Leon's Furniture Limited

Good morning, everyone, and welcome to the LFL Group's first quarter of 2026 conference call. All lines today have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If any research analysts would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Jonathan Ross, Investor Relations for LFL Group. Please go ahead.

Thank you. Good day, everyone, and welcome to LFL Group's first quarter 2026 conference call and webcast. LFL's first quarter 2026 financial results were released earlier. The press release, financial statements, and management's discussion and analysis are available on CDAR Plus and on our website at lflgroup.ca. Joining me on the call today are Mike Walsh, President and Chief Executive Officer, and Victor Diab, Chief Financial Officer. Today's discussion includes forward-looking statements. These statements are based on management's current assumptions and beliefs and are subject to risks, uncertainties, and other factors that could cause actual results that differ materially from these assumptions and beliefs. We encourage listeners to refer to the risk factors outlined in our management's discussion and analysis and annual information form, which provide additional detail on the risks and uncertainties that could affect future results. This call also includes non-IFRS financial measures. Definitions, reconciliations, and related disclosures for these measures can be found in the management's discussion and analysis and press release issued earlier. Forward-looking statements made during this call are current as of today. An LFL group disclaims any intention or obligation to update or revise them except as required by applicable law. All financial figures discussed today are in Canadian dollars unless otherwise noted. With that, I'll turn the call over to Mike Walsh. Mike?

Good morning, everyone, and thank you for joining us. The first quarter played out largely as we described on our February call. The consumer remained cautious and value-focused with continued pressure market-wide on larger discretionary purchases, and we faced the particularly demanding prior year comparables we had flagged coming into the year. In this environment, our team executed with discipline, and we continued to outperform the market and gain share across our categories, which remains our priority through the cycle. System-wide sales were down 3.5%, with same-store sales down 4.2%. Victor will walk you through the drivers in more detail. Furniture sales were lower against an exceptionally strong Q1 of last year, but the underlying story is a strong one. On a three-year compound annual growth basis, our furniture business is up nearly 7% in Q1, meaningful outperformance against an industry that's been under real pressure for some time. we continued to gain share in the category in the first quarter. Our priority in environments like this is not defending absolute sales. It's strengthening our positions through the cycle. We stayed disciplined on assortment, deeper on our best performing SKUs, and continued to be surgical in how and where we promote. Mattresses were a real standout this quarter, delivering mid-single digit growth in a highly promotional category, reflecting the same focused assortment playbook that drove our furniture performance last year. The dynamic underneath is one we've been talking about for several quarters. Our digital platform is increasingly a research and qualification destination, drawing customers into the store with clear purchase intent. Our salespeople are well positioned to convert that intent into the right product, the right add-ons, and a healthier total ticket. This dynamic, along with their targeted approach to promotional activity, is also showing up in our gross margin, which expanded year over year on a consolidated basis. The category performance was mixed, but that's consistent with our portfolio approach to the overall business. Our warranty, insurance, and service businesses continue to perform well. These are profitable platforms that support the core business, deepen our relationship with the customer, and contribute to earnings. In the commercial channel, trends in Q1 were broadly in line with what we outlined last quarter with some near-term variability. While we expected moderation heading into 2026, winter weather delayed builder activity and shifted project completions, which we expect will support volumes in the second quarter. We also saw a competitor in the channel file for creditor protection following quarter end, which we believe creates an incremental share opportunity for us Taken together, while the commercial business is still expected to moderate through 2026, as builder inventory is clear, we now see that moderation occurring at a slower pace than originally anticipated. We continue to make progress on the replacement side, which has been a deliberate focus over the past 12 to 18 months and remains an important priority going forward. We're also taking a selective approach to growing our store network, In the second quarter, we expect to add four franchise locations. Looking ahead, we expect the consumer to remain cautious in the near term, with some of the Q1 headwinds carrying into Q2. That said, comparisons ease as we move through the year, and we continue to look for gradual improvement in the back app. The fundamentals that drive this business haven't changed. Trusted banners coast to coast, the scale to source directly and secure advantage pricing, one of the largest final mile delivery networks in the country, and a balance sheet that gives us flexibility through the cycle. These are durable advantages, and they matter most in environments like this. Our focus is unchanged, delivering value to our customers, executing with discipline, and continuing to make the right investments in the business. Before I turn it over to Victor, I want to thank our associates across the country, our teams in the store, our drivers and warehouse teams, and our customer service teams. Environments like this are where their experience and commitment really show.