Loblaw Companies Limited

Good morning, ladies and gentlemen, and welcome to the Loblaw Company's limited 2026 first quarter results conference call. This call is being recorded on Wednesday, May 6th, 2026. After the speakers, we will conduct a question and answer session. Please ask that you limit yourself to one question and one follow up if needed. Thank you. If you'd like to ask a question at that time, please press star, then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, you can simply press star 1 again. I would now like to turn the conference over to Roy McDonald, Vice President, Ambassador Relations.

Great. Thanks very much, Colby, and good morning, everybody. Welcome to the Loblaw Companies Limited first quarter 2026 results conference call. As usual, I'm joined this morning by Per Bank, our President and CEO, and by Richard Dufresne, our CFO. And before we begin, I want to remind you that today's discussion will include forward-looking statements, which may include but are not limited to statements with respect to levels of 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 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 are made, and the company disclaims any intention 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 report 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 also note, following the announced sale of BC Financial to EQ Bank and our ongoing partnership, PC financial results are presented under discontinued operations. And it's important to note that we are not getting out of the financial services business as such, unless otherwise indicated. Our remarks today will focus on the comparable total adjusted consolidated results. And with that, I'll hand the call over to Richard.

Thank you, Roy, and good morning, everyone. I'm pleased to report another quarter of consistent financial and operational performance. carrying on the momentum from last year. 2026 is off to a strong start. Our business continues to perform well, reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service, and convenience to Canadians. In the first quarter, revenue growth was strong at 4.5% when normalized for the exit of our optical business and the divestiture of Wellwise. Our top-line growth was supplemented by the opening of 13 stores in the first quarter eight shoppers, and five hard discounts in underserved communities. Total company adjusted EBITDA increased by 6% to $1.7 billion, and margin improved by 20 basis points to 11.5%. Adjusted diluted net earnings per share grew by 10.6%. On a GAAP basis, revenue grew $600 million, or 4.2%, and diluted EPS was 50 cents, up 19% in the quarter. In food retail, we delivered traffic and basket growth on a same-store basis. Absolute sales grew 3.9%, and our food same-store sales grew 2.4%. Our investments in the right-hand side of our stores are seeing positive results in apparel and most GM categories. However, we see ongoing pressure in liquor and tobacco. Normalized for this right-hand side impact, our food same-store sales grew 2.7%. Our internal CPI-like food inflation metric continues to be significantly lower than Canada's grocery CPI of 4.4%. Customers are seeking value and are finding it in our stores. This is a function of the effectiveness of our loyalty program, promotional offers, and value on shelf. Our efforts to push back on unjustified costs increases from global suppliers as delivered results, helping to reduce the inflationary pressures on Canadians. This shows up in our inflation measures at the cash register, which was more or less aligned with our same-store sales growth. As consumers continue to focus on value, our hard discount banners remain a key driver of absolute sales growth. We opened five new hard discount stores in the quarter and will open about 30 stores in total this year. We are pleased with the performance of our new stores. Included in this quarter's food-comparable sales growth results are 28 hard discount stores that have opened since 2023. These stores are averaging double-digit same-store sales growth. We are looking forward to bringing more no-frills and maxi stores into more communities across Canada. We're also pleased with the momentum and performance of our conventional stores. This growth continues to be led by our Fortinos, Yig, and TNT banners. In drug retail, absolute sales increased 4.8%, while same-store sales grew 4.1%. Pharmacy and healthcare services grew same-store sales by 6.7%. Our specialty prescription growth continued to lead our pharmacy performance. Within this category, our GLP-1 sales growth continues to outperform and has further accelerated in the quarter. Across our pharmacy network, patients continue to respond positively to the convenience and expanded level of primary care we offer through our more than 1,800 pharmacies across the country. We opened eight new drugstores in the quarter and remain on target to open more than 30 new locations in 2026. Front-source same-store sales were up 1%. Beauty remained strong, while OTC was affected by the timing of the cough and cold season and inclement weather. Online sales continued to perform well, growing by 20.3% in the quarter. E-commerce sales were driven by growth in PCX delivery, along with the successful integration of third-party delivery options. Retail gross margin of 31.4% was stable. While our food margins were flat, our drug retail gross margins were down. This was driven by changes in sales mix in drug retail categories, timing of the cough and cold season, partially offset by continued improvements in shrink. Retail SG&E was better by 40 basis points, primarily driven by operating leverage from higher sales and timing benefits on certain costs. I'm very pleased with our ability to reduce this rate despite the additional costs associated with opening new stores and ramping up our automated DCs. Retail adjusted EBITDA grew 6.5% and retail EBITDA margin increased by 20 basis points to 11.1%. The ramp up of our first automated DC in East Gwillimbury continues to progress well. Both cost and operational improvements have been better than planned. We remain pleased with our progress and expect to be fully ramped up later this year. Construction on our second automated DC in South Caledon is progressing very well. The project remains on plan with automation installation beginning at the end of this year. PC Financial's revenue increased 3.9%, driven by higher insurance commission and higher interest income. The bank's adjusted net earnings increased by $9 million, or 40.9%. This was primarily driven by higher revenue and favorable impact from lower expected credit loss provisions. The previously announced sale of PC Financial to EQ Bank has obtained all required regulatory approvals, and we now expect the deal to close in the third quarter. We are very excited about this transaction and it will expand the benefits of our PC Optimum program and offer more ways for Canadians to earn rewards. As previously stated, Loblaw will unlock approximately $600 million in cash related to this transaction. We expect to deploy a portion of these proceeds to increase our share buybacks in 2026 and the balance to purchase EQB shares in the market. Free cash flow from the retail segment was strong at $432 million for the quarter. We repurchased $648 million worth of common shares and announced a 10% dividend increase, our 15th consecutive annual increase. Our balance sheet is strong, and we continue to improve our key return metrics, as shown by a recent credit rating upgrade by DBRS to a low. Our return on equity sits at 26.8%, and our return on capital at 12.4%, reflecting our strong capital allocation discipline, focused on cost management and proven strategy. Looking ahead to the balance of the year, performance should closely resemble what we're seeing in Q1. As mentioned earlier, 2026 is a year where the ramp-up of our East Glenbury DC and our investments in TNTUS have the greatest negative impact on our earnings growth. Despite that, we feel confident in our ability to deliver on our outlook for the year, as we've shown in Q1. Our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep delivering value to our customers while continuing to reward our shareholders. I will now turn the call over to Per.