Leon's Furniture Limited

Good morning everyone and welcome to LFL Group's third quarter 2026 conference call. All lines 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 star followed by number 1 on your telephone keypad. If you would like to withdraw your question, press star 2. 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 third quarter 2026 conference call and webcast. LFL's third quarter 2026 financial results were released yesterday. The press release, financial statements, and management's discussion and analysis are available on CR 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 to 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 yesterday. Forward-looking statements made during this call are current as of today, and 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. Third quarter looked much like the first half of the year from a macro perspective. broadly consumers remain cautious and value focused with continued pressure market-wide on large discretionary purchases. We were comparing against a very strong third quarter last year. We have managed through markets like this before and we keep investing through them. This year we have opened 8 stores at an increase of 4, taken full ownership of our Edmonton Distribution Centre and continued to buy back shares. In this environment Our team executed with discipline across the business. System-wide sales were down 0.8% with same-store sales down 1.2%. Victor will take you through the drivers in more detail. Our priority is to remain squarely positioned against the value that Canadians are looking for, keep gaining share in our core categories, and turn that execution into profitability. Category performance was mixed during the quarter. and that is consistent with our portfolio approach to business. Appliances return to growth in the quarter with sales up in both our retail and commercial channels. On the retail side, that reflects a year of work on improving how we go to market in the category. A tighter assortment, deeper on our best sellers, enhanced presentation in our stores and marketing that does a better job of telling customers what comes with the purchase from delivery and hallway to installation. That is how we build every category, one at a time, around what that category needs and we did it while some of our vendors were working through supply chain challenges of their own. Mattresses, where that work started earlier, grew again, our third consecutive quarter of growth in the category. Furniture sales were lower against 11.2% growth we posted in the category last year. That is the comparison we knew we were facing. On top of it, as we flagged on our last call, Certain shipping lanes tightened, which led to some inventory delays. Some of what we planned to receive came in later. That held back deliveries, and because we couldn't feature our best sellers the way we normally would, it affected written sales as well. Supporting all of our categories, online sessions grew strongly, and e-commerce sales were up. Our digital platform is increasingly a research and qualification engine, drawing customers into our stores with clear purchase intentions. and our salespeople convert that intent to the right product, the right add-on and the right solution. In the commercial channel sales group, the housing market continues to remain weak so that growth is shared and much of its business that became available when a large competitor exited the market. In August, we said that exit would create opportunities over time and we are starting to see some of it, though it is still very early days. On the store network, we continue to expand at a measured pace During the quarter, we opened four new locations. Two are Leon's corporate stores in Ontario. Cornwall is a new store. Brockville converted from a franchise store to a corporate store. Two are franchise stores, the Leon's in Kinloch, Prince Edward Island, and a brick in Kindersley, Saskatchewan. We also celebrated the grand reopening of a newly built Leon's store in Welland, the birthplace of the brand. That brings us to 304 stores. We expect to open two new franchise stores in the fourth quarter. We'll give you more color on our plans for 2027 on our February call. Looking ahead, the consumer remains cautious, consistent with what we have seen all year on large discretionary purchases. Our plans are built around the key promotional events in the fourth quarter. On the things we can control, we are in good shape. Our inventory position is better than it was at the end of the third quarter, and Comparison Ease in the fourth quarter. We are planning the balance of the year prudently. Our focus remains on coming out of this cycle stronger than we went in. The fundamentals that drive this business have not 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 when the market is soft. Before I turn it over to Victor, I want to recognize our associates across the country. Periods like this ask a lot of our people, in our stores, on our trucks, in our warehouses and on the phone with our customers. This quarter asked them to adapt and once again they delivered.