Loblaw Companies Limited

Good morning, ladies and gentlemen, and welcome to the Loblaw Company's Limited 2026 Second Quarter Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If you would like to ask a question at that time, please press star, the number one on your telephone keypad, to raise your hand and enter the queue. If at any time you need assistance during this call, please press star, then number zero on your telephone keypad. Please note this call is being recorded on Thursday, July 30th, 2026. I would now like to turn the conference over to Roy McDonald, Vice President, Investor Relations. Please go ahead.

Thanks very much Colby and I will also officially welcome you to the Love Law Companies Limited second quarter 2026 results conference call. and joining me this morning is Per Bank, our President and Chief Executive Officer, and Richard Dufresne, our Chief Financial Officer. 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 Loblaw's 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 our expectations. These risks and uncertainties are discussed in the company's materials that are filed with the Canadian securities regulators. And any forward-looking statements speak only as of the date they are made. 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 or other materials filed with the Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure. And with that, I will turn the call over to Richard.

Thank you, Roy, and good morning, everyone. Before I begin with my remarks, I just want to acknowledge that today is the last day for Michael Van Elst before he retires. So I want to thank Michael for his longstanding support. And so while he's not officially on this call, I hear that he is listening. So enjoy your retirement, Michael. Okay, so we delivered another strong quarter of consistent operational and financial performance. The quarter was characterized by solid revenue growth, stable gross margin, a flat SG&E rate, and strong adjusted EPS growth. We delivered this performance while we continued to invest in new stores, pharmacies, and optimizing our distribution network. All of our businesses have momentum. We feel good about the rest of the year, and our 2027 plans are beginning to take shape. In the second quarter, revenue, including PC Financial, was $15.3 billion, up 4.1%. Total company adjusted EBITDA increased 5.1% to $1.9 billion, and adjusted EBITDA margin improved by 10 basis points. Adjusted diluted net earnings per common share grew 11.9% to 66 cents. On a GAAP basis, revenue was $15 billion, up 4.1%, and diluted net earnings per common share were $0.64, up 8.5%. In food retail, absolute sales grew 3.3%, supported by new store growth, while same-store sales grew 1.6%, which includes a 20 basis point drag from the right-hand side. Our hard discount banners continued to perform well in the quarter, with comparable sales close to 4%. Maxi and No Frills remain well positioned for customers focused on value, supported by strong execution in both existing and new stores. As recent openings mature and enter the comparable store base, they are delivering strong double digit same store sales growth. This performance reflects the strength of our expansion strategy. Food retail, traffic and baskets were both positive on the same store basis and we remain pleased with our market share. We continue to gain share and hard discount and we are outperforming our peers in conventional. Our internal CPI like food inflation metric remains lower than Canada's grocery CPI. Our actual quarterly in-store average article price has now been consistently lower than CPI inflation for more than four years. This reflects the relevance of our promotions, our effectiveness at pushing back on unjustified supplier cost increases, and trade downs by consumers. During the quarter, we opened 11 food stores, including 7 maxi and no-frills stores, 1 TNT store in Canada, and 1 TNT store in the U.S. We also opened 3 new shoppers drug mart locations. These new stores contributed to a net positive impact on our grocery square footage, of approximately 1.5% and 2.6% in pharmacy. Our new stores continue to perform very well, and we are currently on track to open about 75 stores this year. Our conventional banners also perform well, delivering positive same-store sales growth. For TNOs and TNT remains strong, helping our conventional banners continue to outperform their peers. In drug retail, absolute sales increased 6.1%, while same-store sales grew 4.6%. Pharmacy and healthcare services grew same-store sales by 7.5%, driven by continued strength in specialty and chronic prescriptions. On a same-store basis, prescription volumes increased 3.4% and average prescription value increased 5.5%. Specialty prescription growth continues to lead our pharmacy performance. Within this category, we are beginning to see the impact of GLP-1 drugs going generic. It's still very early, but the initial indications are encouraging. Lower generic pricing is being offset by higher volumes and we expect higher revenue, higher gross profit dollars and higher gross margin rate. We will provide a more detailed update at our Investor Day in September. Lifemark delivered double-digit sales growth as it continued to experience strong growth in the number of patient visits to its clinics. Front-source same-source sales grew 1.3%. Prestige Cosmetics, OTC, and Baby were strong, while the timing of the Easter ship was a headwind to sales. The underlying strength and profitability of their front store business remained solid. Online sales increased 19.3% in the quarter, driven by PC Express delivery, PCX Pass, our third-party marketplace partnerships, and the expansion of pick-and-deliver and marketplace locations. Retail gross margins were stable, up 10 basis points. Retail SG&A is a percentage of sales with SLAT at 20%. This reflects operating leverage from higher sales offset by incremental costs related to opening new stores, the ramp-up of our automated distribution facility, and the year-over-year impact of certain real estate activities. The ramp-up of our East Gwillimbury Distribution Centre continues to progress, and we're making progress on the construction of our second new distribution centre in South Caledon. These remain important investments in the long-term capability and efficiency of our supply chain. Turning to financial services, subsequent to the end of the quarter, we completed the sale of PC Financial to EQBank. As of closing, Loblaw owns approximately 19.9% of EQB's issued and outstanding common shares. We expect to increase our ownership to approximately 25% over time. In connection with the transaction, Loblaw received $625 million in cash representing the release of excess capital, cash consideration from EQB, and the collection of certain commodity tax receivables. Starting in the third quarter, we will no longer report PC financial results and will begin to recognize our proportionate shares of EQB's net income within our consolidated financial results as financial services remain important to Loblaw's strategy. As we begin this new partnership, we are excited to continue expanding the benefits of PC Optimum while participating in the future growth of EQB. In the quarter, we repurchased $552 million worth of common shares under our NCIB program for a year-to-date total of $1.2 billion. Our return on equity was 27.2% and our return on capital was 12.5%. Looking ahead, we continue to expect our retail business to grow earnings faster than sales and adjusted net earnings per common share growth in the high single digits. Because the PC financial transaction closed partway through the quarter and our reporting calendars are different, we'll only recognize one month of EQB's earnings in the third quarter. Despite this timing-related headwind, we remain confident in our ability to deliver net earnings per common share growth in the high single digits. We expect to continue to deliver consistent top line sales growth in the third quarter and remain confident in the long-term strength of our retail business and our ability to deliver on our outlook for the year. Consistent growth in free cash flow remains one of the defining strengths of our business. It provides us with the flexibility to simultaneously invest to deliver our long-term growth strategy while maintaining a strong balance sheet and returning capital to shareholders. We believe this balanced approach to capital allocation is a key competitive advantage and an important driver of long-term shareholder value. Given the strength of our balance sheet and growing free cash flow, we now expect to repurchase $2.1 billion of our shares this year, an increase of $200 million to our initial plan. I'll now turn the call over to Per.