt. We have built a more elevated proposition and our brand Another important part of the model is inventory. We view inventory as capital allocation. We intentionally operate lean and engineer scarcity into the model. In fashion, having too much of the wrong product is far more expensive than occasionally having too little of the right product. But scarcity alone isn't enough. We operate a pull inventory model. Then we let the customer decide where that inventory goes. Our highest productivity stores pull the hardest against global inventory because that is where demand and full price sell-through are strongest. Our objective isn't to maximize inventory in every store. It's to maximize the productivity and gross margin dollars network-wise. That drives stronger full price selling, fewer markdowns, faster inventory turns, and greater agility. That is how we take the fashion risk out of fashion. Real estate is another part of that same equation. Our philosophy is simple, the smallest house on the best street. Today, our investment grade real estate tier one through three represents approximately 72% of sales. In 2017, it was roughly 28. Our highest quality stores don't simply generate greater volumes, they turn inventory materially faster than our lower tier locations. So as we shift more sales towards investment-grade real estate, we aren't simply improving the quality of our stores. We are improving the productivity of the entire business. Over time, that creates a higher quality network and continuously raises the performance standards across the portfolio. It's a positive flywheel effect.

Canada and the United States represent different stages of the same story shaped by Garage's significant evolution.