Loblaw Companies Aktie

Good morning, and welcome to the annual general meetings of shareholders for both George Weston Limited and Loblaw Companies Limited. I'm Galen Weston, Chairman and Chief Executive Officer of George Weston and Chairman of Loblaw. And thank you for joining us here at Massey Hall, a Canadian cultural landmark that was first opened in 1894, which for those of you who have a good memory for dates was only 12 years after the founding of George Weston Limited in 1882. It's wonderful to see this historical space revitalized after several years of renovations. And I hope you'll take the opportunity to explore this unique venue following today's meeting.

So during the hybrid meeting, we look forward to engaging with shareholders of both companies. Those of you who are gathered here in person and through our virtual platform. Joining me on stage, we have Richard Dufresne, President and Chief Financial Officer of George Weston and Chief Financial Officer of Loblaw; Per Bank, President and Chief Executive Officer of Loblaw; Nick Henn, Chief Legal Officer and Secretary of George Weston; and Andrew Bunston, Chief Legal Officer and Secretary of Loblaw.

By the way, in case you didn't pick up on this, they switched places from last year because they've done a little roll swap, which is very exciting for me and for both of them.

Okay. We're honored to welcome Director nominees of George Weston and Loblaw Trust and trustees of Choice Properties, representatives of the auditors and members of the senior management team from across the Weston Group. I'd ask all of you, please, to stand and be recognized.

That's the management team, the Board of Directors, our auditors, come on guys.

We'd also like to extend a warm welcome to the Grade 12 accounting class from Bloor Collegiate Institute. I had a chance to chat with them a little bit earlier, study hard and stay in school. That was my major message. And so I'd ask you all to please stand and be recognized. Thank you. It's absolutely terrific to have you here, and I hope you enjoy the meeting and that you will take the opportunity to ask a couple of questions, just direct them to the folks over there and not to me.

Okay. So just before we begin, I want to take a minute to outline the meeting procedures. It is slightly complex because of the combination of the 2 AGMs at the same time. So we'll also describe how voting and questions will be handled. And then following those remarks, we'll get an update from Richard on the business and financial performance of George Weston. I've asked Rael Diamond, the President and CEO of Choice Properties, one of George's biggest holdings, to share a bit about that business, including their latest real estate transaction, which is exciting, quite a big deal.

And finally, we'll hear from Per as the President and CEO of Loblaw. We'll then proceed with the formal business of the George Weston meeting, followed by the formal business of the Loblaw meeting, including voting on the matters set out in the respective management proxy circulars.

Once the formal business has been concluded, I'll share a few thoughts on our group of companies followed by a joint question-and-answer session. So the majority of shareholders of both companies have submitted their proxies or their voting instructions in advance. Voting during today's meetings will be conducted in person or through our online platform. And please note that you cannot cast votes via telephone. If you're voting in person, please complete the ballot provided by the scrutineer.

If you're a shareholder of both companies, please note that the blue ballot is for George Weston and the yellow ballot is for Loblaw. To vote online, please use the Lumi platform. And when an item of business is put to vote, you'll see voting options on your screen. And if you're a shareholder of both companies, please ensure that you're logged in with the control number provided for George Weston as the George Weston formal meeting will be held first. I'll remind you to log in -- I will remind you to log into the meeting using your Loblaw control number when the Loblaw meeting begins.

Your online vote will only be counted if you have logged in with the correct control number for the relevant meeting. Your vote on George Weston matters will not be counted if you've logged in with your Loblaw control number and vice versa, even if Lumi appears to be accepting your vote. So everybody got that. Those of you who are online, just try and keep it straight, and we'll navigate you through it as well just to make sure you get as much support as possible.

The scrutineers will then tabulate all of the votes cast during each meeting, and we will share preliminary voting results at the end of the relevant meeting. Nick Henn will act as Secretary of the George Weston meeting, and Andrew Bunston will act as Secretary of the Loblaw meeting. Computershare Investor Services Inc. is acting as scrutineer of both meetings by way of its representatives, Melissa Phillips and Kate Stevens.

Only George Weston and Loblaw shareholders of record at the close of business on March 16, 2026, or their proxies are entitled to take part in and vote in each respective meeting. To make the best use of our time, certain shareholders have been asked to move and second the motions, which are called for in the notices of the meeting. A copy of each of the George Weston and Loblaw notices of meeting and proof of their mailing have been filed with the respective company.

The scrutineer's report indicates that a quorum is present for each meeting, and I therefore declare that each of the George Weston and Loblaw annual meetings has been properly called and is duly constituted for the transaction of business. Questions will be accepted in person and through the online platform. We will address questions directly related to a particular motion at the appropriate time of the relevant meeting and save general questions until the question-and-answer period. To ask a question in person, please line up in front of one of the microphones at the front. There's one, I think, here, one in the center and then one over on your right-hand side. And if you ask -- want to ask a general question, please wait to line up until we begin the question-and-answer period at the end following my closing remarks.

If you wish to submit a question online in writing, select the messaging tab on the top of your screen and please identify whether your question relates to a motion being considered as part of the formal business of either meeting or whether it is general in nature. If you wish to ask your question verbally, please dial the audio line and press star 1 or click the request to speak icon on the online platform. The operator will verify that you are a shareholder or a proxy holder and you will be asked to ask your question at the appropriate time.

If you have further questions, you'll need to repeat this process and to be added back into the queue. If you are attending the meeting virtually and are logged in as a guest, you will be able to listen to the meeting, but you will not be able to vote or ask questions as only registered shareholders and duly registered proxy holders may do so. Today's remarks may include forward-looking statements. Details regarding forward-looking statements can be found in the applicable company's 2025 annual report and first quarter 2025 report to shareholders.

How are we doing? Okay. So we'll now move to the financial update portion of the meeting as well as the business update for George Weston. And with that, I'd like to ask Richard Dufresne to share his perspective on how the group of companies performed in 2025.

Thank you, Galen, and good morning, everyone. I'm pleased to share an update on the continued strong performance of George Weston and its operating businesses, Loblaw and Choice Properties. At George Weston, our focus remains consistent, building long-term generational value through disciplined capital allocation, strong operating performance and active portfolio management.

Canadians continue to feel pressure from higher prices, and that environment has shaped what our businesses have focused on and how they have operated and performed over the past year. In 2025, we delivered solid results across the group. Consolidated revenue increased to approximately $64.5 billion and adjusted EBITDA grew by 7.5%, reflecting continued strength in both Loblaw and Choice Properties. We also grew net asset value and free cash flow, supported by stable earnings and a disciplined approach to capital deployment.

George Weston repurchased $1 billion of its shares last year. Today, we announced an 8% dividend increase, marking our 15th consecutive year of growth. Net asset value increased by 25.8% year-over-year, underscoring the strength of our underlying assets and long-term strategy. We remain focused on actively managing our portfolio to enhance long-term value.

At Loblaw, the announced sale of the PC Financial business to EQB reflects a strategic decision to simplify the business and sharpen our focus on core retail and health care operations. Importantly, this transaction also establishes a long-term strategic relationship with EQB, ensuring that financial services remain a key part of the PC Optimum ecosystem while reducing capital intensity and complexity. At Choice Properties, the recently announced acquisition of high-quality urban necessity-anchored assets of First Capital REIT represent a significant step forward in its continued focus on strengthening the scale and quality of its portfolio. The transaction supports long-term growth in both net operating income and net asset value.

George Weston participation reflects our role as an active long-term owner, supporting strategic opportunities that enhance value over time. Together, these actions demonstrate our disciplined approach to capital allocation, simplifying where appropriate and investing where we see the strongest opportunities for sustainable long-term returns.

Turning to Loblaw. 2025 was another year of solid financial and operating results. Total company revenue increased by $3.8 billion to approximately $64.8 billion, up 6.2% year-over-year. Food same-store sales grew by 2.3%, while drug retail same-store sales increased by 3.9%. These results reflect strong execution and a continued focus on delivering value to customers in a challenging environment. Performance in food retail reflected continued strength in traffic and market share growth, supported by a clear focus on value, particularly in our hard discount banners.

In drug retail, beauty, pharmacy and health care services remained key growth drivers. Gross margins remained stable, while disciplined cost control enabled operating leverage and EBITDA growth. On a total company basis, adjusted EBITDA increased to over $7.5 billion. Adjusted net earnings grew by $276 million and adjusted earnings per share grew by 13.6%. Loblaw also generated strong free cash flow, supporting reinvestment in the business alongside continued returns to shareholders. In 2025, we reinvested $2.8 billion back into the Canadian economy, creating new jobs and building a foundation for Loblaw's future growth. We also repurchased $1.9 billion in shares last year. And last week, we announced that we would further increase our buybacks in 2026.

At the same time, we grew our dividend for the 15th consecutive year, announcing a 10% increase. The balance sheet remains strong as evidenced by Loblaw's recent credit rating upgrade by DBRS to A low. At the same time, the company continues to invest meaningfully in its network and infrastructure to support long-term growth. The market has taken notice. In 2025, Loblaw delivered a 32.5% total shareholder return. And today, this Canadian company stands as the third most valuable grocer in the world by market cap.

Turning to Choice Properties. Choice delivered another year of strong and stable performance underpinned by the quality of its portfolio and disciplined execution. Occupancy increased to 98.2%, supported by strong tenant demand across its grocery-anchored retail and industrial assets. Same-asset cash NOI grew by approximately 2.2% and funds from operations increased by 3.6%, reflecting steady underlying growth. Choice continues to benefit from a differentiated platform, combining a high-quality necessity-based retail portfolio, a growing industrial footprint and a disciplined development pipeline. The balance sheet remains strong and flexible. Choice ended the year with an adjusted debt-to-EBITDA ratio of approximately 7x and $13.8 billion of unencumbered assets.

In closing, I'm very pleased with the continued performance across the Weston Group. Our businesses are delivering consistent results supported by strong balance sheets, disciplined capital allocation and clear strategic focus. We remain committed to returning capital to shareholders. Looking ahead, we remain confident in our ability to continue creating long-term value for our shareholders.

And I will now turn the meeting back over to Galen.

Richard, thank you. That's terrific. Okay. So as I mentioned before, I'd now like to invite Rael Diamond, President and CEO of Choice Properties, to come out and give us an update on that business.

Thank you, Galen, and good morning, everyone. I'm very excited to be here to share Choice Properties' strategic priorities and story with you. The growth of Choice since our IPO in 2013 has been extraordinary. In just over a decade, we've built something truly special. Today, Choice is the largest REIT in Canada with nearly 700 properties across 3 strategic asset classes: retail, industrial and mixed-use and residential, and we're not done.

4 weeks ago, we announced a $5 billion transformational asset acquisition as part of the privatization of First Capital REIT. This transaction is a clear step change in Choice's scale and long-term growth potential. I'll come back to this in a moment. But to fully appreciate it, it is important to understand how we got here. Choice was not built overnight. It was built through a series of deliberate, disciplined decisions over time, decisions that compounded to create an irreplaceable foundation in what is Canada's leading REIT. It started with Choice's IPO in 2013 when an initial portfolio of 425 properties representing $7 billion of assets was spun out of Loblaw to create Choice. In our first 5 years, we focused on acquiring and intensifying high-quality retail properties.

We acquired approximately 120 additional properties and completed more than 60 intensification projects. By 2018, we've become Canada's third largest retail-focused REIT. That same year marked a major step forward with the acquisition of CREIT. With this transaction, we became Canada's largest REIT. We expanded into new strategic asset classes and created the best-in-class operating platform.

Also in 2018, Loblaw spun out its stake in Choice to George Weston. This gave us a more natural long-term owner that is better positioned to support our growth and diversification plans. Following the CREIT acquisition, we focused our attention on 3 priorities: first, strengthening the balance sheet; second, improving portfolio quality; and finally, leveraging our strategic relationship with our key tenants, including Loblaw.

We executed a clear plan, recycle capital by selling noncore assets and reinvested into higher-quality assets and reduced leverage. To achieve this, we completed over $5 billion in transactions, including $3 billion of dispositions and reinvested $2 billion into high-quality retail assets while expanding our industrial and residential businesses. The results were meaningful. And in a relatively short period of time, we significantly improved our strategic asset mix, including a sharpened focus on our core asset classes.

We reduced leverage and built what we believe is the strongest balance sheet in the Canadian REIT sector. A strong balance sheet provides us with financial flexibility. It allows us to be patient and when opportunities arise, such as the First Capital transaction, it allows us to be decisive. And importantly, we leaned on one of Choice's key differentiators, our strategic relationship with Loblaw. This relationship gives us access to growth opportunities and stability. It lets us move faster, act with conviction and create value for both organizations and ultimately, George Weston.

And you can see that advantage clearly in our development program. Over the past few years, we have developed nearly 4 million square feet of new commercial real estate. This includes retail intensifications, greenfield developments and new industrial distribution facilities. Many of these are anchored by Loblaw. For example, we recently completed a new 40,000 square foot T&T in Erin Mills, which celebrated its grand opening last month.

The reception from Mississauga and the surrounding communities has been exceptional. What's equally exciting is that we're developing 5 new grocery-anchored shopping centers. One of these is in Barrhaven, one of Ottawa's fastest-growing communities. It will be anchored by No Frills and a Shoppers Drug Mart alongside a strong mix of complementary retailers. The center is well positioned to serve a rapidly growing residential population. On the Shoppers Drug Mart side, we're also building 8 new Shoppers Drug Marts with 20 more in the pipeline.

These projects are a few examples, but they illustrate how we continue to grow with our key tenants and create win-win situations. That brings me to today. A few weeks ago, we announced another defining moment in Choice's history. Together with our partner, KingSett Capital, we announced the acquisition of First Capital REIT for $9.4 billion, the largest take-private transaction in the Canadian REIT sector.

As part of this transaction, Choice plans to acquire $5 billion of First Capital's highest quality neighborhood retail centers in Canada's strongest urban markets. Choice's ability to pursue this transaction was made possible by the operating platform we have built, our team's relentless focus on balance sheet strength and the support of our largest shareholder, George Weston, who committed $600 million of equity to this transaction.

The portfolio acquisition is another transformational step for Choice and firmly solidifies us as Canada's leading REIT. It meaningfully scales our exposure to high-growth markets and strengthens our tenant mix. These assets serve daily needs, are located in dense urban communities and benefit from the strong demand and resilient cash flow. Take Carre Lucerne in Montreal, for example, 116,000 square feet anchored by Provigo and Pharmaprix. The property is supported by a strong mix of tenants, service, food and fitness with exceptional visibility along the expressway and serves a dense high-income trade area.

Or Leaside Village in Toronto, 120,000 square feet in one of the city's strongest urban markets anchored by Longo's in a restored heritage rail building with a deep mix of service-orientated tenants. Together, these assets exemplify the portfolio we're buying high-quality, necessity-based retail in dense urban neighborhoods.

Stepping back, including this transaction, what we have created at Choice is remarkable, and it is clear that Choice stands apart. We are Canada's largest REIT with nearly 800 properties nationwide. We have an unmatched retail platform with 83% or 44 million square feet of our portfolio anchored by grocery, pharmacy and other necessity-based tenants.

We have a clear growth runway with a development pipeline of over 18 million square feet. We have the most capable team in the real estate industry, one that is highly experienced, diverse and deeply focused on delivering exceptional service to our tenants. And finally, a true differentiator, an unmatched foundation, including a strategic relationship with our largest tenant, Loblaw. Our journey has been deliberate. Choice has never been stronger and the opportunity ahead of us is significant.

Thank you. I'll now turn the meeting back over to Galen.

Okay. Terrific. So thank you very much, Rael. That was fabulous. And Per, I think you're up next.

Thank you, Galen, and good morning, everyone. Looking back on 2025, I'm very pleased to report that it was another strong year for Loblaw. Throughout the year, we stayed focused on what matters most, delivering quality, value, service and convenience to help Canadians live life well. At the same time, we are executing against our 5-year commitment to invest $10 billion into the Canadian economy.

This will create approximately 8,000 jobs while supporting new stores, modern supply chain infrastructure and expanded health care services. This is about building for the future while continuing to deliver value today. And we did that in an environment that remains challenging. Canadians are feeling the impact in their everyday spending. Inflation is being driven by multiple forces from global conflicts to higher input costs and supply chain pressures.

We see it every day in our stores, and we have always felt a responsibility to respond in a meaningful way. Every decision that we make starts with one question, how do we deliver more value for our customers. Over the past 12 months, our internal food inflation has been significant below the CPI. Customers, they are noticing. They are looking for value, and they're finding it in our stores. In '25, we made meaningful progress across our business. We introduced new programs and refined existing ones, all grounded in what customers are telling us they want.

We expanded our promotional programs, and we delivered even more value and excitement back into our stores. We also continue to invest in how and where we deliver value. Over the last year, we expanded our hard discount footprint, opening Maxi and No Frills stores in new and underserved communities, helping bringing lower prices to more Canadians. And at the same time, we are applying that same value mindset across the entire business, combining lower pricing with the service and selection customers expect from our full network.

When conditions changed last year, we moved quickly. As tariffs began impacting a wide range of products, we made it transparent to customers, allowing them to choose Canadian-made alternatives, both in stores and online. At the same time, we strengthened our sourcing. We onboarded over 200 new local companies onto our small supplier program in last year, expanding our local assortment, improving value and increasing the resilience of our supply chain. This is a really good example of how we operate, moving quickly, staying transparent and always putting the customers first.

Customers are responding. We saw strong traffic growth, market share gains and continued momentum across the business. And our new stores outperformed our own expectations. In '25, we surpassed $64 billion in revenue for the first time in our history. That is one of the milestones that reflects the trust Canadians place in us. Our growth continues to be driven by a powerful combination of assets. Our hard discount supermarket formats remain at the core of our food business.

Our pharmacy network continues to expand access to care. And all of this is connected through PC Optimum, our digital platforms and our broader ecosystems. As Richard mentioned, we also announced the sale of our PC Financial business to EQ Bank, and this allows us to sharpen our focus on retail and health care, while maintaining a strong long-term relationship with EQ Bank that will continue to deliver value to the PC Optimum platform.

PC Optimum remains a key differentiator with more than 18 million active members and over 1 billion in points redeemed this year. We're also seeing strong momentum in e-commerce with more than $4.5 billion in annual sales. These are powerful drivers of engagement and growth. Over the many things that makes Canada unique and by extension Loblaw is the diversity of the people in this country. Canada is one of the most multicultural markets in the world, and this is reflected in our stores and in the people that we serve. We continue to expand assortment from everyday essentials to international and multicultural products.

T&T is a great example. It is one of our fastest-growing banners with more than $2 billion in sales -- $2 million. Sorry, not $2 billion yet, Tina. Last year, in April, we opened our 37th Canadian store, and we are bringing more T&T products into our other banners to meet the growing demand that we're seeing. For many new Canadians, T&T stores are a place that feels familiar, a connection to home. And for others, they offer something new.

That diversity is a strength, and we continue to lean into it. We're also seeing strong momentum as we expand T&T into the United States with 2 stores opened last year and 9 more already internally approved. Our Shoppers Drug Mart and Pharmacy business remains a key contributor with a balanced model that combines prescription management, health care services and a strong front store offering.

In pharmacy, we're seeing steady growth driven by prescription volumes, expanded scope of practice and continued demand for accessible health care services. Our network of pharmacy-led clinics has grown to approximately 250 locations, improving access to care while supporting the broader business. Our health care professionals continue to serve millions of Canadians every year. In fact, our pharmacies filled more than 180 million prescriptions in 2025 alone. Front store performance continues to be led by the strength of our beauty offering.

At the same time, we continue to invest in pharmacy services, digital capabilities and workflow improvements, enhancing both the patient and the customer experience. We're also continuing to invest in our network. In '25, we expanded our reach to serve more communities across Canada. We opened 77 new stores, including 27 pharmacies, 48 hard discount grocery stores plus 1 new T&T store in Toronto, our second T&T opening in the U.S. We continue to modernize our supply chain, improving efficiency, reliability and how we serve our customers.

These investments are so critical to building the foundation that will support our long-term growth. Across all of this, our focus remains clear. We are delivering value to more communities across the country. That's how we continue to earn customers' trust. As proud as we are of our results, we know there's more to do. We'll continue to invest in our business by opening new stores and clinics, expanding our digital capabilities and strengthen our value proposition to deliver greater value to our customers.

These investments will also create jobs and opportunities for Canadians and build stronger partnership with the suppliers and communities that grow with us. We're also making meaningful progress on our environmental and social commitments that benefit both the business and the communities where we operate. We continue to advance our net zero ambitions, reducing our enterprise carbon emission by 16% from our 2020 baseline alongside continued progress on reducing food and plastic waste. I'm proud to share that 98% of our controlled band plastic packaging is now recyclable and/or reusable.

At the same time, social impact remains a key focus. Last year, over 1 million children received access to in-school meal programs through our President's Choice Children's Charity. We also surpassed $50 million in funding support for women's health and expanding access to care in communities across the country through Shoppers Foundation for women's health.

Together, these efforts reflect a clear focus delivering value to Canadians across our operations and in the communities we serve. Finally, and most importantly, I want to thank our colleagues across the country. More than 220,000 colleagues bring our purpose to life every day, serving customers, supporting their communities and continuously improving how we operate. Their commitment is what drives our success and gives me confidence in our future. Please join me in recognizing their incredible work.

And I'll now turn the meeting back to Galen. Thank you.

Thank you so much, Per. Your passion for providing great value to our customers is always so incredibly clear, and your team continues to work so hard and do such a great job trying to help Canadians live life well.

Okay. We're now on to the next phase of the meeting, which is the formal elements, and we're starting with George. So everybody who is a George shareholder, this is your time. So just as a reminder, George Weston shareholders who wish to vote online must be logged into the meeting using their George Weston control number. If you don't do that, your vote will not be counted. Also, if you have questions regarding the formal items of business, please proceed to the microphone prior to voting on that matter or identify online that your question relates specifically to the motion that is being considered.

I'd now like to place before the meeting the annual audited consolidated financial statements of George Weston, together with the notes and auditor's report for the year ended December 31, 2025. These are included in the annual report, which was provided to shareholders and can be retrieved from George Weston's website or SEDAR. Are there any questions in connection with the financial statements?

Okay. Hearing none, we'll continue with our next item of business. We'll now move to the nomination and election of directors. With us today are all of George Weston's Director nominees, and I ask that they stand to be recognized. There are 6 director nominees standing for election at this meeting. All of these nominees are current directors of George Weston. George Weston's Management Proxy Circular contains detailed biographies setting out the valuable qualifications and diverse backgrounds of the nominees, and I'm pleased to report that based on the proxies received by the scrutineer in advance of the meeting, each director nominee received votes in favor from at least 97% of votes cast.

We will now consider the election of directors. I declare the polls open to all George Weston resolutions. Before proceeding to voting, I'll address any questions related to the nomination and election of directors first in person and then online.

Nick, are there any questions related to the nomination and election of directors?

I'm a shareholder, a very small shareholder, a shareholder nonetheless, of George Weston Limited. And I do want to register one important point. You -- pretty well, actually, I have 2. I miss the presence of Sabi Marwah. He was the smartest by far, financial manager I have ever met in my long career, and he did yeoman service for you, and he has retired, and I miss him.

I'll pass on your well wishes, Bob. I'm going to have lunch with him in a week or 2.

Okay. Now just a brief comment. The Weston board doesn't meet very often, but it gets paid better than the Loblaw board. And that doesn't make sense to me. I know that Board service is more than the formal meeting, but it seems to me that the workload of the Loblaw Directors is more significant than the workload of the Weston directors, and the pay should be commensurate.

Okay. Now can I have a nomination for the election of directors?

My name is Salma Sahibzada, and I am a shareholder. Mr. Chairman, I nominate the following persons for election as directors of George Weston to hold office until the next Annual Meeting of Shareholders or until they resign or their successors are duly elected or appointed. M. Marianne Harris, Nancy H.O. Lockhart, Gordon M. Nixon, Barbara G. Stymiest. Galen G. Weston, and Cornell Wright.

My name is Jeff Gabe, and I am a shareholder. Mr. Chairman, I second the motion.

Thank you, Jeff. I'll now call for a motion to move that the nominations be closed.

Mr. Chairman, I move that nominations be closed.

Mr. Chairman, I second the motion.

Thank you. I ask shareholders or their appointees to cast their votes by completing their blue George Weston ballots or through the online portal. Okay. We'll now move to the next item kind of business, the appointment of our auditor. Are there any questions related to the appointment of the auditor? Thank you. I'll now ask for a motion for the appointment of the auditor of George Weston and the authorization of the directors to fix the auditor's remuneration.

Mr. Chairman, I move that PricewaterhouseCoopers LLP be appointed as auditor of George Weston until the next Annual Meeting of Shareholders of George Weston and that the directors be authorized to fix the auditor's remuneration for the 2026 fiscal year.

Mr. Chairman, I second the motion.

Thank you. If you've not already done so, I ask shareholders or their appointees to cast their votes. The next item of business is the advisory resolution regarding George Weston's approach to executive compensation. The resolution is more fully described on Page 19 of the George Weston Management Proxy Circular. Are there any questions related to the advisory resolution regarding to George Weston's approach to executive compensation?

Hearing none, I'll now entertain a motion to approve on an advisory basis, George Weston's approach to executive compensation.

Mr. Chairman, I move that the advisory resolution regarding George Weston's approach to executive compensation be approved.

Mr. Chairman, I second the motion.

Thank you. If you've not already done so, I ask shareholders or their appointees to now cast their votes. Thank you. This brings us to the end of voting on George Weston's items of business before the meeting, and I therefore declare the polls closed. Please raise your hand now so that a representative of the scrutineer can collect your George Weston ballot. Otherwise, your vote will not be counted. Thank you. Any others up here on...

Yes? Don't be bashful. Wave your ballots. Okay. Terrific. All right. We've received already the preliminary voting results from the scrutineer on George Weston's 3 items of business. On the election of directors, the voting results show that each director nominee received votes in favor from at least 97% of the votes cast. On the appointment of the auditor, the voting results show that more than 99% of the votes cast were in favor. And on the advisory note on George Weston's approach to executive compensation, more than 97% of votes cast were in favor of George Weston's approach to compensation.

I declare all motions to be passed.

The final voting results will be available after the meeting and posted on the SEDAR profile of George Weston Limited. As there is no further business, can I have a motion to terminate the George Weston meeting?

Mr. Chairman, I move that the George Weston meeting terminate.

Mr. Chairman, I second the motion.

I now declare the meeting of George Weston Limited terminated. It's now time to proceed with the Loblaw meeting. So if you're a shareholder of Loblaw who is currently logged in using the George Weston control number, now is the time to log out of the Lumi platform using the icon in the top right corner of your screen. Once logged out, then please log back in using your Loblaw control number. If you're not a Loblaw shareholder, you don't need to do anything.

While we give shareholders a moment to log back in, I want to thank all shareholders and guests who have taken the time to join us here today for these meetings. We look forward to engaging with you each year and are pleased to be able to provide an opportunity for you to participate here in person or virtually. We'll now proceed with the formal part of the Loblaw meeting. If you have any questions regarding the formal items of business, please proceed to the microphone prior to voting on that matter of business or identify online that your question relates to a motion being considered as part of the formal business.

I'd now like to place before the meeting the consolidated financial statements of Loblaw Companies Limited, together with the notes and auditor's report for the year ended December 28, 2025. These are included in the annual report, which was provided to shareholders and can be retrieved from Loblaw's website or from SEDAR. Are there any questions in relation to the financial statements? Thank you. We'll continue with our next item of business. We'll now move to the nomination and election of directors. With us today in person and online are all of Loblaw's director nominees. I ask that those here today, please stand to be recognized.

There are 13 director nominees standing for election at this meeting. All of these nominees are current directors of Loblaw. Our management proxy circular contains detailed biographies setting out the valuable qualifications and diverse backgrounds of our nominees. I'm pleased to report that based on the proxies received by the scrutineer in advance of the meeting, each director nominee received votes in favor from at least 97% of votes cast. We will now consider the election of directors. I declare the polls open on all Loblaw resolutions. And before proceeding to voting, are there any questions related to the nomination of the election of directors.

Thank you for the opportunity, Mr. Chairman, Robert Gregan, shareholder. This is a massive company and -- but its success depends on millions of people making small decisions every week for the necessities and the wants of their life. So it's very important that we have directors who are customers of our food and pharmacy divisions. So I'd like to do a little exercise if the share -- if the directors of Loblaw would raise their hands, please? Come on, get them right up. Now how many you can keep your hand up if you've got more than 4 million PC Optimum points accumulated since 2018.

I can. I can, Bob, I can do it. I can do it.

Okay. Well, I've got 4,300,000 something, so I'm a serious shopper. And I love shoppers. And some of the reasons why I'm still standing tall at 77 with good knees and all my teeth are products that I buy at Shoppers.

Good to hear you, good to hear you. You hear that, Gregers, a loyal customer.

So that's my point. I want my directors shopping so that you know what's going on in this company and you can relate to the millions of people who are essential to our success.

Thank you, Bob. It's terrific feedback, and I can say with certainty that we have very avid shoppers on the Loblaw Board of Directors and on the George Board as well. They always have a tip, don't they, Per, for you or for me or for -- Mel, are you laughing. Well, you get them as well. So there's a constant stream of constructive feedback from our directors as shoppers and of course, as fiduciaries. So it's well called out and I think well represented on the board.

Okay. So could I please have a nomination for the election of directors?

My name is Emma Race, and I am a shareholder. Mr. Chairman, I nominate the following persons for election as Directors of Loblaw Companies Limited to hold office until the next Annual Meeting of Shareholders or until they resign or their successors are duly elected or appointed. Scott B. Bonham, Shelley G. Broader, Christie J.B. Clark, Daniel Debow, William A. Downe, Janice Fukakusa, M. Marianne Harris, Kevin Holt, Claudia Kotchka, Rima Qureshi, Sarah Raiss, Galen G. Weston, Cornell Wright.

My name is Richard Pattack. I'm a shareholder. Mr. Chairman, I second the motion.

Thank you. I'll now call for a motion to move that the nominations be closed.

Mr. Chairman, I move that nominations be closed.

Mr. Chairman, I move the nomination be closed.

Thank you. I ask shareholders or their appointees now to cast their votes by completing their yellow ballots or through the online portal. We'll now move to the next item of business, the appointment of the auditor. Are there any questions related to the appointment of auditors? Thank you.

I'll now entertain a motion for the appointment of auditor of Loblaw and the authorization of the Directors to fix the auditor's remuneration.

Mr. Chairman, I move that PricewaterhouseCoopers LLP be appointed as auditor of Loblaw until the next annual meeting of shareholders of Loblaw and that the directors be authorized to fix the auditor's remuneration for the 2026 fiscal year.

Mr. Chairman, I second the motion.

Thank you. If you've not already done so, I ask shareholders or their appointees to now cast their votes. The next item of business is the advisory resolution regarding Loblaw's approach to executive compensation. The resolution is more fully described on Page 20 of the Loblaw management proxy circular. Are there any questions related to the resolution regarding Loblaw's approach to executive compensation? I'll now entertain a motion to approve on an advisory basis, Loblaw's approach.

Mr. Chairman, I move the advisory resolution regarding Loblaw's approach to executive compensation be approved.

Mr. Chairman, I second the motion.

Thank you. If you've not already done so, I'd ask shareholders and their appointees to now cast their votes. I think we'll just wait, Bob.

While we're waiting, I want to give you a compliment. I want to give you an A plus on your conduct of this meeting. It has been flawless.

Okay. Thank you. Thank you.

And the format works perfectly, and it saves a lot of money to have one assembly. And I also thank you for bringing us in this hall. I realize it was not your first choice, but I haven't been here for a while, and I'm happy to see the Weston name out in the lobby. I was here in the 1960s with a lot of hair and to hear the great Pete Seeger perform here. So -- and this is a special place, and I'm glad to know that the Weston family is supporting it so generously.

Terrific. Thank you. Well, it is a pleasure to be here. Thanks, Bob. Okay. So the next item of business is a shareholder proposal submitted by the B.C. General Employers Union. The shareholders' proposal and supporting statement are included in Schedule B of Loblaw's management proxy circular.

I'd now ask Emma Pullman of the BCGEU to please present the proposal. Please go ahead, Emma.

Thank you, Mr. Chairman, and good morning, fellow shareholders. I'm here as the Chairman said, on behalf of the B.C. General Employees Union, a long-term shareholder, to introduce our resolution, which can be found on Page B1 of the Loblaw management information circular. Loblaw has made headlines recently for a data breach, overcharging for meat once again, promoting imported food as Canadian and as having failed to delete PC Optimum accounts in a timely fashion.

In 2025, Loblaw made headlines by committing to end property controls, restrictions that limit how a property can be used by others. In the grocery industry, property controls may harm competition by making it difficult for businesses to open new stores or by limiting the food products that can be sold in a food retailer store.

For years, Canada's Competition Bureau has scrutinized these practices. This announcement was welcome. However, Loblaw's commitment is conditional and depends on competitors acting first. There are no fixed time lines, no public milestones, no reporting on progress. A recent CBC marketplace investigation found that Loblaw had released just 150 controls across the country and would do more when other competitors followed suit. A commitment to ending anticompetitive practices that is contingent on competitors' behavior is not much of a commitment at all.

Investors deserve measurable time lines, not moving goalposts. And there's a second issue. Loblaw's principal landlord is Choice Properties REIT, Canada's largest REIT, as we've just learned and a vehicle originally spun out from Loblaws, the controlling shareholder, George Weston Limited, also controls Loblaws. This vertically integrated structure raises questions about whether Loblaw's commitments to end property controls apply to properties it effectively owns through Choice Properties. And we don't know this. Loblaws hasn't said.

Meanwhile, regulators are moving, the Manitoba provincial government has taken action against Loblaw and its competitors passing legislation requiring the disclosure or expiry of property controls, targeting predatory pricing and requiring the public disclosure and elimination of property control. The Alberta government and others are considering similar measures. As a long-term investor, we have engaged with Loblaw on several important issues over the years, and we attempted to engage with the company on this issue. We were unfortunately not given the opportunity.

The resolution is simple. We are asking the Board to publicly disclose how many properties still carry controls, what the time line is to end them and whether the commitment extends to assets held through Choice Properties. Transparency and accountability are the basics that any long-term investor expects. The Competition Bureau is still watching this issue. Regulators are and the absence of disclosure in our view is not neutral. It is a risk that builds quietly until it isn't quiet anymore. We encourage all shareholders to vote in favor of this resolution. Thank you so much.

Thank you, Emma. The Board and management recognize the importance of food affordability, and we're committed to operate in a manner that supports competitive markets and complies fully with applicable laws. Loblaw publicly committed to eliminating property controls in the grocery industry and has announced concrete steps to do so. Since then, it has released over 150 restrictive covenants and lease exclusivities granted numerous waivers, ceased enforcing radius restrictions and aligned all new lease practices with Competition Bureau guidelines.

The Board does not believe that additional disclosure is necessary or would accelerate progress beyond the work underway. The Board of Directors recommends that Loblaw shareholders vote against this shareholder proposal. Schedule B of Loblaw's management proxy circular provides a detailed explanation for this recommendation. Are there any questions in connection with this shareholder proposal? Okay. Hearing none, I'll now ask that the motion be made to put this shareholder proposal to a vote.

Mr. Chairman, to facilitate the business of the meeting, I move that the shareholder proposal as more fully described in Schedule B of the management proxy circular be put to shareholders for voting.

Mr. Chairman, I second the motion.

Thank you. If you've not already done so, I'd ask shareholders or their appointees to cast their votes by completing their ballots or through the online portal. Okay. Thank you. This brings us to the end of voting on the Loblaw items of business before this meeting, and I therefore declare the polls closed. Please raise your hand now so a representative of the scrutineer can collect your yellow ballot in person. And otherwise, your vote will not be counted.

A few yellow ballots up here, one in the back, one over here on the left. Okay. Terrific, Making a way around, I think, here on the left and then at the very back.

All right. So we have received the preliminary voting results from the scrutineer on Loblaw's 4 items of business. On the election of directors, voting results show that each director nominee has received votes in favor from at least 97% of votes cast. On the appointment of the auditor, voting results show that more than 99% of the votes cast were in favor of the appointment of PwC as auditor of Loblaw. On the advisory vote on Loblaw's approach to executive compensation, approximately 94% of votes cast were in favor of Loblaw's approach.

I declare these motions passed. On the shareholder proposal, the voting results show that approximately 94% of the votes cast were against the proposal. As there are a greater number of votes against than in favor for the proposal, this motion is not passed. The final voting results will be available after the meeting and posted to the SEDAR profile of Loblaw Companies Limited. As there is no further business, can I have a motion to terminate the Loblaw meeting.

Mr. Chairman, I move that the Loblaw meeting terminate.

Mr. Chairman, I second the motion.

Thank you. I'll now declare the meeting of Loblaw Companies terminated. Okay. So we made it through our second combined Loblaw and George Weston AGM. Bob thinks it's going very well. And hopefully, it felt a little bit quicker than last year. We tried to tighten it up in a few places, but I know there is a lot to get through, and we've got a lot to share. As you heard from Richard, from Rael and from Per, our businesses are performing very well.

Choice Properties has announced this major real estate transaction while continuing to serve their tenants in ways that uplift communities with an eye towards sustainability, creating places where people thrive. At Loblaw, helping Canadians live life well remains at the very heart of their strategy. Having now opened 250 pharmacist clinics while bringing dozens of new discount supermarkets into underserved areas, Loblaw is making health care more accessible and food more affordable for Canadians.

Both Choice and Loblaw did so while delivering another year of steady and consistent growth. And it's that strong performance, which allows us to go even further in supporting the hundreds of communities that we serve. You'll recall that last year, I announced my family's commitment to dedicate $1 billion towards strengthening Canada. A year later, I wanted to share a little bit of progress. We've been focused in areas that we understand well in health care and in our nation's food systems with an emphasis on philanthropic investment anchored in market-based principles that help to build prosperity for all Canadians.

In food, we've set up a $100 million Made in Canada fund to support local manufacturers and growers. It includes more greenhouse capacity for radishes, so we no longer have to import them in Eastern Canada during winter, something radish lovers like myself are celebrating even if a few radish critics who no doubt are in the room may be rolling their eyes. We have several other investments in the works, ranging from Apple storage in British Columbia to aquaculture in the Great Lakes and cherries in Toronto.

And we're extremely appreciative of the sourcing and procurement team. Danny is in the room. She's partnering with our folks very closely on this. And it's really exciting to see the kinds of opportunities that are coming our way because of our depth of understanding of what's happening in the supplier community and our opportunity to invest not just to -- into start-ups, but actually to scale up sustainable production in areas that we would otherwise be quite vulnerable to as a country that spends so many months under ice and snow.

We've committed $50 million towards regenerative agriculture through Canza's Million Acre Challenge, partnering with farmers to bridge the gap from the adoption of sustainable practices to financial sustainability. Starting with corn in Ontario. That project aspires for regenerative techniques to be employed across 85% of the crop in this region. And the Weston Family Foundation's homegrown innovation challenge, an exprise-like project where teams are competing to optimize the year-round cultivation of produce indoors.

We are now scaling 4 finalists, including a team at Simon Fraser University who are growing blackberries, raspberries and blueberries simultaneously by staggering their dormancy windows to create year-round harvests. And here in Toronto, where TMU researchers are shortening plants from 8 feet to 4, creating a faster-growing crop that aims to make indoor raspberry production commercially viable. Spanning every stage of the innovation curve from novel breakthroughs to scaling production, these efforts are making Canada's food system more sustainable and more secure.

In health care, the challenge is no less significant. Our $100 million innovation fund is helping to bridge Canadian discoveries all the way through to commercialization. Last year, we announced a $12 million investment in Grey Matter Neuroscience to commercialize noninvasive focused ultrasound that will allow patients to manage cognitive disorders like dementia and depression outside of the hospital. And last week, after 12 months of work, the team showed me their latest prototype. Put simply, it is transformational technology and very, very cool. They wouldn't let me put it on my head, but it was really pretty amazing.

I think there's a couple of people in the room who've seen it, and it is pretty sensational. And they are headed to clinical trials very soon. It's a great example of the capability we have right here in Canada. But too often, that progress through clinical trials as an example, is slowed by fragmented and inadequate infrastructure. That's why we've also launched a major partnership with Sunnybrook Research Institute to accelerate clinical trial activations, shrinking it from 200 days to activate a clinical trial to just 45, which would be a world-leading speed if we can achieve it.

More trials mean more Canadian innovation coming to market and importantly, most importantly, better care for patients. And lastly, we're proud to back the recently launched nonprofit, nonpartisan media outlet Be Giant. Its purpose is to shine a spotlight on the amazing Canadian companies and people whose passion and innovative spirit are making our communities and our country more prosperous. And it's off to a great start using the highest quality independent Canadian journalism to bring these kinds of stories to life.

Stories like Melanie Bitner and Alex Delorier, who turned the tragedy of losing their family's generational cabin to a wildfire in 2003 into a water-bombing drone startup that is now extending for the firefighting effort during the forest fire season into the night where planes and helicopters are otherwise grounded. It turns out that fighting fires at night is the most potent time to do it because the wind drops and the temperature drops, but pilots don't fly into those danger zones at night. Drones, of course, can.

And so imagine swarms of water-carrying drones heading out over the British Columbia forest at exactly the right time. Led by one of Canada's foremost journalistic editors and with no advertising, Be Giant is designed to be freely accessible and widely shared, widely shared. So now is your queue to get your phones out, you can do that now and scan the QR code on the screen, and that will take you to a window where you can sign up for the Be Giant newsletter, which if you haven't done, you all must do because it will provide for you a weekly dose of optimism around Canada's incredible potential and progress, and it will support one of Canada's newest media outlets. Come on guys. If you haven't -- maybe you've already done it. There we go. Okay. Good.

And then finally, just by way of wrapping up, I'd like to take a moment to thank all of those who are in this room who've been working on these projects. It's been a pretty sensational year of momentum and achievement. I'd specifically like to call out my Aunts, Camilla and Wendy, who continue to lead our efforts in an inspiring way at the Weston Family Foundation, where so much of this work and other work is being done.

Now there are President's Choice -- Well, good. Yes. There are President's Choice treats to be had. So that's one of the reasons so many of you come to this meeting, I know. And a few questions to be answered, hopefully. So let me end it where it all started and with the success of our group of companies. and the hundreds and thousands of colleagues who work hard every day. It's their hard work and the work of the management teams in this room that enable us to do all of these additional things.

And so as I prepare to open the floor for questions, let me just say thank you. Thank you to them, and thank you to you for your wonderful and continued support. Thank you. Okay. So we'll now move ahead with the question-and-answer period. So we will first answer questions from those in person. And then we'll also -- we've got a system set up so that we can answer any questions that are submitted online in real time. We're certainly going to try and do that. And then if there's anything we don't get to in this Q&A period, we'll address them after the meeting through members of management or we'll follow up with any of your e-mail questions we don't get to. So let's start with the in-person questions. And where are we over -- do we have anybody? There we go, Bob.

Although I have to say after that impressive report, it's a hard act to follow. I don't think I can come up with anything that matches the importance of what you've just told us about. Thank you very much. But I do have a challenge for each of the 3 major divisions. And I'm going to start with Choice Properties because it's very close to my heart, even though I was a newspaper man, I started my education in civil engineering. And after I sold my newspapers when I was 50 years old, sold them in just in time to the Toronto Star before the Internet grew in the business.

I went into the hotel development marketing business. But if Choice Properties had existed then as it does now, I'd have been knocking on your door begging for a job because that's the kind of company I would love to work for as a younger man. It's -- I've watched amazing things done in the last few years. So I have a specific challenge for Choice. I've raised this informally in the past, but I'm going to make it formal this time. I live in Stratford, where we have a once-in-a-lifetime opportunity for the wisdom of this company to be put to work and really do something with the Choice brand.

Stratford was built as a railway town. The steam engines were serviced there. There was a massive building in the middle of the city. It is massive. And it's been sitting idle for more than 20 years. And finally, the city has gotten its act together. It's been cleaned up enough that it can be presented to a savvy developer. The asbestos is gone. The frame of the building is of a scale that you can't imagine. It was big enough to bear cranes that carry the steam engines around like toys. And so it's the strength of that frame. It's sitting there.

It's bigger than any industrial building you've ever built. It has enough room inside for 2 layers of parking. And it's just waiting for -- and I think this is the only company that can do it. And the city is...

For a creative developer.

They're looking for a responsible creative developer. They're looking responsible creative developer There will be charitable opportunities, but I'm presenting this as a shareholder saying, this is a profitable opportunity that will really raise the profile of the choice brand. So I'll be happy to talk to Rael after the meeting and arrange.

Let's do another deal, Stratford.

Okay. So that's my challenge to Choice. Now Loblaws, I've raised this before, and I'm going to raise it again. You're doing a lousy job with low salt food. And there's an awful lot of us baby boomers who need low-salt food. We struggle with fluid retention. So you've got the best rotisserie chicken in the world, but it's not available most of the time. It's called Portuguese style. Now Portuguese is not a recognized cuisine. So I can see where it doesn't sell well. It needs rebranding. This creative company should be able to rebrand that.

Wait, so hold on. Is the question -- we can't only do one. Is the question about the chicken or the question is about low sodium? Or is it?

Well, the question is generally about more good low sodium food.

Okay. Where is April? Is she here? April, where are you? Are you waving -- you get that note? Okay. Perfect.

Well, so I can tell you, Bob, you have a kindred spirit in April, who has recently joined us as the Head of Loblaw Brands and healthy food. And what do you say healthy and -- what's your -- now I've really put her under...

Healthy food that tastes amazing.

Now yes, healthy food that tastes amazing, that's what we want, right?

Okay.

Okay. So April is there, and she's worth having a chat with actually, she should be pretty inspiring.

Her name is April?

April.

April, would you find me after the meeting, please.

All right. That matter resolved. We're doing really good. Okay, the challenge...

Last one. The students, they're getting tired. They're not used to standing up for very long.

Yes. Okay. The challenge for Shoppers, I'm in Shoppers at least once a week. And I know it tremendously well. I know your strengths and your weaknesses. But the one thing I have observed is that you've had total control now for 8 years. You have not done with pharmacy products, what you do with food products. I'm waiting for some serious innovation as you do with President's Choice because I'll give you the example.

Here, here. I totally agree with you. And by the way, April -- in addition to doing -- she's putting her head in her hands now. In addition to being a rock star when it comes to great food products, she's also worked in one of the big health and beauty companies over in the U.K. before she came here. And Gregers is the new President of Shoppers Drug Mart. And what we were just talking about this yesterday, weren't we, about the opportunity to bring some real differentiation and innovation to Shoppers Drug Mart, perhaps even through the Life brand. I mean, Life brand is a pretty fabulous name. And so we need some fabulous innovation to go with it. So that's a strong yes. Gregers, that's a strong yes, okay? And if you want to talk to Gregers, he's right there. And he's...

Let's get serious about this because I mean I've been Shopper's shopper since the thing came to town. I knew David Bloom, I watched the place grew like crazy. And I thought what a brilliant move when you bought it?

No, no. Bob, you're right, and it's on our hit list. We needed new management to get on with it. It's exciting. We're going to expect some big things. So hopefully, next year, we'll be able to bring you a couple of products that really do it for you. By the way, I will say there is one product. The packaging isn't great, but the quality is amazing, which is the Life brand masks, face masks. So if you tried those and then sent me a picture with one on, that would really be awesome. Bob, thank you, let me move to these.

Okay. On your Weston. I'm Helea, and we're all from Bloor Collegiate Institute. And we're all taking accounting right now. So I was wondering as the Chairman of Loblaw Companies Limited, how the information and financial reports are used in your decision-making?

Richard, do you want to take that one?

Sure. Financial reports are crucial. They are really important. Everybody who is at Loblaw looks at financial reports on a daily basis, whether it's our sales or margin, like that's how we make decisions. That's how we figure out what's going well versus not, what is challenging. And so it helps us make those decisions. Financial statements also provide accountability and transparency to the public, to customers and to shareholders. So that's also key.

But also, it's important to note that all these financial reports or financial statements, they look in the past. So we spend a lot of time here trying to predict the future. And so we use that past financial information to try to build models that allow us to predict the future. And I would say that is what's most important for us because if we can build good plans for the future, that will allow us to come here every year and have good results to present to all of you.

My name is Prakridi. We understand that Loblaws has begun using driverless trucks for some deliveries, and we are wondering how this was working out. And will robots be used more for automation in stores, too.

Noted that one?

Yes, I can take that one. So yes, it's very exciting with our driverless trucks. So our supply chain, they are ahead of the game. So right now, we have 10 so-called street trucks running daily around Toronto. And we have 15 more by end of June. And end of this year, we will have 50 in total. We'll still have a person in the cabin. So we still have -- it's not completely driverless yet, but it will be over time. It's driving on its own. And then we have one of these Class 8, is one of the big trucks.

We're testing it for another 3 weeks between Toronto and Cornwall. But in 3 weeks' time, it's going to run on its own still with a person in there trying to survey and making sure everything is okay. But over time, we will definitely be driverless. So no, it's very, very exciting. But about the stores, I still believe that grocery stores are very, very people focused. So our colleagues, they play a vital role in serving our customers. So I don't foresee any change with that regard in the near future. Thank you for the question.

We understand that Loblaws has made a big commitment to fighting climate change. What are some of the areas where you see the greatest improvements happening?

Do you want to take that one, too?

Yes. So thank you, very important for all of us. So fighting climate change is a very important priority for Loblaw. And we are really focused on making some practical improvements across our business. It could be reducing emissions through LED, it could be smarter heating and also within our refrigeration systems.

And then food waste is probably the biggest contributor to climate change at all. So we're doing a lot on food waste. For example, in our discount business, we have removed multi-buys. So you don't force customers to buy more than one and thereby reducing food waste also at customers' home. And then we have that target to reduce zero food waste to landfill by 2030, and we are well underway to achieve that target as well. On plastic, it is another great example. In our control brands, we're more than 98% where we use reusable plastic. So we are well on our way. But again, in so many other aspects, there's so much more we can do. Thank you.

We saw -- I'd say we saw a great picture yesterday, didn't we. We were up at the new warehouse up in East Gwillimbury. And it's a big, big building, and they showed us sort of the imprint of, was it, 7 football fields on top of this building, all of which will be covered with solar panels, and it will be the largest solar panel installation in Canada.

And I think they think it might be the largest solar panel installation in all of North America and all to take the energy from the sun and to use it to power that distribution center. So there's that type of project that's going on throughout the company as well. And I have to compliment the team. They're really superb, particularly in energy management and reducing our carbon footprint that way. Thanks. Good questions.

Yes, over here.

I'm a proxy for Michael Tysowski. Now his question is the T&T grocery store expansion in U.S.A. cities, have you thought about Portland or Boston?

Tina, have we thought about Portland and Boston. You don't need to stand up. We'll -- so the short answer is yes, we've thought about both. But the focus is on the West Coast right now. And as Per said, we've got -- is it 9 stores approved? Tina, is that 9 stores approved and the next one is opening when in June.

Yes.

And where is that one?

So we're focused on Greater Los Angeles and Greater San Francisco.

So West Coast, T&T, San Francisco, Seattle and L.A.

Okay, good. Over here in the middle.

My name is Daniel. I am a proxy holder for myself. I have 2 questions. The first one, going back to the automation in the stores. A few years or quite a few years ago now, Takeoff Technologies like automated Micro Fulfillment was announced. Is there any future plans? or is that still being used?

So no. So the Takeoff Micro Fulfillment facility, we decommissioned. It wasn't -- it didn't work, not from a cost-effective perspective. And what we see now is that far and away, the best way to pick and deliver groceries to Canadian consumers is through the stores themselves. And so that is the basis of our business model. And Frank Gambioli, who's here, who's responsible for most of that in-store fulfillment, he tells me that productivity and accuracy are going up every day. And he's laughing at me because I give them a hard time about this. We're getting -- we're really good, and we're getting even better. So that will continue to be the focus for online picking and delivery.

My second question is about PC Optimum customer service. personally, myself, I've defined it as having a lot of friction. One point of contention I have is I feel like there's a 5-minute minimum wait time to talk to someone before you even know how long that wait time is, whether it be 30 seconds or 40 minutes. Is this something that the company is purposely adding to drive people to online channels?

What a great question. So who wants to answer that. I'm going to -- I'll answer the first part of it. No, it's not a purposeful effort to drive people to online channels. But we are trying to maximize the efficiency of the way that we deliver customer service and online is getting increasingly capable of directly addressing customer concerns. It's one of those things where I imagine, I think I know the general statistic, like 90% of phone calls that come in to our call center would relate to people concerned that they didn't get the points that they thought they should have gotten at that recent shopping trip that you can automate pretty quickly. You don't have to have a person answer the phone.

And we want to maintain the capacity of those operators to deal with particularly nuanced or complex issues. But it is a real -- it is a frustration of mine. I think for everybody who calls into a call center, that struggle to get to a person and they struggle to have their complex issues resolved. So suffice to say, it's an important priority for us. And I don't know if Dax is in the room, but we have an absolute superstar managing that part of the organization for us. And she's working both with people and with technology to really step change the way we deliver service through those call centers. Thanks. Great question.

Okay. Bob, are there any more questions? If not, well, maybe, Bob, you can be our last question, and then...

Is there anybody online?

Yes. Is there anyone online? Thank you for asking.

Okay. Don't want to leave them out.

You're right about that.

Yes. I wasn't going to raise this, but I think it is important. There is a problem with the customer service with Optimum. It doesn't happen very often, but I got gas the other day, put my card in, it acted like it had received it, got my receipt, but it said, if you were a PC Optimum member, you would have got 940 points.

So we're talking about $0.94. Now I tried to do it online, and I couldn't make it work. And then I phoned and waited 35 minutes. And I got somebody who said, "Oh, yes, we'll take care of this." And he was a bit too efficient and hung up before he got enough particulars. I got an e-mail saying that the matter had been settled, but the points didn't show up in my account. But we're still talking about $0.94. So -- but that's the kind of thing that can drive people crazy. And the point of the loyalty program is not to do that.

Yes, you're absolutely right. And I can tell you, hygiene around points has been an issue for us over the years. It's vastly, vastly, vastly improved, but there are still too many incidents where small amounts like that don't get resolved quickly. And frankly, I don't -- honestly, I don't understand why any point would ever go missing in sort of a digital system like ours. But there are a few -- it's very complex and all sort of mechanisms need to fire at the right time in the right place. Esso is a partner of ours. The interface between us and them is just yet one more part of the system. But suffice to say, we're much better than we were and we are continuing to prioritize it.

And I want to agree with you. Yes, it is much, much better than it was. So you're going in the right direction.

Terrific. Thank you. Okay. All right. So I think that is the end of our question-and-answer period. And thank you, everyone, for your very thoughtful questions. You folks in from Bloor Collegiate. Those were terrific questions. Really appreciate that. And so on behalf of George Weston and Loblaw, I'd like to thank you all for having taken the time to join us today. I wish you the best to you and to your families. And I hope that those of you who are here in person will take some time to join us for the refreshments provided by the team at President's Choice.

There's lots of President's Choice snacks. There's lots of President's Choice beverages, and there is a skin hydration machine upstairs, so you can test your skin hydration. It's very cool and everybody should do it. It's upstairs on the third floor. So one up from where we had the welcome reception. So make sure you get up there and test your skin hydration. Apparently, Per's is perfect. So -- but now he has to maintain it, right, Per? Okay. Thank you, everyone. Please enjoy some refreshments. I appreciate it very much.

Good morning, ladies and gentlemen, and welcome to the Loblaw Companies Limited 2026 First Quarter Results Conference Call. This call is being recorded on Wednesday, May 6, 2026. [Operator Instructions]. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor 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 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 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 Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure.

And also note, following the sale -- the announced sale of PC 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, 8 Shoppers and 5 hard discount 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 $0.50, 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 programs, promotional offers and value on shelf.

Our efforts to push back on unjustified cost increases from global suppliers has 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 sale growth. As consumers continue to focus on value, our hard-discount banners remain a key driver of absolute sales growth. We opened 5 new hard discount stores in the quarter and we'll 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 T&T 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 8 new drugstores in the quarter and remain on target to open more than 30 new locations in 2026.

Front store 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&A 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 costs 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 would 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 our recent credit rating upgrade by DBRS to a 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 with the ramp-up of our East Gwillimbury DC and our investments in T&T U.S. 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.

Thanks, Richard, and good morning, everyone. We are very pleased to report a strong first quarter for '26, making a robust and successful start to the year. We delivered solid financial results, including strong revenue and adjusted EPS growth, and I'm delighted that we are able to achieve this while making significant investments to grow our pharmacy and discount presence, expand our T&T banner into the U.S. and advance 2 new technology-enabled distribution centers. Our performance reflects the successful execution of our strategic priorities and our unwavering focus on the customer.

Our strategic and deliberate investment in opening new stores are clearly resonating with Canadians. We are listening to our Canadians need and investing where it matters. Our everyday focus remains steadfast on providing quality, value, service and convenience for customers across our coast-to-coast network. These efforts are clearly resonating as evidenced by continued strong customer engagement and increased traffic levels across our business. From the strong performance and the continued growth of PC Express delivery to the consistent strength of our pharmacy services, we are demonstrating our commitment to being there where and when our customers need us most.

We have momentum in our Food Retail segment, marked by the contribution from our new store investment and our same-store sales growth. Increased customer traffic was underpinned by our compelling everyday value offering, personalized PC Optimum loyalty offers and impactful promotions. The ongoing performance of -- outperformance of our hard-discount banners, Maxi and No Frills was a key driver of this success reinforcing their vital role in helping Canadian manage affordability. We're also very pleased with our conventional performance where our multicultural and preferred food delivered a very strong growth.

Our conventional stores gained tonnage and share gains against our peers. We also achieved strong e-commerce sales growth led by PCX delivery and the successful integration of third-party delivery options. This growth was significantly driven by our discount customers as they are increasingly choosing the convenience of delivery, highlighting the broad appeal and accessibility of our digital offering. In Drug Retail, Shoppers Drug Mart and Pharmaprix continued to demonstrate resilience and growth. Pharmacy and front-store growth reflected positive trends in prescription volumes, specialty drugs and beauty categories underscoring the vital role of our pharmacies and health care professionals play in Canadian health care. This performance proves the strength of our health care services and our commitment to meeting the evolving needs of Canadians. The strategic investments we have made across retail to expand and enhance our network continue to pay off.

During the quarter, we're expanding Canadians access to both nutritious food and essential health care services. We opened 5 new hard discount stores and 8 new drug stores, further solidifying our commitment to being where Canadians need us most. Our commitment to modernization and -- was also evident with the introduction of a new look for our No Frills banner marked by the opening of a new store in Komoka, Ontario, a modern design delivered at an efficient build cost. And for everyone living in the DTA area, I hope you are able to visit our newly opened T&T supermarket in Erin Mills, which we celebrated with a wonderful opening ceremony that was really, really well attended by many stakeholders. These investments are crucial to strengthen our foundation, expanding our reach in key growth areas and providing the best possible shopping choices for our customers.

Last quarter, we launched the PC Express integration with OpenAI's ChatGPT, turning previously dead-end recipe searches into transactions. Customer adoption is already ahead of plan, and we are continuing to advance our leadership with a 2.0 version coming soon. And earlier in this week, we are proud to announce that we are partnering with Canadian technology firm, Shakudo, providing our team with a common platform that will enable us to manage and scale AI machine learning across our data infrastructure. In addition, we're starting to roll out AI productivity tools across our teams to support them in their day-to-day work. There's more to come here, and we're just getting started.

As a proud Canadian company with more than 2,800 locations and 220,000 colleagues, we remain deeply committed to supporting the communities we serve and providing their lives everyday essential to families from coast to coast. As we look ahead, we remain confident in our outlook for '26. We have a strong portfolio of businesses that are really exceptionally well positioned to meet the evolving needs of Canadians and successfully navigate the macro environment.

I want to once again express my sincere gratitude to all our colleagues for their unwavering dedication, commitment and focus on our customers. Their hard work is the cornerstone of our success. With that, I'll now open the floor for questions.

[Operator Instructions] Our first question comes from Irene Nattel with RBC Capital Markets.

I was wondering if you could talk about what you're seeing in terms of consumer behavior in the store? And notably, as you went through the quarter and we saw the spike in gas prices, did you see any sort of notable changes in how people are trying to adapt and where are we at Q2 today?

Thank you, Irene. And a great question that, of course, we are thinking a lot about. But honestly, what we are seeing right now is more of the same. And we are fighting back on the price increases from our suppliers. So far, we are not seeing any price increases due to that reason, and customers, they are still doing what they did in the last quarter. So they are trading down.

For example, I just got an example this morning on chicken, where our customers, they are buying more into the opening price point of chicken, and they're buying less of the free from. And it's a double-digit decline in the free form and it's a double up in our opening price point. So more growth in chicken. The same for steaks. Customers are buying less steaks, but they're buying more minced beef. They're still buying more on promotion. So we are not worried about the customer sentiment because we do believe that the offering we have across our entire portfolio actually plays well to the customer sentiment. So more of the same than the last -- in the last quarter. And it's also proven in that our internal inflation is lower than the external inflation.

Yes. The only thing I'd add, Irene, is like definitely we saw nothing in Q1 because actually, when you look at gas prices, though, it's definitely more in Q2, Q2 is a slight change, but not material. So -- but the example that Per mentioning are what we're starting to see now, but like the trajectory of our business continues to be going in the same direction.

Your next question comes from the line of Chris Li with Desjardins.

Maybe a couple of questions on the front store sales performance. I was wondering, in addition to the factors you mentioned, was that also impacted by any pricing adjustments you might have made to further enhance the value proposition to consumers at Shoppers?

So our Q1 front-store sales were impacted by a number of events and not the one that you mentioned at all. On the positive side, we had Prestige continue to do well. There was some Easter shift that drove a bit of sales, while the cough and cold timing, inclement weather and slow food sales in some regions moderated our performance. So there was more than negative than the positive in the quarter. But I stay very confident on the Shoppers front-store performance going forward.

Okay. Perfect. And maybe just a follow-up here. I know you mentioned before, you've been doing some testing on the new food concept at some of the Shopper stores. Wondering if you can provide us an update on how those pilots are performing so far?

Yes. So what we are doing, we are adding about 1,500 products into the mix of Shoppers front store where we're doing a relay. So what we have done now, we have finished the first 3 tests. It's only 3, so we have agreed to do another 40. And I'm sure that by the end of next quarter, we will be able to give you some insight on the 40. And if that goes well, then we are ready to deploy that to a significant number of stores. And if it goes well, it will give us an uplift.

Your next question comes from the line of Mark Carden with UBS.

This is Mat Rothway on for Mark Carden. So I was hoping you could touch on the drivers of gross margin a little bit. You called out drug retail mix as a headwind. Can you just detail a little bit more about what the driver was there?

Yes. It's actually pretty clear like first of all, on food, it was flat, okay? Very likely flat, like no difference versus last year. On the drug front, it was, I guess, twofold, what we're talking about on front store like cough and cold. Like if you remember, we mentioned that cough and cold was -- happened this year in December, whereas last year, it was in January. So we didn't get the same margin that we had in front store this year. So that was the other factor to mention.

Great. Very helpful. And as a quick follow-up on SG&A, you mentioned the timing of certain costs as a benefit in the quarter. How should we think about that impacting subsequent quarters?

Yes, that was a onetime thing associated with the way the year ended. There were some costs that actually were booked in Q4 that were not in Q1. So therefore, that improved our SG&A rate. So -- but the bulk of the benefit came from operating leverage from higher sales.

Your next question comes from the line of Michael Van Aelst with TD Cowen.

You talked about a ramp up on the new store growth, and it's been pretty strong for about the last 6 quarters. And we know that there's always that drag in the -- particularly in the first year on the new stores. But what -- where do you think you are in that cycle? And where do you see this effort to increase your square footage growth rate becoming more neutral to earnings and may be even positive?

First of all, we have built a little bit fewer stores this year than last year, but it's more of the same stores. So those from last year, they are now in the base. So it's not dragging us down further. Normally, a new store in discount would be profitable within 3, 4, 5 years depending on the location. About the new store growth, we're confident that we continue to build about, I don't know, 30 to 40 new No Frills and Maxi's per year and about 70 total, including the Shopper Drug Mart. But what we're looking at what we are doing, and that's why we believe so much in our plan is that we are building in under-served areas. I can take as an example. So in the beginning of 2025, we only had one No Frills in Vancouver Island. At the end of this year, we have 4, and we have planned and approved another 3, so that would be 8. Another one is when I started in September 2023, I visited Shoppers of all places with 166,000 inhabitants. We had zero No Frills there. Today, we have 2 and they are doing very, very well. So it's really, really working for us.

Yes. So financially, Michael, like you're right, like the drag on new stores is no longer a factor. That's actually not -- that's not what's dragging. Like what's dragging now it's essentially a ramp-up of East Gwillimbury, which is going to be completed like, let's say, around Q3 and T&T U.S. that's still dragging. What's not yet contributing is like, as you know, like a grocery store takes, I don't know, 3 years before it starts to contribute to earnings, and that's probably going to start a year or 2 from now. So when these new stores start to contribute to earnings, like this less drag is going to become a positive. So we expect to see that over the next 24 months.

That's what I was looking for. And then just clearly -- just to be clear on the DC side, when do you see that becoming -- turn from a drag to a positive?

It's going to be a positive in the second half of the year. Like the drag on EPS of both T&T U.S. and East Gwillimbury this year in our plan is about 1%, slightly more than 1% EPS growth. So that will be gone next year.

And then when the new -- when the second DC ramps up, is that just going to replace the drag that we're seeing?

Yes. So in '27, you're going to get a year of calm. And in '28, you're going to have the same thing we live with the first one. But by that time, hopefully, like our new stores are starting to drive earnings and the drag of T&T will be behind us. So it should be a better position than we are in right now.

Your next question comes from the line of Vishal Shreedhar with National Bank.

With respect to the buyback, you suggested that some of the $600 million would be used for buyback. So relative to the [ 1-9 ], how much of that $600 million do we put in? And what should we anticipate the cadence being given that you were stronger than usual in Q1?

Yes. So I'd say, Vishal, like we haven't landed yet, but like [ 2-1 ] is probably as good a number for you to put in your model right now.

Okay. And -- with respect to genericization of GLP-1 molecules and the developments that have happened, can you just clarify any updated thinking in terms of the impact to same-store sales growth and when that may begin and the impact across the P&L and how you see that unfolding to the extent you're getting better info now?

So it's too early to tell. Like what -- I think what we know today, 2 manufacturers have been approved. And we told you that we thought it would be in P8, which is August, that we should be getting supply. So that may come a few weeks before, okay? The truth of the matter is, is when we release Q2 we'll know a lot, okay? So we'll be able to give you more specific guidance. We won't be able to give you a trajectory of how it's going to get adopted by the market, but we'll have a better sense.

Having said all that, like clearly, what's going to happen mathematically is you're going to have an impact on same-store sales, but you're also going to have an impact on margin. Like we talked about the drag on gross margin of Shoppers because of sales mix is because like GLP-1 drugs right now are accelerating, but when the price is going to fall, it's going to go the other way. So it's too hard right now to pinpoint it, other than to say that we feel good about our gross margin. We feel good about our SG&A rate and your guess is as good as mine as to what's going to be the impact on top line of generic drugs when they do become available.

Yes. And I would say this is really, really good for Canadians because they're getting this drug much more cheaper. It's about $350 depending on the doses today, and it's -- we don't know yet, but maybe it's going to be -- the cost is going to be 1/3. So it's definitely going to be a tailwind for us. And it is growing about 40% year-to-date, which is a lot. And think about the growth when the price is going to be much, much cheaper. And again, as Richard said, we can only be guessing right now, but for sure, it's going to increase, but again, looking forward to informing you more in the next quarter.

Your next question comes from the line of Mark Petrie with CIBC.

I just wanted to ask about -- actually just follow up on the line of questioning that Michael had around store investment costs. And I know you've been working to get efficiencies in the upfront investments. I think you mentioned that with the new format No Frills store. And so just hoping you could potentially quantify any of that? How does that affect the economics and the payback?

Well, the way it's very simple for every dollar that we reduce our construction costs and just drive up our IRR. So we've been working hard on this, as we've told you in the past, like construction costs are a number that have been moving up a lot over the last 10 years. But like the areas that are big for us are refrigeration, and we found ways to cut costs on refrigeration. We're trying to find ways to build store faster, with semi-assembled panels, which reduce the time, therefore, reducing the cost, and we're also testing a bunch of other initiatives where we can reduce it even further.

So the point I want to leave you with is this is a relentless focus on, like we're not -- we're happy where we are, but we're not satisfied. We keep working on it, and we want to find ways to reduce it even more so that will just drive more IRRs and allow us to have stores that deliver great return with a lower sales threshold to start with.

And think about that -- if we and when we get cost down to build and what we have done and with the team have done that until now, we can get into smaller towns with a catchment area that's significantly lower than today and still make the same IRR. So meaning that the accessibility to discount stores, of course, the country will increase, and that's just basically solidifying our strategy.

I think we're very happy, Mark, like all our performance of our new stores, like we said we opened a bunch since the beginning of the year, and we -- all of that -- all of the ones we opened are doing really well. So for us, like we just keep on going here.

Yes. Okay. So more about expanding the markets that you can get into as opposed to necessarily improving or materially improving the paybacks. But are you able to quantify at all or just give us a sense ballpark about how much the construction costs have fallen with all of your efforts so far versus, I don't know, 3 years ago?

Well, without throwing an absolute dollar number, I'd say we've been able to reduce construction cost by 30% so far.

And to your other question, it's not only about expanding. It's also about improving the IRR where we can get new stores. So it's not only going into smaller catchments There's also lots of places with the big catchment areas where we can build more discount stores. Again, back to the example of Sudbury. We only have 2 stores in the city with 166,000 inhabitants and there are many, many places similar to that.

Your next question comes from the line of Etienne Ricard with BMO Capital Markets.

This is Emily for Etienne. Just wanting to focus back on any differences between discount and conventional. And we know that discount growth is really driving sales. So are you seeing any different behaviors within each of them? And are you seeing more or less trade down within discount or conventional?

It is still more of the same, and we are positive both in our conventional business and in our discount business. And our discount business comp sales is significantly higher than the conventional business. But still, it's not accelerating. Customers, they are staying cautious. They are. And as I said before, maybe it's a more conventional entry price point for chicken, exactly free from, the organic barriers might see a decline and then the conventional barriers is increasing. So it is like buying more on promotion. So it's kind of the same mechanics that our customers are using, but we are not seeing it's increasing. It is more of the same.

Yes. And I want to add that our conventional business remains very healthy. We look at our same-store performance, our total growth, despite the fact that we're not adding much square footage, if any, and that business continues to perform really well for us. So that with the strong growth in our hard discount business, which because we're adding stores on top of higher same-store performance is growing really fast is helping us deliver the results that you're seeing today.

Okay. And just a follow-up. How should we compare the competitive dynamics in Quebec versus other provinces? And are you seeing any better or worse contribution from the new stores in Quebec versus the other jurisdictions?

The Quebec market is as competitive as the rest of the country. And so we're very happy with the performance of our stores in Quebec as we are happy with all of our stores across the country. So no notable differences.

And your next question comes from the line of John Zamparo with Scotiabank.

I wanted to come back to the GLP-1 side of the business. And I believe you said you're seeing this accelerate and that Shoppers is taking share and that's even before generics were announced. I wonder what you attribute that to? It's obviously a dominant player nationwide, but -- and then you can say about why you share has increased so much and whether that's the result of any intentional efforts or investments from Shoppers?

I don't know whether we said that we were gaining shares on GLP-1. Probably, we are, we're growing by 40%, but we don't have the same Nielsen data as we have on food so we can say something with the exact knowledge. But we are seeing a significant gain in GLP-1, not gain but the growth in sales.

And I don't know why, to be honest with you, just like we were surprised when we saw the acceleration in growth in Q1. So -- and as you said, we're not even generic yet.

Yes. Okay. Understood. And then back to the state of the consumer, and in particular, trade down metrics. I appreciate the color on discount versus conventional. Is there any other color you can add on promotional intensity and performance of national brands against private label?

Yes, I still see an outperformance on our own brands. They're doing really, really well, and we have an enhanced focus on our PC and our no name. So we're doing well there, and customers, they like it and it's a good alternative to the brands when they want to save money and have better quality.

And with no further questions in queue, I'd like to turn the conference back over to Roy MacDonald for closing remarks.

Great. Thanks very much, everybody, for your time this morning. If you have any follow-up questions, drop me an e-mail or give me a call. And then please mark your calendar for the Thursday, July 30 when we'll be releasing our Q2 results. Have a great day.

This concludes today's conference call. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Loblaw Companies Limited 2025 Fourth Quarter and Full Year Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 25, 2026. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead.

Thank you very much, and good morning, everybody. Welcome to the Loblaw Companies Limited Fourth Quarter and Full Year 2025 Results Conference Call. As usual, I'm joined here this morning by Per Bank, our President and Chief Executive Officer; and by Richard Dufresne, our Chief Financial Officer.

So before we begin today, I'll remind you that today's discussions 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. And these risks and uncertainties are discussed in the company's financial materials filed with the Canadian securities regulators.

Any forward-looking statements speak only 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 GAAP -- non-GAAP financial measures may be discussed or referred to today. So please refer to our annual report and the 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 I will add that following the announcement of the sale of our PC Financial business to EQ Bank and that ongoing partnership, our PC Financial results are presented under discontinuing ops. It's important to note that we are not getting out of the financial services. As such, unless otherwise indicated today, our remarks will focus on the comparable adjusted consolidated results, excluding the impact of the extra week this quarter. And with that, I will hand the call over to Richard.

Thank you, Roy, and good morning, everyone. I'm pleased to report on another quarter of consistent financial and operational performance, reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service and convenience to Canadians. As Roy mentioned, with the announced sale of PC Financial to EQB, the results of the bank are now presented in discontinued operations. It's important to highlight that we're not getting out of financial services by virtue of our interest in EQB, so we will continue to focus on our consolidated results.

When the transaction closes, the current discontinued operations business will be replaced by Loblaw's proportional ownership share of EQB profits. In the fourth quarter, on a 12-week basis, revenue growth was 3.5%, reaching $15.5 billion. Our top line growth was supported by the opening of 30 stores in the final quarter of the year. In the year, we added 1.5% square footage to our food retail stores and 2.1% to our drug retail portfolio. This growth was primarily focused on adding Hard Discount stores and pharmacies to underserved communities.

Adjusted EBITDA increased by 4.8% to $1.8 billion and margin improved by 10 basis points to 11.5%. Adjusted diluted net earnings per share grew by 10.9%. On a reported basis, revenue grew 11% and adjusted EPS was $0.67, up 22% in the quarter. In Food Retail, we once again delivered traffic and basket growth, resulting in tonnage market share gains. Absolute sales outpaced same-store sales by 160 basis points at 3.1%, reflecting our new store growth. Absolute sales also outpaced our internal inflation, which reflects our market share gains.

Our food same-store sales grew 1.5%. It's worth indicating that we are lapping a strong Q4 last year when we increased promotional activity. As we progress through Q4 2025, our same-store sales growth accelerated, and this has continued in the first quarter of 2026. We continue to see positive momentum across key categories in the right-hand side of our stores with continued accretive growth in toy, apparel and home and entertainment.

That said, with continued pressure in liquor, tobacco and HABA categories, right-hand side resulted in 20 basis points of pressure on food same-store sales. Our internal CPI-like food inflation metric was significantly lower than Canada's grocery CPI of 4.4%, and that gap widened over the final 2 months of the quarter. So customers are seeking value and are finding it in our stores. This reflects our effort to push back on unjustified cost increases from suppliers and the effectiveness of our loyalty and promotional offers.

As consumers continue to focus on value, our Hard Discount banners remain a key driver of absolute sales growth. We opened 15 new Hard Discount stores in the quarter, bringing our total opened in the year to 48. These stores are meeting expectations and will start rolling into comparable sales throughout 2026. In fact, 20 of the new Hard Discount stores opened in 2024 are already in our comps and are averaging healthy double-digit same-store sales.

We're also pleased with the momentum and performance of our conventional stores. In the quarter, this growth was led by our Fortinos and YIG banners. Across conventional, multicultural, natural value and prepared foods continue to be growing categories. In drug retail, absolute sales increased 4.4%, while same-store sales grew 3.9%. Pharmacy and health care services grew same-store sales by 5.6%, driven by broad strength in prescription and new health care services.

Our specialty prescription growth continued to lead our pharmacy performance. Patients continue to respond positively to the convenience and expanded level of primary care we offer to our more than 1,800 pharmacies across the country. I'm happy to confirm that we've achieved our target of opening 250 in-store clinics this year, improving access to health care services for Canadians in underserved communities.

Our front store same-store sales continued to improve, growing 2.2%, reflecting the ongoing strength of our beauty category. We saw an increase in our OTC sales as Canada was hit hard by the cold and flu season with influenza cases reaching a 3-year high. Flu season peaked in December, a shift from last year when it peaked in our first quarter.

We continue to be pleased with YIG's underlying strength and profitability in our front store business. Online sales continue to demonstrate strong growth, reaching over $4.5 billion last year. In the fourth quarter, our digital sales increased by 19.6%, highest growth in the year. Delivery continues to be led -- to lead that growth, particularly in discount. In November, we launched another third-party delivery partnership across our grocery banners and early results are very positive.

Our retail gross margin improved by 10 basis points to 31%, driven by improvements in shrink and drug, while food trading margins remained stable. Our retail SG&A rate was flat with operating leverage from higher sales, offsetting incremental costs related to the opening of new stores and the ramping up of our automated distribution facilities.

I'm very pleased with our ability to maintain a flat rate despite the additional costs associated with this growth. Retail adjusted EBITDA grew 4.6% and retail EBITDA margin increased by 10 basis points to 10.9%. The ramp-up of our first automated distribution center in East Gwillimbury continues to progress well. Both cost and productivity improvements came in better than planned. This allowed us to roll out our ambient sections 2 months ahead of schedule. We are 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 by the end of this year. PC Financial's revenue increased 3.1%, driven by higher insurance commission income and higher interest income. The bank's adjusted net earnings increased by $12 million or 36%. This was primarily driven by higher revenue and the favorable impact from lower expected credit loss provisions.

The previously announced sale of PC Financial to EQ Bank will streamline the company's operation. We expect the transaction to close later this year. Free cash flow from the retail segment was $1.9 billion for the year. And in the quarter, we repurchased $592 million worth of common share for a full year total of $1.9 billion. Our balance sheet remains strong, and we continue to improve our key return metrics. Our return on equity sits at 26.3% and our return on capital at 12.4%. On a full year basis, our consolidated revenue grew 4.4% to $63.7 billion, net earnings of $2.8 billion and EPS grew 10.7%. Including the impact of the 53rd week, EPS grew an incremental 2.9% to 13.6%.

Turning to 2026, we have a solid plan in place, allowing us to continue delivering consistent financial and operating performance while advancing our growth initiatives. New store investments will be similar to last year with an increase in Shoppers Drug Mart stores. We plan to grow our grocery square footage in line with 2025. However, our drug footprint is expected to increase by 3%.

In 2026, we expect the timing of the closing of the sale of PC Financial and the lapping of the 53rd week to impact the company's financial results. Excluding these impacts, we expect our retail business to grow earnings faster than sales and adjusted earnings per share growth in the high single digits. We plan to invest approximately $2.4 billion in capital expenditures. Again, we plan to return most of our free cash flow to shareholders through dividends and share buybacks.

We're more than halfway through the first quarter, and same-store sales are showing continued momentum. Looking ahead, our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep on delivering value to our customers and performance to our shareholders. While early, 2026 is off to a good start, I will now turn the call over to Per.

Many thanks, Richard, and good morning, everyone. I'm very pleased to share our solid fourth quarter results, which caps a very successful year for Loblaw. We delivered revenue growth of 3.5%, reflecting both the success of our strategic investments in new stores and strong operating performance. This top line growth enabled us to deliver the 10.9% adjusted EPS growth in the quarter.

We accomplished this earnings growth while increasing our spending to support the opening and ramp-up of our two 1 million square foot DCs and our new stores, including the successful opening of our second T&T store in the United States. This past year has truly showcased that we have the right strategy, we are executing well, and everything is grounded on an unwavering focus on our customers.

More than ever, we have seen Canadian prioritize value. We know that affordability is so important for many households, and that's why we are expanding our Hard Discount network. We opened 48 new No Frills and Maxi stores this year. These new locations were strategically placed in underserved communities. This year, we also invested to expand our e-commerce service for our Hard Discount customers and are very pleased to see our digital penetration rate doubled in these banners compared to last year. This highlights the vital role that our Maxi and No Frills stores play in helping families stretch their budgets without compromising on quality, selection or convenience.

Our commercial banners, including the high-performance Fortinos and T&T stores continue to attract and delight shoppers. Fortinos, which focus on fresh, local and premium offerings remained a community favorite, while T&T Supermarket continued its impressive growth trajectory. We saw really strong performance in areas of strategic focus, including our multicultural assortment and our right-hand side refresh.

We have now updated 34 stores and are seeing high single-digit sales growth in these stores led by apparel, cosmetic and toys. I'm actually especially excited by how well our toys category performed with sales increasing almost 50% in Q4. Beyond value, we recognize our customers' desire for choice, quality and a superior shopping experience, including a strong preference for supporting local manufacturers. I'm proud to share that in '25, we added 267 new Canadian supply to our network, reinforcing our commitment to Canadian businesses.

When Canadian businesses grow, communities grow, when local producers win, we all win, and we're actually just getting started. In Drug, we continued our trajectory through quarter 4 as we delivered our fourth consecutive quarter of positive sales growth momentum in front store. This reflects continued strength in Beauty and strength in our HABA OTC and baby categories. We're also seeing early shoots from our initiatives to bring more value and sales productivity to front store.

In Pharmacy and Healthcare Services, we continue to deliver solid performance led by growth in the specialty drug category. In line with our commitment to being where Canadians need us the most, we are actively building new pharmacies and clinics to provide essential health care services, especially in underserved communities. Q4 was very busy as we opened a record of 15 new pharmacies in the quarter, bringing our total to 27 for the year.

Our pharmacies and health care professionals play an increasingly important role in the health and well-being of Canadians, and we are committed to supporting them with the tools and resources they need to provide exceptional care, making it easier for Canadians to manage their health closer to home. For Loblaw, investing to be at the forefront of innovation has always been key to building customer loyalty.

To support growth and enhance our customer experience, we made record investments in the future this past year. These strategic capital deployments were focused on strengthening our foundation and expanding our reach across key growth areas. We significantly grew our store network with investment specifically directed towards new discount stores, additional pharmacies and the continued expansion of T&T.

These investments are not just about stores, they're also about strengthening the backbone of our operations and investing in innovation to serve our stores and customers more effectively. I previously highlighted the significant success of our [indiscernible] program. Building on these achievements, we remain deeply committed to continuous product innovation. This year, our investment in this crucial area have successfully brought more than 250 new products to Canadian households under our private label brands like the President's Choice, no name and Farmer's Market. These exciting new additions have not only enhanced our offering, but have also generated nearly $400 million in sales.

Beyond our core retail operations, we also strategically grew our alternative businesses, including retail media, our logistics as a service offering and significantly enhanced our health care services through clinics, and the expansion of our Lifemark business. We have talked about media and logistics in the past, but I would like to spend just a moment on Lifemark. With over 4 million customers visits each year, Lifemark offers a range of rehabilitation services through 320 locations across the country.

Lifemark is another small, but quickly growing business that we expect will deliver $100 million in EBITDA this year. Technology too, plays a crucial role in our differentiation. We are not simply adopting AI, we are building an AI-enabled organization. We are experimenting with intent and discipline, focusing on practical use cases that create real value for customers. Our recent partnership with OpenAI and Google were first in Canadian retail and great examples of embedding AI into the tools Canadians already use every day while also building purpose-built application where it makes sense.

We also continue to deploy AI inside our organization, optimizing operations, improving forecasting and assortment decisions, simplifying workflows for colleagues and enhancing the shopping experience. None of these achievements would be possible without the incredible dedication of our 220,000 colleagues. The uniqueness and strength of our culture is a cornerstone to everything we have accomplished. To each and every one of you, in stores, distribution centers, pharmacies, clinics, offices, I extend my sincerest gratitude. Your hard work, commitment and passion for serving our customers are incredibly important to our success.

As we look to the future, we remain optimistic and determined. The foundational investment we made, coupled with our resilient business model, unwavering focus on the customers and being where Canadians need us the most, positioning us exceptionally well for sustained growth and continuous market leadership.

We will continue to innovate, adapt and evolve to meet the changing needs of Canadians, whether that's through expanding our value offering, supporting local suppliers or bringing essential health care closer to home. Our commitment to delivering unparalleled value, quality and convenience remains steadfast, as does our dedication to our communities and helping Canadians live life well. With that, I will now open the floor for questions. Many thanks.

Thank you, Per. Operator, if you'd please introduce the Q&A process.

[Operator Instructions] Your first question comes from Mark Carden with UBS.

So to start, I just wanted to see how the consumer is faring overall. Are you guys seeing any shifts in spending patterns, any incremental trade down occurring? And then has anything changed in the competitive landscape in your core markets?

Thank you, Mark. And I would overall say that customers are behaving a lot like they have done in the past. So not that much has changed. I would say, though, that the discount strategy for us is working very well. Promo penetration still stays high. And private label in the quarter 4 is outperforming national brands. And we are seeing some category trade downs. I just looked at an example the other day where an impulse category like berries, the organic berries is down double digit, where the conventional berries would be up.

So more of the same. Maybe one flavor more if I look at the discount. So our discount, which I mentioned in my script, the penetration in e-commerce and discount has doubled. So we are seeing more customers now that they have more access to our discount e-commerce, they're choosing that. But within the stores, it stayed the same. So the gap between conventional and discount, I would say, staying the same. So still value-conscious customers, but more of the same.

That's great. And then as a follow-up, you guys noted that retail same-store sales steadily improved throughout the quarter. How did the cadence play out month-to-month? I know there's some promo compares in there. And how have you trended thus far in 1Q?

Yes. As I mentioned in my remarks, in 2024 in Q4, we were a little bit more aggressive than we were this year. And so that affected especially the first month of Q4. And so as we started to lap that month, we saw a sequential improvement in same-store sales. And we're actually seeing further improvement as we begin 2026. So definitely, we feel good about our same-store sales performance.

Your next question comes from the line of Irene Nattel with RBC Capital Markets.

Just continuing with consumer behavior, how should we be thinking about the cadence of same-store sales and margin evolution as we move through 2026 and we normalize for some of the headwinds, notably at Shoppers and perhaps see some of the headwinds from the right-hand side starting or continuing to diminish?

So what I'd say, Irene, if you -- our outlook, the way we see it, like big picture is you're going to see above normal top line growth, as we've talked about because of new stores. So you're going to see that. You're going to see stability in gross margin, stability in the G&A rate, maybe a little bit of increase in gross margin rate as the year progresses as we continue to find more shrink benefits in Shoppers. And that, together with all of the other efforts should allow us to be delivering our high single-digit EPS growth.

Yes. And I would say that we are confident in our comp sales and our total sales. Our new stores are working really well for us, and that's both our Shoppers and our Hard Discount. And when we look at the second year comp, we are seeing some really, really good numbers, actually better than we expected. So again, we feel confident about our strategy. But whether comp sales will be a little bit up one quarter and down another quarter, I don't think it's that key to our overall performance. So we will keep our guidance no matter whether it fluctuates a little bit because, of course, it can and have done, but we stay very confident in our sales projection.

And just as a follow-up to that, how would you describe the spending in some of the more discretionary categories at Shoppers? I mean, Per, you made the comment just a second ago about organic versus regular berries, which is interesting. What are you seeing at Shoppers in front store...

We're seeing that prestige continues to -- prestige beauty continues to be up. So that's good. But when that is said, there's not a lot of difference in Shoppers. Maybe I think in the beginning of the year, we are seeing that GLP-1 has increased a little bit in sales because prices are coming down, which is really good for customers because now more customers have access to that drug. And of course, we all know that it goes generic in the second half. So hopefully, more to come. We just don't know precisely when that's going to happen.

And then, of course, spending, if you look at a big picture, it is also depending on inflation. And I'm just looking at an interesting store map here that we got some information from Nielsen on inflation. So it differs from area to area because when we look at produce inflation, it's flat to 1% only for quarter 4, where dry grocery is up by 4%, impacted by, in our opinion, the unjustified price increases by the big CPGs. And then meat, of course, because of commodity increase in general is up by 7%, where frozen is at 2%. So I thought that will be interesting. And, of course, also impacting customers. But what customers they do, they actually mitigate that inflation by shopping differently.

Your next question comes from Chris Li with Desjardins.

Just at a high level, Richard, as you look at your EPS outlook for this year, are there certain areas where there might be some conservatism being embedded? And vice versa, what areas do you see having a higher variability or risk?

For us, when we look at the 2026 plan, it looks a lot like the 2025 plan. So it's pretty -- if you look by quarter, it should be pretty similar all quarters and not much volatility amongst quarters. That's how we're seeing it for now. There's going to be all the noise regarding when the PC Financial deal closes for sure. And -- but we'll deal with that when we know when that happens. But other than that, like it's going to look a lot like '25.

One detail to add to that would be that this is the second year where we're opening around 70 stores. Last year, it was 77. This year, we project around 70. So while we are ramping up, of course, it costs us a little bit more also because the new stores, they don't really in food and drugs for that example, don't get profit before like between year 3 and 5. So we will have incurred a little bit more cost in the beginning, and we're seeing that this year as well. But the 76 stores from last year, they're now in the base.

Yes. So tailwind we talked about last year are more or less the same, like new stores and T&T U.S. So that's -- those are the tailwinds in our plan, and we've accounted for them.

On sales.

Yes.

And my follow-up is just on -- with CapEx going up a little bit this year and it looks -- doesn't look like there's any sort of funding from asset sale to partially fund the CapEx like previous years. Do you expect to maintain a similar pace of share buybacks this year versus previous years?

Yes. We've actually were saying it would be around $1.8 billion for '25. We did $1.9 billion. And so we have -- we plan to do about $1.9 billion in '26.

Your next question comes from the line of Vishal Shreedhar with National Bank.

Just a quick clarification. When you talked about the same-store improving through the quarter, was that a comment specifically to food? Or was that also related to Shoppers?

It was food.

And it was basically because we lapped in the beginning in our P11, we lapped a very high promotional period last year that we, for many obvious reasons, didn't want to repeat.

And with respect to Shoppers, the comment regarding the change in timing of the flu season, the implication is that it could be softer in Q1 for Shoppers on same-store?

It could have a bit of an impact. We'll see as the quarter progresses. But definitely, last year, P1 in cough and cold was very strong. And this year, it finished in December. But the business continues to be strong.

Richard, obviously, 2025 has a high number of investments in terms of dollars flowing through the P&L and Loblaw continues to hit its framework. I was wondering if you can give us some context on a dollar value of the cost, if not a dollar value, just some qualitative commentary on the costs related to the new stores, the DC, the T&T ramp-up and how these all might impact and the degree to which you have to implement offsetting plans in order to grow.

No, I won't give you numbers, but like we expect that '26 will be the worst year from a drag on T&T U.S. So i.e., the drag will be more in '26 than it was in '25. Having said that, the ramp-up cost of East Gwillimbury is going to be less. We think Q1, maybe a little bit of Q2 of ramping up costs and then we will be done. So all in all, the drag should be a little bit less than it was last year. Having said all that, we've accounted for that when we did our planning for '26. I don't know if that's helpful.

Your next question comes from the line of Mark Petrie with CIBC.

You guys both touched on it in your script, but I wanted to ask more about Prepared Foods. It seems notable that the 2 best-performing full-service banners are leaders in that area. Could you just talk about where Prepared Foods ranks in your list of priorities? Obviously, some nice tailwinds in your favor as consumers look for value in food, but still want convenience and accessibility.

That's a really good point, and that's something that we are doubling down on at the moment, and it was accretive to our comp sales in quarter 4. And when I look at the beginning in this quarter, it's also accretive to our overall business. So customers, they are looking for meal solutions more and more. I don't know whether it's because they eat less out for others to judge. But we are seeing that it's really helpful for us.

And we are planning some good stuff that you will all see in our stores this quarter. I remember that we have some one-pan meals supporting customers who want a single-serve meal or for smaller household, I think that's important that we support singles and smaller households even more. And then we have the Korean Fried Chicken and Bao Kit program. That's innovation in the Korean kitchen to create more convenience and excitement in our stores. And then the last example I can remember, we have Halal Chicken now expanded to all our stores across the market. So meaningful, and I'm curious to see how that develops over the next year.

Yes. Okay. I also wanted to just ask about Shoppers at a very high level. I know it's early in Gregers tenure as leader there, but curious to hear any comments on his initial take on the business and opportunities that he sees and focus areas.

Yes. I think there's not a lot of news since we spoke last time, but it's still an opportunity about online. Our penetration for online shoppers is very low. So I'm sure over the next years, we'll be able to do better there. And then Gregers, he comes with a wealth of experience within beauty. So that will also add to the experience for our customers in Shoppers. But it's not something you will see because it takes time before you look at the assortment, before you go to change the stores, but we aim to have a few stores with a new layout being ready within this first year, but it's 3 weeks in. So I'm only quoting what we have discussed so far. But we are really positive on Gregers and his start in Shoppers and what he brings to the table.

Your next question comes from the line of Michael Van Aelst with TD Cowen.

You've been talking about AI and specifically agentic AI more in recent quarters. Can you get into a little more specifics in terms of discussing the most rewarding applications of agentic AI to date and how it's helping you either drive your sales higher or lower costs and things like that?

Yes. So big credit to our digital team who have made 2 collaborations, both with OpenAI, which is the Food part and then with Google, which is more the Health and Beauty and in apparel. So on the OpenAI, remember, if you go in and search and try it out, write at PCX and then you can state what you want and what you're looking for because then with one click, you'll be taken through and you will be watching going from app to app and from product to product. So it's more seamless for customers and actually very convenient for customers to use that.

And when we look at it, there's like millions of Canadians who are searching more and more for meat solutions and products on OpenAI. First of all, for us, it's important to be first as I'm aware of that we at Loblaw, we were first when we started the e-commerce and food. And that we are still benefiting from today because we have a significant higher market share on food e-commerce than we have in the past.

So that's good for us, good for customers. So being first is meaningful. I don't think it will be something that we can read in the numbers in the next quarter or 2. But over time, I think that's important. So that's one part. That's what's great for customers, and that's how we help customers. Another thing is our internal use of AI, which I think is going to be more and more important as we go forward.

It's how do we make it better for our colleagues to serve and doing the right thing for customers. We have a tool called Robin internally, where I think I mentioned that on some of our previous earnings call that where the district manager, the store managers have access to data, they can search and they can make things right in stores faster than we have ever done before. So all in all, I think it's going to be meaningful over time. It's not something you will see in the next quarter. We are first in Canada with a lot of it, and we will continue to drive that agenda very hard.

And then just a separate question. Can you explain how the tax holiday impact or how the tax impact -- holiday is having an impact on same-store sales in the food side?

Like it's hard to measure with precision. But obviously, like the price of certain items went down, okay? And then now when they record the price this year, it's much higher. And so that's how it's affects CPI. So I suspect that unlike other retailers, the number of categories that were taxing them for us were not as significant. So that's why probably there's a big gap between our internal inflation measure and the CPI food that's measured by StatCan. Because as we said in our remarks, the gap has expanded significantly over the last 2 months, and our internal inflation is not materially higher than what it was like a few months ago.

Your next question comes from the line of Etienne Ricard with BMO Capital Markets.

So to follow up on the transaction with EQB, I recognize it's still early in the process. How meaningful is the potential for additional PC Optimum Point issuances? Because the way I see it, it depends on offering a wider range of payment services to the EQ Bank customers or maybe also having a broader banking service to the PC Financial customers. So what gives you the confidence that these customers would be willing to own more than one product in the new entity?

I think, Etienne, you're right, but that's more in the long term. Like the key driver for us is more credit cards. Like we are not bankers, we're grocers. And so the way we've been managing the bank has been very conservative. Like a normal banking institution will be a little bit more liberal in its issuance of cards and EQ Bank was quite confident that they could be issuing more credit cards than we did historically. So -- and we know that customers who have the PC Mastercard are better customers from a customer long-term value perspective.

So for us, that's what's most strategic. And we have a number in mind that they think that they can increase the number of annual cards with, and that's going to be the biggest driver. So more cards, more points, more loyalty. And over time, yes, you will see expansion in other products. But like initially, expect to see more credit cards, and that's what's going to drive the sales conversion in Loblaw.

And I appreciate the willingness to simplify the financial reporting at Loblaw. Now if we look past closing for this deal, should we expect long term the ownership in the EQB shares to remain at the Loblaw level? Or could you still have a say in the program without directly owning within Loblaw?

There's no plan to do anything for the moment, yes. We're very -- we haven't even closed the deal yet. And -- but suffice to say, there is -- there needs to be the building a very strong and tight relationship between EQ Bank and our loyalty program. And so that's going to be the first task at hand. And so that's what we'll be focused on for the short to medium term.

Your next question comes from the line of John Zamparo with Scotiabank.

I wanted to ask about the real estate picture. I guess, first, a clarification on the planned openings for '26, are we right to assume that's going to skew a bit more towards the smaller format? But then the broader question is when we're seeing grocers increasingly taking up expectations for square footage growth, are you seeing any change in the quality of locations you're finding or the attractiveness of the lease terms?

First of all, in 2026, we opened a little bit more conventional, and I think we're opening one of our bigger superstores as well. But looking at the discount stores, it's a good mix of normal size 32,000 square feet or down to 15,000 square feet, down to 10,000 square feet. I would say that in some of the underserved areas, we are doing more of the smaller stores. And if you look at the mix, we open a little bit less discount, a little bit more Shoppers this year. And it's just basically a coincident. And going forward, we are looking to do about the same number. And I said, it's quite easy to find good sites in Canada. And there's many, many underserved areas around the country where customers they want discount.

The only thing I'd add is our pipeline for '27 is already pretty much full on both food and drug. So we still see a lot of runway for opportunities to build stores.

And then my follow-up is on the PC Express OpenAI announcement. I wonder if taking a step back, is there anything you can say about the state of profitability of Loblaw's e-commerce operations now to help us better understand the bottom line impact of the overall greater shift to e-com, not necessarily the OpenAI announcement, but the broader shift e-comm.

Yes. No, it's a good question because when we go back a few years, it was diluting. Now it's not diluting anymore. So it's a good support both to customers who want more of it, but also to our profitability. So it's actually okay for us now. It's not diluting.

And the key driver for it is us using third parties to do delivery. And so that is dramatically altering the financial equation to our favor. So that's why we like it.

And also because we don't have any fulfillment centers around the country, we pick in store. So not only is it helping our efficiency, it's also helping the waste and food waste that we have in stores because customers who buy online, they buy more deep into the range. So it's helping the overall store productivity when we see more online sales, and that's not something that you normally think of.

Your next question comes from Chris Li with Desjardins.

Just maybe a couple of questions on Pharmacy. First, is there any update on the genericization of GLP-1 drugs? Is the expectation that it's going to be around the summer?

It has moved a few times. So we're actually not certain. Our best guess now would be around August. That's August, September, that's our best estimate right now when it will go generic because they still need those approval, and it's hard to say when they will get them.

And then my second question is just around the Pharmacy Clinics. How is the performance so far? And I noticed the pace of the new openings is slowing a little bit this year. Is that because you're taking a more measured approach to the rollout to see sort of how the regulatory landscape evolves? Or are you starting to reach a bit of a saturation point in terms of the number of clinics?

I'm glad that you asked that question because there's a good sound reason for why we slowed down because we heard up to do it in the provinces where we had expanded Care scope, so -- which was Alberta and Nova Scotia. So there we are -- we've done. And then we're basically waiting for the other provinces to come up so where we can prescribe for more, then there we also meet the clinics.

So we are not in urgent need in the other provinces. When that sets, all our new stores are built with clinics, and we are good in the provinces where we are. So you will see more of it. The performance we are seeing is following the plans that we had. So we're really pleased with the performance. There's just no urgent need to hurry up. And since we have a very healthy nice different divisions who are competing for the CapEx, then we allocate the CapEx elsewhere because CapEx is -- we are fighting for that, which is good because they're all giving us a very good return.

[Operator Instructions] your next question comes from Mark Petrie with CIBC.

I just wanted to ask about T&T and the growth plans there, both for Canada and the U.S. I guess, specific in the U.S., 2 stores you've called out performing very well. How aggressively can you pursue that opportunity?

So there's been no change in plans since we last saw you. So we have 11 stores approved. There's a few more that are -- that we're looking at. But for 2026, there are 3 U.S. stores planned to open, 3 in Canada. I hope we opened all the 3 because the last one is scheduled to open like mid-December. So that could slip. But if it doesn't slip, like there's going to be 3, one in San Jose, one in San Francisco and one in L.A., and the last one is the one in L.A.

And with no further questions in queue, I would like to turn the conference back over to Roy for closing remarks.

Great. Thanks, everybody, for your time this morning. You know where to find me if you have any follow-up questions. And put a circle on your calendar for Wednesday, May 6, when we will be releasing our Q1 results. Have a great day, everybody, and thank you again.

This concludes today's conference call. You may now disconnect.

Good afternoon, ladies and gentlemen, and welcome to the EQB Inc. Conference Call and Webcast. [Operator Instructions] This call is being recorded on Wednesday, December 3, 2025.

I would now like to turn the conference over to Lemar Persaud. Thank you. Please go ahead.

Thank you, Ina, and good evening, everyone. Thank you for joining us on short notice during a busy earnings season. Your hosts for today's call are Chadwick Westlake, President and CEO; and Richard Dufresne, President and CEO of George Weston Limited and CFO of Loblaw Companies Limited. Also in the room are EQB's CFO, Anilisa Sainani; CRO, Marlene Lenarduzzi; and Chief Strategy and Growth Officer, David Wilkes.

After prepared remarks, we will open the lines for questions from our prequalified analysts. Please note that this evening's call is to discuss the announced agreement to acquire PC Financial and establish a long-term partnership with Loblaw Companies Limited. We will be happy to answer your questions related to EQB's Q4 and full year results and outlook at the regular scheduled earnings call tomorrow morning at 10:30 a.m.

For those on the phone lines only, we encourage you to also log into our webcast and view the presentation covering this transaction, which will be referenced during the prepared remarks.

On Slide 3 of our presentation, you will find EQB's caution regarding forward-looking statements, which involves assumptions and has inherent risks and uncertainties. Actual results may differ materially. I would remind listeners that all figures referenced today are on an adjusted basis where applicable, unless otherwise noted.

With that, I will now turn the call over to Chadwick.

Good evening, and thank you for joining us at this incredibly exciting moment of change for Canadian Banking. As you've likely seen, after market close, we announced that EQB and Loblaw Companies Limited have agreed to a transaction, where EQB will acquire PC Bank, PC Financial Insurance Agency, Inc., PC Financial Insurance Brokers, Inc. and certain other affiliated entities of PC Bank. During this presentation, we'll refer to all those aforementioned entities collectively as PC Financial.

We also announced that we'll enter a new long-term strategic partnership to become the exclusive financial partner for Loblaw and the provider of one of the country's largest and most beloved loyalty programs, PC Optimum. This is precisely on strategy for EQB and our Challenger Bank purpose for Canadians. We partner with the best organizations to innovate faster and what we'll be able to achieve together is so much greater than what we could do alone.

We are acquiring 100% of PC Financial for 1.15x book value. This translates to a total consideration of $800 million at today's estimate. In exchange, Loblaw will receive approximately 7.2 million shares of EQB issued from treasury, which is expected to represent about 17% of EQB's outstanding shares on closing. The balance of the consideration will be paid in cash. This will be subject to customary adjustments at closing, which we anticipate will occur within calendar 2026, pending the required regulatory approvals.

This transaction unites 2 of Canada's most innovative banks, with aligned visions for better banking for all Canadians. It redefines the sector by scaling the delivery of extraordinary products and services and brings the value of challenger banking to new audiences, with EQB expanding to serve nearly 3.5 million customers combined at closing. It also presents a highly compelling opportunity for long-term value creation for our shareholders.

Our mission at EQB is to drive change in Canadian banking to enrich people's lives. The acquisition of PC Financial will fuel our mission by cementing EQB as the challenger in Canadian banking, by growing our position to become one of the largest digital banks by customers and introducing Loblaw as a long-term strategic partner and shareholder. I'm proud to say that this is now a joint mission of our EQB and PC teams.

Today, PC Financial is part of Loblaw. They provide everyday banking services to millions of Canadians, including their deposit account and their beloved MasterCard credit card program, one of Canada's largest credit card portfolios and most recognized card brands, with PC Financial serving 2.5 million customers.

Some key metrics to highlight are its $4.4 billion in average credit card receivables, $5.8 billion in total assets, $32 billion in transaction volume and $1.1 billion in revenue reported as of September 2025 on a trailing 12-month basis. Alongside the transaction, we have agreed to a long-term commercial partnership in which we will become the exclusive financial partner for Loblaw.

We'll also become the only financial services partner where customers can earn rewards through the PC Optimum loyalty program, Loblaw's marquee rewards program. This program is held in high regard by over 17 million Canadians, many of whom redeem rewards and receive exceptional value on a daily basis.

I'm thrilled about this last point, and we'll expand more on the unique power of PC Optimum in the loyalty space in a moment. This partnership creates the competitive banking option that Canadians deserve. EQ Bank customers will be able to earn PC Optimum points, open a credit card and gain benefits from new in-person access to a banking on their teams -- on their terms as part of Loblaw's extensive retail footprint, a footprint that spans 2,500 stores, over 180 in-store pavilions and a nationwide 600 ATM network.

PC Financial customers will be able to seamlessly access EQ Bank's broadest suite of banking products, such as our Notice savings account, gain access to our leading digital platform and enjoy the PC Optimum rewards they know and love. This partnership not only benefits our shared customers, it will benefit all Canadians by giving them greater access to better banking products and compelling innovations in the future from 2 banks with agile technology stacks, capable of bringing better products to market faster than our incumbent peers. Together, Canadians will benefit from increased opportunities to save, borrow and manage their money.

Now let's take a deeper dive into what this acquisition unlocks and how it fits into our strategy. When we look at the strategic rationale of the acquisition, it fits into 5 broad categories as a transformative and financially compelling transaction.

First, EQB's strategic priorities are each directly accelerated with the addition of PC Financial. Our first strategic priority is reigniting our core franchises. We're channeling significant time and energy into what makes us a true challenger. We're renewing focus on businesses where we have a competitive advantage, becoming more efficient and rigorous in our capital allocation. This transaction is a tremendous growth catalyst for our combined direct personal banking Challenger platform.

Second, we're growing our product offering and ability to serve our customers. One of the biggest and most exciting pieces here is the PC Optimum linked MasterCard portfolio. The ability to offer our customers a leading credit card product is nothing short of transformational and precisely on strategy. Our complementary strengths allow us to even better -- are even better for our shared customers.

PC Financial excels in spend, products and loyalty, while EQ Bank excels in everyday banking and deposit products. Together, our product shelf is diverse, digital first at the core and fiercely competitive. In addition, this partnership brings exclusive access, as I've said, to the award-winning PC Optimum program, the extended retail footprint of Loblaw stores and the totality of the ubiquitous brands and digital infrastructure, all of which prepare the Launchpad for future innovation.

And then finally, the third strategic priority is expanding our capabilities in challenging the market. PC Financial brings experienced leadership with deep expertise in lending and payments as well as exceptional capabilities and hyperpersonalization. This will drive a more bespoke experience to our customers once we come together post close.

Importantly, this expands our capabilities when we welcome the over 300 talented members of the PC Financial workforce to the EQB Challenger team. Their skill sets and culture complement ours perfectly, and we're excited for how our teams can learn from each other and innovate faster together.

The second driver of our strategic rationale is the expansion of our customer base and how we believe this partnership can accelerate our growth. Growing to nearly 3.5 million combined customers and gaining exposure to the more than 17 million PC Optimum customer base is a reason to celebrate, but the fit of PC Financial's customer profile with EQB's existing ecosystem is what makes this growth so valuable.

PC Financial customers are digitally engaged and aligned both geographically and from a risk perspective, with most accounts concentrated in prime and super prime borrowers. Their high pace of digital deposit uptake should bode well for growth in our direct deposit and savings account offerings.

Banking is a scale business, and this deal delivers both scale and diversification. Our fiscal 2025 revenue was $1.26 billion. But when combined with PC Financial, it nearly doubles to more than $2.3 billion on a pro forma basis. The additional noninterest revenue is a significantly positive change for EQB and a long-standing strategic priority. Of PC Financial's $1.1 billion trailing 12 months revenue, 53% is noninterest. The noninterest revenue primarily consists of interchange transaction fees and card-related fee income, which will continue with EQB.

The rapidly growing deposit base at PC Financial is currently over $800 million, and the addition to our EQ Bank model materially diversifies both our funding and revenue. Combined, we'll accelerate our focus on growing EQ Bank core deposits, progressing its position to become the largest component of our funding stack. This will be an eventual net interest margin tailwind.

EQB has historically been referred to as a mortgage lender. This has matured to that of a Challenger Bank, and this transaction represents a significant strategic evolution and what it means to be a Challenger Bank.

We'll continue proudly running our strong mortgage lending franchise in commercial bank, but we will become a far more competitive and multifaceted bank. We'll have a lending profile closer to those of our peers, but the capability to introduce new innovations and products faster. While the customer revenue growth will have a meaningful impact in the short term, it's just the beginning. This is the start of a long-term partnership with some of Canada's most recognizable brands, an intangible asset with massive potential.

Many of the stores, ATMs and pavilions across Canada will introduce the EQ Bank brand. The tangible assets of this new partnership will be used to expand and diversify our marketing capabilities, opening avenues to reach customers and dramatically scaling our household awareness in Canada.

With the acquisition of PC Insurance, which will be operated under EQB Inc. outside of the bank, EQB will continue to run the existing brokerage arrangement under the PC Financial banner in partnership with its underwriter. This offering provides everyday home and auto insurance solutions for Canadians. Importantly, it does not introduce property and casualty insurance risk to EQB as all policy risk remains with the underwriting partner.

The business generates revenue primarily through gross written premium referral commissions paid to PC Insurance, translating to approximately 800 -- to $8 million and growing in annual earnings. It represents a simple, higher earnings stream for EQB.

We're excited by the opportunity to add another financial services product to our shelf, expand our stable fee-based revenue and bring in a uniquely skilled and highly capable team. This is all compounded by EQB becoming the exclusive financial partner of PC Optimum.

I want to expand on this for a moment because the impact of PC Optimum can't be understated. It's one of the largest loyalty programs in Canada, but the depth, power and sophistication of the technology is what really sets it apart. So not only will we have the opportunity to administer PC Optimum points, we'll have the privilege of working alongside the team that made it.

The final category of how this transaction fits into our strategic rationale is about our joint financial profile and growth curve. This is a financially compelling transaction. Revenue synergies are expected from the significant cross-sell opportunities to our expanded customer base, but they are not required to make the transaction attractive. We also expect to realize funding and capital synergies through EQB's banking expertise and improvements in CET1 and RWA metrics, respectively.

The cost synergy target is modest, representing just 7% of the cost base relative to the significant strategic benefits and acceleration of customer growth. Transactions like this are only successful with the right team in place. This will be our primary focus as this is about growth, not cutting, and we intend to create as much value as possible.

Year 1 is expected to be mid-single-digit accretive to adjusted EPS and accretive to ROE in the first full year post closing on a run rate fully synergized basis. To be clear, we're talking about being accretive to the lower end of EQB's 15% to 17% ROE objective on a fully synergized basis, with PC Financial simply running at a more appropriate capital ratio. Additional upside is expected from cross-sell, capital and securitization and funding opportunities.

We will continue our prudent capital management strategy and maintain strong capital ratios. As part of our capital management plan, we intend to submit our application to renew our normal course issuer bid in January 2026, an ongoing component of our capital allocation framework. We expect those annual pretax run rate cost synergies to be greater than $30 million and onetime pretax integration costs of $105 million. Most of the cost synergies and integration costs are anticipated to occur within the first 2 years of closing.

On purchase accounting impacts, we estimate a gross credit markdown on credit card receivables of $300 million pretax, which will be amortized over 3 years and largely offset by future expected credit losses. Fair value increases on deposits and long-term notes are estimated at $50 million pretax, which accretes substantially to earnings over 3 years. And the identifiable incremental intangibles are estimated at $230 million, $200 million of which will be amortized over 8 to 10 years.

This acquisition and our long-term partnership will deliver meaningful scale and diversification to EQB. This is illustrated by the pro forma metrics below, derived by EQB's adjusted fiscal 2025 results and PC Financial's reported September 2025 results trailing 12 months. Using these numbers, our assets increased 11% to $59 billion, and our combined customer base quadrupled to nearly 3.5 million. Revenue nearly doubles and in line with our stated objective of diversifying revenue, noninterest revenue increases by more than 4x to $759 million.

It's clear that this transaction establishes a strong foundation for the accelerated growth we expect in the years ahead. In fueling this accelerated growth, we expect to close the deal in the second half of calendar 2026 subject to regulatory approvals and customary conditions. This transaction will not require EQB or Loblaw shareholder approvals, and the transaction has unanimously been approved by the Boards of EQB, Loblaw and George Weston Limited.

On behalf of our Board, the leadership team and everyone at EQB, I can't wait to welcome the amazing, talented and innovative people at PC Financial to our Challenger team.

Now I'd like to turn the call over to Richard Dufresne.

Thank you for giving me the opportunity to join your analyst call today. As Chadwick emphasized, this transaction is strategic for EQ Bank, but is also strategic for Loblaw. For Loblaw, it offers a new home for some of our best customers, but it will allow us to attract more customers going forward. It will, over time, offer an enhanced suite of products to further improve our customers' ability to live life well.

EQ Bank has an impressive track record, which, combined with our great suite of products, should drive more shareholder value going forward. PC Optimum as one of Canada's leading loyalty programs will help drive EQ Bank's business. We have reviewed EQ Bank's strategy and are excited by the potential it offers to grow the business long term.

The transaction consists in the sale of our PC Bank business in exchange for cash and equity. We will get 2 Board seats and the ability over time to increase our ownership to 25%. EQ Bank does not offer credit cards currently, and we will benefit from their scale and depth. Together, we offer a unique opportunity to accelerate the growth of Canada's leading digital bank, while allowing us to increase our focus on our core retail food and drug businesses. This will simplify our operational structure and balance sheet and will be accretive to earnings in our first full year post transaction.

From a financial perspective, we will simplify our reporting structure, eliminating the bank segment. We will realize total value of about $1.3 billion. This includes our equity position, the cash portion of the transaction, the unlocking of excess capital associated with the conservative capitalization of our credit card portfolio, plus some other benefits. We intend to use a portion of the cash proceeds to increase our ownership in EQB up to the agreed level of 25% over time. The balance will be deployed toward our share buyback program.

We have built a very loyal base of 17 million active PC Optimum cardholders. We also touch over 6 million Canadians every week in our stores and online offerings, and Canadians earn and burn more than $1 billion in PC Optimum points every year. We know that the more engaged a customer is, the more valuable they are, they spend more across our network and are more loyal. PC MasterCard holders are amongst the most loyal customers to Loblaw.

As EQB accelerates the growth of PCO-linked financial products, more PC Optimum points will be issued, driving engagement and top line growth for Loblaw. From Loblaw's perspective, I believe this transaction represents a clear path to greater operational efficiency, financial strength and ultimately, superior shareholder returns.

This is a strategic relationship designed to deliver transformational benefits to customers, creating one of Canada's largest loyalty linked banking ecosystem and offering more ways for Canadians to earn rewards.

I will now turn the call back to Chadwick.

Thank you, Richard. With that, operator, can we please take questions from the line? We ask that you limit yourself to one or two questions, then requeue.

And your first question comes from the line of John Aiken from Jefferies.

Chad, you mentioned the cost synergies. I think it was around 7% of the cost base. But in terms of your EPS accretion, is there any assumptions in terms of revenue synergies? Or is that surplus that we may see down the road?

That would be surplus that you would see down the road.

Perfect. And if I may add one on since that was an easy question. The overlap in terms of the customer base, the 3.5 million that's going to be coming in from PC Financial and 17 million in terms of the loyalty members on PC Optimum. What is the overlap? And what -- how does a PC Financial customer look versus an EQB legacy customer?

Yes, sure. Thanks, John. I'd say it's very, very minimal overlap. This is net new opportunity. And I'd say that the makeup is actually very similar when you think of how digitally engaged the PC Financial customers are, where over 57% are digitally engaged. And when you look at the -- what the customers are looking for and value and product offerings and also the propensity of PC MasterCard customers to want a deposit account is very high, especially for the PC Bank digital offering now. So that bodes very well for cross-selling to the EQ Bank digital everyday account. So we see very significant upside.

And then as I mentioned, we think the quality of the PC Financial customer, obviously, is extraordinarily high, right? This is a business that's been operating for over 25 years. The majority of accounts in the portfolio are concentrated in prime and super prime, as I mentioned, very high income earning in many cases. There's just -- there's a very good complementary growth opportunity here when you add all the 3.5 million together.

And your next question comes from the line of Gabriel Dechaine from National Bank Financial.

Congrats on the deal. Just a question on the financing here. So 7.2 million shares issued to a Loblaw Company, that's around $625 million or so at current price. I'm assuming it's the current price we should reference or something else.

Yes.

Where does the extra $200 or so million come from? Is that coming out of your excess capital, you'll dip down into the 12s for your core Tier 1? I guess, well, on close, you would have the new shares issued that would put you back in the other direction. Is that kind of how it would work though mechanically?

That's right, Gabriel. So it would be -- we have a VWAP that you would have seen for the current share price peg and then the residual in excess cash that we have on hand, yes.

Okay. And then that cash gets replaced essentially by the shares issued -- well, the capital, I guess, rather. Now about this cross-sell opportunity, what's -- when you're game planning this, what's more likely to work from this pairing?

EQB with its new and improved over the past year, deposit business, selling that into the Loblaw customer base, maybe mortgages, I don't know about that one, or PC Financial MasterCards to the EQB customer base? Because I can draw that on a PowerPoint slide, but I mean, the PC Financial customer base is loyal, but it looks like they're single product customers primarily.

So a couple of questions there. So we do see material growth potential, right? We're going to be very focused with a complete EQ Bank product shelf, more complete now, and that's part of what's been missing. It's a little bit too early to give detailed specifics on all the cross-sell potential, but you got to think of a few ways where, yes, PC customers will gain access to the broader EQ Bank product suite. So we do have the savings, registered accounts, the digital platform. Yes, could you see mortgages at some point? Absolutely.

We obviously have a significant mortgage business, including an offering through EQ Bank. And as I mentioned earlier, we see a high propensity for the PC MasterCard customers to be engaged in getting a deposit account, over 10% do now. And we see -- and that's really been ramping up as the team has been working on that more and more. So we do see a lot more growth for EQ Bank deposits and both sides to really have a complete offering.

When you don't have complete product shelves on both sides, it's more difficult. And now really important as well, I think, is the distribution gate with this being, again, making us more omnichannel. So we have the digital, and we can actually be there in, say, for example, 180 pavilions and -- where EQ Bank can be. That will also help with advice and also help with more cross-sell of EQ products over time. So there's actually a pretty full shelf that we can sell on both sides.

And the brands are going to be distinct as well. So if I'm in a PC kiosk, I'm not seeing an EQB deposit, it will be labeled PC Financial or branded or whatever. And if I'm an EQB customer, you just try to sell me a PC Financial labeled credit card? I don't know if that's been -- maybe down the line.

It will all become EQ Bank. That's the brand that we're investing in. So that will be very simple and clear. You'll see PC Financial for insurance, which is -- but it's all going to be -- those pavilions, the ATMs, everything will become EQ Bank, but PC Optimum will be that lead brand with us, but there will be brand simplicity.

Yes. All our pavilions -- Gabriel, sorry, all our Pavilions will turn yellow and -- but you'll continue to see the PC logo on our card and the EQ Bank logo on it, too. So I think it's going to be great.

All right. Well, my wife might -- she collected at the Shoppers Drug Mart, so she might get on this stuff.

And your next question comes from the line of Stephen Boland from Raymond James.

I think a couple -- there was a few good questions. Chad, look, I mean you've got some several big shareholders already. I know you don't need shareholder approval. But I'm just curious, have you reached out and seeing how supportive they are because you are issuing stock at probably -- I haven't looked at the chart, but maybe a lower valuation than you wanted 3 or 4 months ago. I'm just curious if you've had any reactions from your 3 big shareholders.

Thanks, Steve. I appreciate you calling in. We -- I can't offer a perspective on our shareholders, but I could say I have spoken with a couple of our shareholders. And I would say that -- I'd say, with great support, and this deal is a great deal for Canadian Banking, for EQB, for Loblaw, and that's what we focus on most. This is there's great value exchange here and huge value creation. So we're not as focused on the share price today. We're focused on creating the best value possible for shareholders, and that's what we're doing here.

Okay. And second question is when I look at the Slide 17, PCLs, I mean, you're grabbing a large unsecured book, a fraction of your size, but the PCLs at PC Financial are a lot higher than what you've delivered. I'm just wondering, is your accretion include similar levels of PCLs in post-closing?

Yes. Yes, we have looked at the churning on PCLs. And I'd say, again, we believe this portfolio is a really strong quality, Steve. Higher FICO credit scores than the Canadian average, high household income, high digital engagement provides an attractive customer base. And on the customer behavior, customers are revolving and charge-off at rates we would expect and are in line with peers. So absolutely, we've thought that through, and we've modeled that accordingly.

And your next question comes from the line of Graham Ryding from TD Securities.

You flagged $800 million of direct retail deposits within PC Financial. How is the rest of the PC Financial business funded?

Want to try, Richard?

With equity. Like...

Yes, securitization.

Securitization and equity, that's how we've been funding our business. Like we're a grocer. So we -- we're not expert bankers. So we've, over time, been very, very conservative because it's not our expertise. So we've always been very conservative on all aspects of running this business, whether it was on credit, capital and any other thing that revolves around banking. So it was all securitization facilities.

And I think important too, Graham, the push on PC Financial Digital, it's really just ignited, I'd say, probably over the last year plus, right? The team is really building and gaining velocity there. So I think that $800 million would have a much higher run rate over time as well. But otherwise, it's been the securitization vehicles.

Okay. I assume those will continue going forward?

Yes, yes.

Okay. Great. And my second question, if I could. Just like, how can you describe the sort of the loan book or the credit card loan book, in particular, the growth profile and the earnings profile either over the last year or over the last few years?

Sorry, just the overall assets have been fairly consistent over the past year. So I'd say the PCL ratio, the PCL experience actually over the last 12 months has been a little bit lower. So I think on average, it's around 4.6%. We've seen about 4.2%, I think, on a trailing 12-month basis, which reflects the strong quality of the book. But overall, it's a stable to increasing credit card portfolio.

And your next question comes from the line of Mike Rizvanovic from Scotiabank.

Chad, I want to go back to that credit card, the growth profile. And I'm sure you're going to look to amp it up as time goes on as you sort of get that value proposition to the new clients that you're going to pick up. But when I look at the OSFI data, I do see that the credit card balances have been in and around $4 billion for a couple of years.

It's underperformed versus when I look at the larger banks. And I'm wondering -- I don't know if Richard wants to opine on this, but what's been driving that? But it looks like it's been pretty stagnant for a couple of years here in terms of the actual outstanding balances.

No, I think the growth has been pretty stable, we'd say, and it's been tied to what's been happening on the food side, like -- and that's one of the reasons why we're so excited about this opportunity. Like we think with EQ Bank, we're going to be able to boost that growth. Because as I said in my remarks, for us, like the more credit cards we have, the more PC Optimum points we issue and that translates to our business. So that was ultimately the big driver of us seeking this transaction.

And I'd say, Mike, too -- thanks for calling, Mike. The -- important to remember is there's -- it's how you think of the book, right? Again, a lot of prime, super prime, it's actually very comparable to the DCB credit card portfolio books. And there's certainly a high transactor component. This is not all about a revolving business.

These are high-quality transactors, and that's why the fee-based revenue and the noninterest revenue is a very significant component here, and that's really important and that's stable and sticky and that will continue as well.

Okay. Got it. And then just a quick one on -- just in terms of the distribution capabilities that you're picking up. Obviously, you're expanding it pretty significantly here. And I guess I was always under the impression that your customer base on the uninsured residential was very well catered to by the broker channel. Was there like a missing component where this sort of enhances that where you're picking up customers that you normally would not get through the brokers? Just curious in terms of how this actually expands into helping your other lending categories.

Yes, absolutely. I'd say our mortgage customers are absolutely very well served by the brokers. The brokers are still the best way to get a mortgage in Canada. This will absolutely -- we don't really cross-sell between EQ Bank and the Equitable Bank brands today. That will -- that is a planned evolution really to offer more mortgages to customers. And this brings in millions of more customers that we can target directly. And more of that might come through broker partnership beyond, but this does expand the universe overall of customers that we're engaging with and bring significant analytical capabilities.

And PC Optimum is going to underpin our offerings, and that's going to be very, very unique and foundational. That is the #1 loyalty program in Canada. It greatly expands the value proposition, and that's really important to focus on here.

And your next question comes from the line of Darko Mihelic from RBC Capital Markets.

Just a couple of questions that I'm a little bit unclear on. And the most important of which I think might be the loyalty reward program. So I guess going forward, how does it work? Who calls the shots on the loyalty reward program? And how are the economics around that shared?

Well, nothing changed in our loyalty program, like EQ Bank will have a license to issue points. And so they'll have the whole points and the breakage that comes with it, and that's it. Like we've been tweaking around the edges on our loyalty program over the years, but it's all about making it better, more accessible. And so -- and it's a big driver for our business. So you should not anticipate to see any changes -- any significant change to our loyalty program other than making it more palatable for our customers.

And the feature that's key for PC Optimum and has been the big driver of its success in Canada is the fact that we offer instant redemption. If you own PC Optimum or you have your PC Optimum app, like you know as well as I do that you have cash on your phone that you can use to pay for groceries or stuff at Shoppers Drug Mart day in, day out. And so that's what's really appealing. And so there are no plans to change anything.

And just to reinforce that, we have -- this is about a long-term commercial agreements, right? So there is -- we're very well organized around this in the partnership. That's why it's so important to know this is a long-term partnership.

Yes. And I want to add one more thing, like this loyalty program is not about making money with loyalty. It's about driving sales. If you were to compare our redemption rates versus all other loyalty program, it's extremely high. It's in the high 90%. And we like it that way. We want people to use the program. And so that's how it's been designed, and that's how it's been run for years, and that will not change going forward.

And does EQB have the right and the ability to add PC Optimum rewards to other financial products?

Yes. The more points get issued, the more -- like we're very much aligned, Chad, with an eye on this. So the more points EQ Bank issues, the happier Loblaw is.

Okay. I think I might have some follow-ups on that, Chadwick, afterwards.

And your next question comes from the line of Etienne Ricard from BMO Capital Markets.

Congrats on the deal. My question is for Richard. So why is PC Financial in better hands under EQB's ownership? In other words, why monetize now?

But to us, we're not monetizing. Like we are transferring ownership into the hands of an organization that we think is going to help us grow it even faster. As I've said earlier, these are our best customers and -- but we want more of those. And we feel EQ Bank strategy is best positioned to increase the number of credit cards that get issued year in, year out. That's ultimately what we seek. And so for us, monetizing PC Bank is not significant financially, but it's very important strategically. And so that's why this process was not a competitive process.

It was a friendly process that lasted quite long because we wanted to get to know EQ Bank, the culture of the organization, their strategy and the people we will have to deal with. And we're very pleased with the outcome that is being announced today because we think this is a great fit for us, and EQ Bank will benefit as we benefit ourselves. So I think this is great from our perspective, and that's why we're so excited about the potential of this deal.

Okay. I appreciate the details. And Chadwick, this is a meaningful transaction for EQB in terms of scale. So how do you think about the integration complexity and the time line on potential revenue synergies?

Yes. It's right on strategy for us. So that's very important. The integration will be key. You've heard us speak about payments and completing our product shelf for a long period of time. So this will be a top priority. It's right -- I think the timing is excellent for us. I think for closing, when you think ahead to how this will accelerate our vision for accelerate the potential of the Challenger Bank after closing, you can start to see revenue synergies, I think, in short order.

We'll be able to realize -- we believe we'll realize those cost synergies within the first 2 years. That's what we weighted to. And then the revenue synergies, the capital synergies, the funding synergies will start to scale, I think, reasonably quickly after closing.

And we have a follow-up question from Stephen Boland from Raymond James.

And this is more for the Loblaw side. I mean I presume the size of your portfolio is desirable from -- for every Canadian bank. So why Equitable? Like you said, it was not an option, I presume, but like why Equitable? Why not National, why not one of the other big 6 banks? Why did you choose Equitable?

Well, we felt from the get-go when we started to think about this a while back that we wanted an institution that would be best to house our customers. And when we look at EQ Bank strategy, we looked at their track record. And when we started to talk with them, like we felt that this was something that felt where we could work well together.

Obviously, we're going to have 2 Board seats. So we'll have a little bit of influence on what's happening versus if we would have sold to one of the big banks, it would be very difficult to have any influence, I would say. So therefore, we think it's a great fit. But I think the more important point, as I said earlier, is like the strategy and the culture is one that fits really well with us. And so that was the key driver ultimately.

And I'll just reinforce. We feel the exact same way. This is such a close cultural alignment and mission alignment and focus on Canadians and the Canadian banking system improving. We couldn't be more aligned and thrilled our entire Board and management team, all of us, we couldn't be more excited than to work with Loblaw companies.

And your next question comes from the line of Gabriel Dechaine from National Bank Financial.

Just a couple of follow-ups here. When you talk about funding synergies and Mr. Dufresne's comment earlier about the funding strategy using securitization, I see about $3 billion of securitization assets and then you got a $4.4 billion receivables book. So is part of the plan just securitizing all of that as opposed to using equity for funding?

We'd securitize more, yes. But -- and then part of the funding synergy is also growing the core digital deposits as well, which we think we can do very well. And then you have -- it's kind of RWA release as well. Gab, I think is an important part of that.

Yes. That actually segues into my other question. The RWAs, I believe, is PC Financial on the advanced approach?

No.

No. Okay. All right. I see operating risk RWAs on the OSFI filings. That's all. Then...

That was standard I should say.

Okay. Cool. Last one I swear. Who asked for this -- I think it's called the change of control provision, the scenario where if there's somebody comes to acquire EQB, and it's successful, you have to pay $40 million to Loblaws. Who asked for that? I guess, Loblaws?

We just want to make sure like that our loyalty program is well treated if something like that were ever to happen. So we decided to partner with EQ Bank because we like their strategy. So we just want to have a say if someone else is interested in EQ Bank. Just between the announcement.

Of course, but it also signals that your intent is to close the deal, and you want to build a long-term partnership, and that's why you're putting that security in there for your protection.

Yes. We want to get married with EQ Bank, not with anyone else.

Sounds great. All right. And then what -- under what conditions would you -- I don't know if you can comment on that, but you're below that 25% cap when the deal closes. Is that -- what conditions would -- have you considered what conditions would need to be existing before you decide to increase that to that level?

No, there's no specific condition. That's our objective. So we'll do that over time. And -- but there are no conditions. So that's a level we think would be adequate for us. And so we're going to do that over time, yes.

Thank you. And I will now hand the call back to Chadwick Westlake for any closing remarks.

All right. Well, thank you so much, everyone, for joining us this evening and for following EQB story. We could not be more enthusiastic about our future with PC Financial and the close collaboration with Loblaw to fuel our next phase of growth. We look forward to keeping you updated and welcome you to join us tomorrow morning to discuss our Q4 remarks at 10:30 a.m. Eastern Time. Thank you, and good night.

And this concludes today's call. Thank you for participating. You may all disconnect.

Good morning, ladies and gentlemen, and welcome to the Loblaws Inc. Third Quarter 202 Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 12, 2025. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead.

Great. Thanks very much, Danny, and good morning, everybody. Welcome to the Loblaw Companies Limited Third Quarter 2025 Results Conference Call. As usual, I'm joined in the room this morning by Per Bank, our President and Chief Executive Officer; and Richard Dufresne, our Chief Financial Officer. So before we begin the call, I'll remind you that today's discussion will feature 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 filed with the Canadian securities regulators. Any forward-looking statements speak only of the date they were made. The company disclaims any intent 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 GAAP financial measure. And with that, I'll turn the call over to Richard.

Thank you, Roy, and good morning, everyone. I'm pleased to report that we delivered another quarter of consistent financial and operational performance reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service and convenience to Canadians. Top line growth continues to be very strong, supported by the opening of 76 stores over the past 12 months, an increase in our retail square footage of 2%. On a consolidated basis, revenue grew by 4.6%, reaching $19.4 billion. Our drug retail business grew at 3.8%, and our food retail business grew at 4.8% in the quarter.

Adjusted EBITDA increased by 7.2% to $2.2 billion and margin improved by 20 basis points to 11.4%. Adjusted diluted net earnings per share grew by 11.3% to $0.69. And on a GAAP basis, our net earnings per share increased by 4.8%. In food retail, we delivered higher sales, traffic and basket growth, once again driving significant tonnage market share gains. Absolute sales outpaced same-store sales by 280 basis points at 4.8%, reflecting our new store growth, while our food same-store sales grew 2%. The impact from the stores we opened so far has been in line with expectations. We continue to see positive momentum across key categories in the right-hand side of our stores, notably in apparel, cosmetics and H&E. That said, headwinds from liquor, specifically in tobacco and our exit from the optical business led to a net 30 basis point negative impact to same-store sales this quarter.

Our Q3 internal CPI-like food inflation was lower than Canada's grocery CPI of 3.6%. Our average article price data, or AEP, which reflects our customers' actual basket mix and includes nonfood items not included in the CPI basket was also lower than CPI. Our lower internal inflation metrics demonstrate that Canadians who shop our stores are finding more value. Cost increase requests from large global vendors continue to trend well above historical levels. In response, we're pushing back harder than ever to ensure that any increases we accept are justified. Our Hard Discount banners continue to deliver strong sales growth based on consumers' ongoing focus on value.

Momentum continues to build across the Hard Discount stores we added to our network through conversions and new builds, proving that our strategy is resonating very well with Canadians. We're also pleased with the momentum and strong performance in our conventional stores, which improved tonnage market share within the conventional sector. This quarter, we announced that Specsavers would be opening 111 locations within Loblaw stores to replace our Theodore and Pringle optical business. Exiting this business resulted in a $30 million adjusted charge this quarter. Going forward, we expect it to negatively impact food same-store sales by an approximate 20 basis points until we lap this transaction, while the exit from the Theodore and Pringle business, coupled with our new agreement with Specsavers is expected to generate approximately $10 million in annual run rate earnings accretion.

In drug retail, absolute sales increased 4.3%, excluding the impact of the sale of Wellwise, while same-store sales grew 4%. Pharmacy and health care services grew same-store sales by 5.9%, driven by broad strength in prescription and new health care services. Our specialty drug prescription growth continued to lead our pharmacy performance. 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, including our 209 in-store clinics. We're on track to reach our target of 250 in-store clinics opened across Canada by the end of this year.

Our front store same-store sales continued to improve, growing 1.9%, reflecting the ongoing strength of our beauty category. This more than offset the impact from the exit of certain electronics category in the prior year, which will no longer be a headwind to same-store sales after the fourth quarter. We continue to be pleased with the underlying strength, profitability and sales momentum of Shoppers Drug Mart front store business. Online sales in the quarter increased by 18% across our retail businesses. Delivery continues to lead growth in the online grocery channel, and we continue to be pleased with our online sales penetration in both food and pharmacy.

Our retail gross margin improved 20 basis points, led by drug retail, reflecting improvements in shrink in both drug and food. Food trading margins remained stable. Our SG&A rate as a percentage of sales was stable with operating leverage from higher sales, offsetting incremental costs related to the opening of new stores and the successful ramp-up of our new automated distribution facility in East Gwillimbury. This new DC continues to ramp up ahead of plan. Costs remain lower than budgeted, and we are on track to ship significantly more cases than planned this year. We have begun fulfilling orders in our ambient section, which is ramping up a full quarter ahead of plan.

We're making considerable progress on the construction of our second automated DC in South Caledon, Ontario. The project is on schedule. In the quarter, retail adjusted EBITDA grew 6.8% and EBITDA margin increased by 20 basis points to 11.1%. PC Financial's revenue increased 5.5%, driven by higher sales in our mobile shop and higher insurance commission income. Our PC money spending and savings accounts are performing very well. Customer account deposits increased by $174 million in the quarter. This increase in deposits is evidence of strong customer engagement and helps us lower our bank's funding costs.

The bank's adjusted earnings before tax increased by $13 million or 36.1%, primarily driven by higher revenue, lower operating costs and favorable impact from our ECL provisions. We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our loss provisioning with a strong and very well-capitalized balance sheet. Free cash flow from the Retail segment was $325 million in the quarter. And in the quarter, we repurchased $450 million worth of common shares. Our balance sheet remains strong, and we continue to improve our key return metrics. Our return on equity is 24.8% and our return on capital is 11.9%.

Looking ahead to Q4, while it's still early in the quarter, we are confident our results will be in line with our financial framework. Reflecting our strong performance year-to-date, we now expect full year adjusted EPS growth to increase slightly from high single digits into the low double digits, excluding the impact of the 53rd week. Our assets are well positioned. We are executing well, and we are investing for the future, all while delivering consistent operational and financial performance. I'll now turn the call over to Per.

Thanks, Richard, and good morning, everyone. I'm really pleased with our third quarter performance. We continue to generate strong revenue growth through a combination of same-store sales strength and the positive impact of our strategic investment in new stores. This top line growth of 4.6% allowed us to deliver 11.3% adjusted EPS growth this quarter and will help us support our long-term earnings expansion. As Richard discussed, we accomplished this while increasing our spending to support the opening and ramp-up of our new stores, the accelerated transition to our new 1 million square foot DC and the lapping of some real estate gains from last year. This is a clear demonstration of the strength of our business and our ability to deliver consistent financial results.

With our broad footprint, we know many Canadians are looking for opportunities to get the most out of their budgets in this challenging economic environment. And we believe it's our responsibility to deliver the quality, value, service and convenience across every corner of our business. Every day, we fight to earn our customers' business, whether that's through competitive pricing, meaningful promotions, through omnichannel service or personalized rewards through our PC Optimum program. As a result, more Canadians shopped our stores, and we generated $857 million in additional revenue.

In drug retail, we delivered another quarter of positive momentum in our front store sales. Our prestige cosmetics continued to be very strong, supported by fragrance and derm categories. Beauty categories remain strong. In Pharmacy and Healthcare Services, we saw ongoing strength in acute and chronic strips and in our specialty drug and new prescribing services categories continue to deliver strong double-digit growth. In drug retail, we're enhancing our omnichannel presence, offering our customers more choice and speed. We're growing delivery through Skip and now Uber Eats and scaling our buy online, pickup from store network to cover 750 stores by early next year. This delivered even greater convenience supporting several customers promise to help make lives easier.

Across the country, we have now opened 12 new pharmacies and 55 new pharmacy clinics this year, providing expanded scope of care service to Canadians. In food retail, same-store traffic was up and basket growth was positive. This contributed to tonnage market share gains. Our Hard Discount banners also continued to outperform same-store sales growth and drove the majority of our absolute growth. In the quarter, we opened 19 Maxi and NoFrills stores. With 16 of these being small format stores, we are bringing Hard Discount to underserved urban markets as well as suburban communities. We see this as an investment to strengthen our position in what is a long-term consumer trend towards value. Similar, we saw higher same-store sales growth rates in our Superstore banner. Within the right-hand side, we saw strong growth from our general merchandise refresh, and we're also showing very positive results from the right-hand side inspired refresh in our medium-sized stores.

Turning to tariffs. Following the removal of Canadian counter tariffs in September, the related cost increases and corresponding tea labels were removed from our shelves as we sold through the inventory. During this time, we received a lot of positive feedback that our efforts were helping our customers make informed decisions. As always, from every challenge comes opportunity. More customers are discovering quality Made in Canada products. So we continue to support these customers and have now sourced and onboarded more than 200 new Canadian vendors since the start of this year. We actually believe that this is good for both our customers and good for Canadian producers and manufacturers and good for the economy.

Our digital sales growth remained very strong, and our weekly engaged users hit an all-time high as we continue to differentiate ourselves by enhancing customer experience with more personalization and choice. We're excited to have begun launching Uber Eats across our network. This provides customers with optionality across third-party delivery providers, which already includes Skip, Instacart and DoorDash. And some of you may have noticed something new on your last shop, 3 of our GTA NoFrills stores have implemented PCO Go. This is a new feature and is designed to provide a faster shopping experience, enabling customers to scan grocery as they shop with a real-time estimated total of the bill and streamlining the checkout process.

Of course, this has only been less than a week, but we are seeing a 90% OSAT for the customers who have tried this new feature. So -- so feel free to take it out. It's great. We are pleased with the strategic foundation that we have built and are excited about the opportunities that lie ahead. The strength and diversity of our business provides differentiation, unique growth opportunities and allows us to deliver consistent operational and financial results. This provides the foundation to make substantial investments today and to accelerate our longer-term growth ambitions.

Freight as a Service is a great example. Today, we are leveraging our existing supply chain delivery infrastructure, enabling us to rent out our empty trucks as a return from the store delivery routes. Next year, this business is expected to generate more than $200 million in EBIT, delivering another year of more than 20% growth. Similarly, our Advanced Media business is expected to generate over $100 million in EBIT next year. So we're scaling this business with the rollout of more in-store digital screens in partnership with STRATACACHE.

Customers like the immediacy and relevance of in-store screens, where it's a beauty tip, seasonal promotions or a great product worth trying, the content feels personally and useful in the exact moment it matters. So advertisers value the ability to reach 4 million plus in-store shoppers every single day at the point of decision with measurable impact. A visible example of this growth opportunity is that you will start to see more screens with new content in our stores over the coming months. And we're very pleased with the strategic advantage our rich first-party data provides. It seems every week we are implementing a data-driven solution that allows us to better understand and serve our customers, improve our operations, make smarter decisions and deliver even more relevant offers. For example, we are now aggregating customer data to guide and optimize space planning for our store network.

This initiative is driving a material sales lift and it ensures each store better reflects the needs and preferences of its local customers. Our data assets will be a key differentiator for Loblaw's continued success and growth. These examples plus our PC Optimum loyalty program and our expanding e-commerce business supports higher growth, higher-margin business opportunities that should have a flywheel effect across everything that we do. This year and next will mark an important milestone in our future growth. We're well on our way in the construction of the second 1 million square foot DC in South Caledon, an identical trend to the East Gwillimbury DC that we are currently ramping up.

We remain encouraged by the success of our new small format discount stores and the new clinic [indiscernible] pharmacies. And tomorrow, November 13, we will be excitedly watching the new opening of our second T&T in the Seattle area. And by end of next year, we expect to have another 5 T&T stores open in Washington and California. So our strategy remains anchored by unmatched core assets, excellence in retail operations and consistent operational and financial performance. So looking ahead, we are well positioned to serve the everyday needs of Canadians today and in the future. I'm excited about the launch of our Holiday Insiders last week. This has been a holiday tradition for more than 40 years in Canada. Our team and I do take great pride in showcasing innovative products crafted so Canadians can celebrate and share the spirit of the season with family and friends. I'll just invite you to try my personal favorite this year. I know it's probably always ice cream. So it's the Santa's Milk and Cookie ice cream that has been received very well by our customers.

I'd also like to call out the amazing generosity that happens every day in all of our grocery stores across the country. I'm very proud to share that each of our stores is partnered with at least one local school to help support the students with their access to nutritious food, removing a significant barrier to learning. This year, the PC Children's Charity met its long-term goal of feeding 1 million Canadian children. Thanks to the support of our customers and colleagues, PC Children's Charity is the nation's largest share of direct-to-school food program, where 100% of all customer donation goes to feed the students in their own community.

I like to thank all members of the Loblaw team for, once again, their tremendous efforts. Your passion and hard work are what allows us to consistently deliver the quality, value and service that people in your community relies on every single day. Finally, I will close by letting you know that we have successfully completed the global search for the key role of President for Shoppers Drug Mart. So I'm very pleased to announce the appointment of Gregers Wedell-Wedellsborg as President. Gregers will be joining us January 26 next year, following his transition from Matas Group, where he's currently Group CEO. He will officially take off his responsibilities on March 16 after a thorough onboarding process.

Matas is a publicly traded health and beauty retailer with over 500 locations across Denmark, Sweden, Norway and Finland. And Gregers is an exceptional leader and retailer with a proven track record in driving growth and performance, digital innovation and operational excellence. Shoppers has a well-established strategy and leadership team, and I'm highly confident with Gregers will help take the organization to the next level. In making this announcement, I would also like to acknowledge the significant contribution of David Markwell, Interim President of Shoppers and Head of our Technology and Analytics Group. David himself into this interim role with great energy and enthusiasm and has made a tremendous difference. He will, of course, support Gregers transition until he starts his official accountabilities on March 16 and also continue his role as Executive Vice President, Technology and Analytics as well as supporting several key enterprise initiatives. Yes, that was the end of my script. I know it was long, but I just had so much I wanted to share with you. With that, I'll now open the floor for questions.

[Operator Instructions] Your first question comes from Irene Nattel of RBC Capital Markets.

A lot of great color there. I was wondering if we could please just start with what you're seeing in terms of consumer behavior. Same-store sales growth of 2% in food was consistent with Q1, but admittedly a deceleration from the Q2 level. So just wondering below the surface, how should we be thinking about that? And how should we be thinking about the growth rate on a go-forward basis?

Thank you. Good question. On consumer behavior, I would say that we are seeing more of the same. So our promo penetration stays high. It's higher than last year, but it's actually not higher than quarter 2. Customers are still shopping more and more in Hard Discount, but we are not seeing it accelerating. So basically, we are seeing more of the same with regards to customer sentiment. At least that's what we see right now as we speak.

Our food or our grocery same-store sales number, just trust me, it's continued to be an important number for us, even though that more sales will be coming from our new stores and will help fuel our long-term performance. And also, I think it's important also to look at our same-store sales in 1/3 of our business in Shoppers because there, we saw the drop same-store sales at 3.8% and our front store sales at 1.9%, which was the best quarter in 9 quarters. And adjusting for the electronics, then we are at a 3% kind of growth in front store. So I think that's how I see it. So I'm pleased with our Q3 performance as we are heading into Q4. But maybe you have some more you will share, Richard, on this.

Yes, Irene. So specifically, if you look at same-store sales in Q3, we need to go back to 2024, okay? As you know, we had -- we hit some bumps in Q4 in the first half towards the end of the first half. And so internally, we had to play some catch-up to be able to recover over that bump. And so that led us to be somewhat more aggressive in the second half last year to be able to deliver on our market share objectives. So now we're comping through that. So that's simply us comping over what we did last year.

Having said all that, I think what's key for us is if you look at our total food sales growth of 4.8% and our internal inflation, which is less than 3%, the delta is essentially tonnage growth. So we've been gaining significant tonnage growth. We're on our way to deliver the best market share we've ever had on top of the best market share we had last year. So we feel very, very good about the business. But you're going to see this wonkiness in same-store sales for food for Q3 and Q4 this year.

And I think maybe I'll just add to that, Irene, that how we see customers are not changing, and we saw it a bit in Q2, but also in Q3. If you look at meat, red meat market prices are increasing because of commodity prices increasing. And then customers, they do understand how to navigate that because they're not just buying the same as they did last year. So they're buying more chicken as an example. And you'll see the same in other categories. If berries goes up, then they'll buy the cheaper berries or not buying berries and buying something else. So that's how customers they continue to navigate through inflation and keeping their costs low and of course, as well shifting to discount for some of our customers.

That's great. And just switching to Shoppers. Can you talk through how we should think about the sustainability of that Rx print as we lap sort of year-over-year of continuous sort of, let's call it, mid -- higher mid-single-digit same-store sales?

Yes, Irene, the specialty drug category continues to grow quite significantly. We're going to see the introduction of less generic drugs in that sector next year, which will affect the top line. But if we look historically on the introduction of generic drugs in general for our business, it's actually been a positive because we get more volume. And so that ends up generating more dollar profits for the organization.

Yes. And maybe when the prices come down, we will see sales could increase as well. So what we know right now, it looks like we will continue the trend that we have seen in the past.

That's great. And I'll be sure to try the Santa's Milk and Cookie ice cream.

That's really good, Irene.

Your next question comes from Michael Van Aelst of TD Cowen.

I just want to follow on some of Irene's questions. But -- so you talked about market share gains in both discount and full service. And I think it's clear to a lot of people what you're doing in discount and how you're trying to gain share. But on the full service side, where you're not really adding stores, how are you gaining tonnage share? What do you -- what would you say are the -- is behind those gains?

Yes. So just to be exact, and we say this every call, like the conventional channel share is going down, but we're doing better than our peers. And so we see that very clearly. So we're doing better than our peers in conventional. And obviously, we're doing better than peers on discount.

Yes. And we have a number of initiatives in our conventional business. So in our Superstores, as you know, we are working on the right-hand side adding more brands into clothing, in food, we are increasing our multicultural assortment. We're making a better shopping trip. We are working more with our digital offers. So we're doing a lot when it comes to our market division, whether it's our Fortinos or Zehrs or Loblaw stores. There, we are giving customers more value in the form of better service, better products, but also better pricing. So we're finding that sweet spot of combining value with the quality that we serve in our conventional banners.

Yes. And net-net, just to be very clear, net-net, we're gaining. When you add both of them together, we're gaining share.

Yes. And we shouldn't forget that T&T. It's not in -- we don't know about the share, but we know that if we're adding that, it's not in the Nielsen data, then it's even more because T&T is still a growth engine for us, both in Canada and of course, what we're seeing in the U.S.

Okay. So conventional, I think we've heard in past quarter is that conventional was growing a little bit. But it sounds like this quarter, you're saying it hasn't -- it isn't growing, but you're just...

No, no, it's the same. We've been saying the same thing, Michael. We've been saying the same thing. Conventional channel.

It's not growing at the same pace as the others.

And -- but we're doing better than our peers.

Okay. But is it -- it's not growing at the same pace, but is it growing?

Yes, it's growing. Sales growth in market are up, same-store sales in market are growing, yes.

The next question comes from Mark Carden of UBS.

So to start, you guys called out strength in your Superstore business. Was the contribution from these formats any bigger or smaller relative to last quarters? And then are you seeing many shifts in how consumers are shopping the stores? And then just your thoughts in general on merchandising for the holiday?

So no, I think it's more of the same. And our Superstores have a very, very strong position, especially in the West, where it's driving some significant sales and the DM, so especially in the home. So toys, we're doing very well, home and also clothing. And that's, of course, helping on our overall margin. So in general, Superstores is a good fit to us. And now we also -- so our supermarket division, they combined our Atlantic Superstores and our Superstores in the West into one Superstores from coast to coast. So now we have 180 of those Superstores, which, of course, we'll try to get more of having those combined.

Okay. Great. And then just on the drug retail side, what have your learnings been thus far from the Shoppers locations that have offered some of the expanded health services capabilities? Have you found that it leads to higher spend in the front store as well? And just any quantification on the lift?

Yes. Overall, they're doing better. And by end of this year, we will have met our target of having 250 Shoppers Drug Mart with clinics. So of course, right now, it's mostly Alberta and it's Nova Scotia. And then we are seeing how much more we can do in other provinces as they open up for more scope. So we're really pleased with the performance we're seeing there. And of course, it has a higher the rest of the business.

Your next question comes from Mark Petrie of CIBC.

I just wanted to follow up maybe on the competitive landscape. Just to clarify. Do you think the comment of gaining tonnage market share holds on a same-store basis? Or would you say it's more stable there? And then second, I know CPI is noisy. So when you do your price benchmarking, would that suggest that Loblaw is an outlier with an internal inflation below CPI? Or do you think that's essentially consistent across the industry?

I think -- I don't know what the others have, so I can't comment. But I can tell you like from a market share perspective, year-to-date, we're gaining share, and we're ahead of our plans for last year and on our way to finish very strong. So yes, we are gaining share.

I think on the market, for me, it stays very rational. It's a good competitive market to the benefit of customers here in Canada, but it also stays rational.

Yes. Okay. And then on Shoppers, also 2 questions. Just based on the behavior that you're seeing, how would you characterize consumer confidence? I know you called out strength in beauty, maybe just behavior within that category, if there's any color? And then second, what has the impact been of your shift in [indiscernible] approach on price and promo? Is there any adjustments to how you're positioning on that today?

I think the consumer sentiment, again, as I said before, it's more of the same. And we are seeing some good growth in fragrance and in the derm category. So customers might not buy as many big electronic items, but they buy -- they definitely continue to buy fragrance and derm. So we're seeing a good strong uplift, and that's helping our overall sales in Shoppers Drug Mart. We have not changed the way that we promote in shoppers. We have lower prices. We started that in November last year, and we continue to do so, but we have not really changed the way that we trade in Shoppers.

Yes. Our business in Shoppers is pretty steady like steady as she goes.

Yes. Okay. Fair enough. And then just last one, maybe just on by Canadian. I think last quarter, you had commented that it accelerated from Q1. How would you characterize it as a factor in Q3? And what do you think the momentum is on that?

Yes. No. So after the tariffs have gone, so we in Canada have moved the territory tariffs, then prices on direct imported products from the U.S. has gone down to normal. And of course, we are seeing some customers who are going back to those products that they love now that they are much cheaper than they were, and that will have some impact on Canadian sales. Overall, Canadians just love to buy Canadian products, and that's also why we have added another 200 suppliers this year so far. So it's still up, but it's not up as much as it was before because of lowering prices of those products from the U.S.

Your next question comes from John Zamparo of Scotiabank.

I wanted to ask about private label penetration. And I wonder if you could share the delta of growth rates in private label versus national brands in Q3 compared to recent quarters? And is there any change in terms of response you're seeing from national brands to try to support tonnage growth?

For us, we like growth both in national brands and in control brands. So we like growing with both. Right now, we are seeing that our no name, especially in our discount division is growing ahead of everything else. So customers are seeking the good choices that we have no name. Overall, we don't see any big significant shift to control brand or to the big national brands. But no doubt that the big players, the big national brands, they need more volume. So -- but that might change over time. But for now and also what we see right now is that it's more of the same with a little bit of favorability to our no name plus right now that we're in the middle of our insiders launch, that's doing incredibly well for us.

Okay. And I wanted to ask also about e-commerce growth. It remains elevated. I wonder how you think about this? And if you could talk about the evolution of profitability from these sales because it's good to see the sales growth and market share, but margins are lower on these sales. So I wonder how margins are evolving as this business grows.

Yes. So if I can just talk about the market share and Richard maybe a little bit on the profit. But overall, we're gaining market shares. And we have a market share in online food that are way above our overall market shares. And with having added Uber, I think, 2 weeks ago, we're seeing a really, really good uplift there. And what we are really pleased about is that the penetration of customers shopping online food is increasing a lot in our Hard Discount stores. So in NoFrills, it's up a lot. So we are giving access to online food to many more Canadians and they can access Hard Discount where they get more value for their money.

And just one overall for the profit before I give it to you, Richard, is that we don't have our own trucks. So a man and a van is very, very expensive. And since we use the delivery services, actually margin is okay for us. It's not as good as if it was online, but it's still very, very good. And also customers who shop online, they also tend to shop more in our stores. So overall, it's good for us. So we are pleased, and it was an 18% uplift in online sales. It's a big part of our business. And we do expect that, that's going to -- that kind of growth levels would continue into next year.

Yes. So the drag -- additional drag on earnings is minimal because essentially, the fastest-growing segment for us is PC Express, which means we pick in store and we have a third-party deliver to home. So we're not paying for the delivery. So the impact on earnings is not that significant anymore. So we feel really good about growing this as fast as we can.

So when we are into loyalty and online and digital, I just want to state that last quarter, I talked about AI for the tool we had for district managers and many, many companies, they do a good talking about AI. But due to the excellent team that we have, we're actually delivering because that tool now is out in 43 districts. And in quarter 1, it will probably be out in our entire store network. So we have a lot of great use cases within this.

The next question comes from Vishal Shreedhar of National Bank.

With respect to your real estate program, I know off the top, you indicated that it was in line with expectations. But as you look at your various projects, is there anything that's within the projects, whether shoppers or the small format NoFrills that's coming in better than expected and maybe you'd like to tweak going forward and accelerate one and deemphasize another?

I think everything is going pretty well, Vishal. I think what is clearly very successful is small format urban. Shoppers continue to click along. Each one we opened is doing really, really well. And as we've said in the past, like outside urban areas, we're going to go with a much slightly larger box. And the few we've opened this year, we're very happy with. So, so far, so good. The top metric we're focused on is sales. And so far, when we look at the sales of these stores, we're happy.

Okay. With respect to industry square footage growth, your materials indicated that it was up. Do you have a sense of how quickly Loblaw is growing versus the industry? Are you all in line? Or are you going a little bit quicker in terms of...

Just a little bit, like we said 2% over the last 12 months. In food, it's less than 2%. So -- but we've been playing catch-up. And I was actually looking at this figure this week, like our square footage share in Canada is not yet back to the level that we were in 2019. So we've been playing a bit of catch-up. We're going to catch up to that next year. So for us, it's pretty sensible. And so far, we feel good about all the stores we've opened. And as long as that continues, we'll keep going.

And many of the new stores we're opening, they are about 10,000, 15,000, 17,000 square foot where previously we might have opened them at 40,000, 50,000. So yes, we are opening more, but less square foot and of course, also less sales. So that's also a big difference. So don't only look at the -- and I know that you don't at the numbers.

With respect to e-commerce growth, still very strong. And obviously, we're putting CapEx dollars in new stores. Do you anticipate the e-commerce growth to taper at some point? Or do you anticipate this accelerated growth in e-com to continue for several years?

I think your guess is as good as mine. But if I can just look at other countries, I think that probably that's the best measurement of guessing where it's going to land. I think overall in Canada, penetration of e-com in food, it's about 4%, above that number. We are higher than that. Would it end up being 8% or 10%, I don't know. In the U.K. right now, after many years where everyone they really went for online food, it's about 11%. In Germany and France, it stays about 4%, 5%. So U.S., I'm not aware of the number. So we predict that growth level of whatever, 15% as an industry over the next few years.

And at some point, yes, it is going to take off because so many customers, they want to do both. They also want to go down. They want to touch their produce. They want to look at what they buy. They want to get the experience going to stores. So I think 7, 8 years ago, I think we all in our industry thought that there was no need to build new stores, but there definitely is because customers, they want to shop and many customers, they are not good at planning, and you also need to be good at planning to shop online.

And one thing I would add, Vishal, is a phenomenon that's definitely affecting the top line growth of everybody is the advent of the new gig players, like all the gig players are filling up their channels, whether it's Uber, Instacart, SkipTheDishes. So as everybody sort of fills up their channel, it's going to lead to higher growth. Once that's all filled, like I think you're going to get to a more normal growth. We don't know what that number is yet. We'll figure it out probably 2 years from now.

Your next question comes from Chris Li of Desjardins.

It sounds like there's a lot of interesting and exciting developments within your Advanced Media business. If I heard you correctly, I think you're targeting like $100 million of EBIT next year. I'm just wondering, are you able to share what is the level right now in this year in the Advanced Media business?

Yes, it's lower than $100 million.

How much lower...

We said we would mention it when it reaches that number.

Yes. I think...

So it starts with a 9, okay? And that's all I'll say.

I think over time, also the STRATACACHE deal will help us generate more and more income there. But that's going to be rolled out over the next year. So all the screens in all our stores.

Okay. Okay. That's helpful. And then just you mentioned about Ozempic and Wegovy becoming generic. I guess it's no secret like we're hearing in the media reports that there has been some delays from Health Canada in terms of approving the applications by the generic drug manufacturers. Are you guys seeing that as well? And do you have a sense of like when generic will be available on the shelves?

Yes. We've heard the same thing as you. We know they're coming. Maybe not early '26, but maybe mid-2026. So that's all we know. We know as much as you do probably.

We agree either way. And what we think about is our customers. So when it goes generic, it's going to be so much cheaper for many, many customers. And so many customers now they will have access to that drug, which is good for us, good for customers and good for health care in Canada. So we hope it comes sooner than later.

And then when you mentioned earlier that, obviously, you get the lift in volumes, which makes a lot of sense. Is that good in terms of more dollars from volume, is that good for the top line as well as the bottom line?

Yes. So that's still to be seen. So our prediction would be that we're going to see -- so even though that it's going to be significant cheaper, then we will sell more. So that's the best guess. So right now, the best guess would be that we will still have a good top line growth. And then on the dollar, we'll be fine.

Got it. Okay. And then my other question, just maybe on the supply chain. On the East Gwillimbury DC, is it still on track to be fully ramped up by middle of next year? And I know it's a bit of -- it's an earnings drag right now for you. But as the ramp is complete, is it fair to assume that, that headwind will turn into a tailwind for you in the back half of the year?

Yes, mid-'26, like the ambient section, which is the last section that we've opened, we started fulfilling orders a few weeks ago. So as I said in my remarks, we're a full quarter ahead of ramp-up. So by mid-2026, we should be well on our way, and we should start to get benefits from East Gwillimbury for sure.

And I'm surprised at how much progress we've done at Caledon. Like let's not forget, we started construction on that one in January. Steel is up. We're going to be finishing erecting steel by the end of winter, and it's going to be fully included, I think, by the summer. So that's also progressing well and on plan. And that one will open in '28.

Got it. Okay. And my last question is just maybe on T&T. Obviously, you guys are planning to convert that Loblaw at Empress Walk in North York to a T&T, which I think makes a lot of sense given the demographics there. And I guess my question is, as you look to potentially double the footprint of T&T in Canada over the longer term, do you expect store conversion to play a bigger role than in the past in terms of how you're opening up new T&T's?

No, I think there's the [indiscernible] store that could become T&T and Empress Walk is one. I think most of the growth will come from greenfield sites.

Yes. So overall, I think that's the same for all across our network. We have not planned for a lot of conversions. There might be a few here and there that makes sense. But overall, that's not a big part of our strategy.

[Operator Instructions] Your next question is from Etienne Ricard, please from BMO Capital Markets.

So revenue growth from new stores continues to accelerate. Given that openings appear to be weighted to the second half of this year, should we expect this growth to accelerate further over the next few quarters?

Good question. So what I'll say is if you look at the 2-year stacked growth of absolute revenue for Q3, which is 6.1%, which is like 4.6% plus 1.5%. We expect that the 2-year stack growth of revenue for Q4 will be in line with the 2-year stack growth of Q3, which will answer your questions because it reflects the timing of new stores.

Yes. And we opened a lot of new stores last quarter last year.

It's mostly in [indiscernible]. We opened a lot of new stores in Q4 last year. We're opening a lot of new stores in Q4 this year. So that's going to be the best guide because you can see -- you'll see if you go back that in Q3 of last year, our absolute sales were up 1.5%. And in Q4, they were up 2.9%. So because of new stores. So you're going to see a similar phenomenon in Q4. Hope that's helpful.

Yes. That's helpful. And as you continue to open the new small format NoFrills, I'm curious, are these stores giving you new read-throughs or maybe customer data that would be additive to the Retail Media business?

That mean more of the same, like one more box with one more stream of data with one more opportunity to put screens. So the answer is yes, but it's -- it would be probably similar type data that we get in any of our Hard Discount stores across the country.

Yes. So we have so much data already now that we're working and utilizing even better, and our team is doing an incredibly good job of doing exactly that.

There are no further questions at this time. I will now turn the call back over to Roy MacDonald. Please continue.

Thanks, Danny, and thank you, everybody, for your time this morning. If you've got any follow-up questions, drop me a line. And mark your calendar for Wednesday, the 25th of February, when we will be reporting our Q4 and full year '25 results. Have a great day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Loblaws Inc. Second Quarter 2025 Results. [Operator Instructions] This call is being recorded on Thursday, July 24, 2025. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead.

Great. Thank you very much, Sal, and good morning, everybody. Welcome to the Loblaw Companies Limited Second Quarter 2025 Results Call. As usual, I'm joined here this morning by Per Bank, our President and Chief Executive Officer; and by Richard Dufresne, our Chief Financial Officer.

And before I begin the call, I'll 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 filed with the Canadian securities regulator. Any forward-looking statements speak only as of the date they're 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 and other materials filed with the Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measures. And with that, I'll turn the call over to Richard.

Thank you, Roy, and good morning, everyone. I'm pleased to report that we continue to deliver consistent financial and operational performance in the second quarter with strong revenue growth fueling solid performance against our plan. Our ongoing focus on delivering value, quality, service and convenience to Canadians continues to resonate with customers and has resulted in strong market share performance across our businesses. Top line growth is a theme this quarter and is becoming the norm as we open new stores.

On a consolidated basis, revenue growth was 5.2% and reaching $14.5 billion, an increase of $725 million over last year. If we exclude the divestiture of our worldwide stores last quarter, revenue growth would have been even higher at 5.4%. Our new stores are performing well and are reaffirming our strategy. Adjusted EBITDA increased by 7.4% to $1.8 billion.

Adjusted diluted earnings per share grew by 11.6% to $2.40. And on a GAAP basis, our net earnings per share increased by 60%. You will notice that we have now completed the bulk of the amortization related to our 2014 acquisition of Shoppers Drug Mart. Completing the amortization was a significant driver of $106 million benefit to GAAP earnings in Q2. Going forward, GAAP earnings growth will be positively impacted by these lower charges through Q1 of next year.

In Food Retail, we did deliver higher sales tonnage and basket growth, driving significant tonnage market share gains. Absolute sales outpaced same-store sales by 230 basis points at 5.8%, reflecting our new store growth while our food same-store sales momentum continues, increasing 3.5%.

Our Q2 internal CPI like food inflation was lower than Canada's grocery CPI of 3.3%. Looking at our average article price data, which reflects the full basket mix bought by our customers across our network, our internal inflation rate continues to be much lower than CPI. Opening more discount stores is helping to maintain low prices for Canadians.

Higher-than-normal cost increase requests from larger global vendors continue to be a concern. Only 1/3 of the supplier cost submission we have received over the last months have been tariff related. In response, we are pushing back harder than ever to ensure that any increases we accept are fair and reasonable and are partnering with our vendor community to mitigate price increases.

Our hard discount banner sales continued to deliver strong growth based on the ongoing consumer focus on value. We are seeing strong momentum across the higher discount stores we added to our network through conversions and new builds last year, and our recent openings in 2025 are continuing this trend. Many more are coming over the coming months.

We're also pleased with the momentum and strong performance in our conventional stores, which also grew tonnage market share within their sector. South of the border, our Seattle TNT store remains strong with sales volume that have significantly outpaced our expectations. Our next store opens in November. We now have a total of six confirmed location in the U.S. and more are planned.

In drug retail, absolute sales increased 4.8%, excluding the impact of the sale of Worldwide while same-store sales grew 4.1%. The Pharmacy and Healthcare services grew same-store sales by 6.2% this quarter, driven by broad strength in prescription and new health care services. Our specialty prescription growth continued to lead our pharmacy numbers. Patients continue to respond very positively to the convenience and expanded level of primary care we offer to our 1,800 pharmacies across the country, including our 174 in-store clinics.

Our front store same-store sales continued to improve, growing 1.7% and reflecting the ongoing strength of our beauty category. This was partially offset by the previous exit of certain items in the electronics category. We remain pleased by the underlying strength, profitability and sales momentum of Shoppers Drug Marts front store business.

Online sales in the quarter increased by 17.5% across our retail businesses. Delivery continues to lead growth in the online grocery channel, and we remain pleased with our online sales penetration in both food and pharmacy. Our retail gross margin was stable at 32%, primarily driven by improvements in shrink offset by changes in sales mix. I'm particularly pleased with the shrink improvement at Shoppers Drug Mart.

Our SG&A rate as a percentage of sales improved by 10 basis points, with operating leverage from higher sales, partially offset by incremental costs related to the opening of new stores and the ramp-up of our new automated distribution facility in East Wallenberg.

The transition to our new DC is progressing very well and is ahead of plan. We have completed the deployment of frozen categories and the first phase of Fresh. Our ramp-up of this new DC is proceeding better than planned. We will ship significantly more cases than planned this year, and our costs are actually running lower than budgeted.

Because of this faster ramp up, we have made the decision to bring our ambient section online a full quarter ahead of plan, which will allow us to realize benefits earlier than expected.

Speaking of supply chain logistics, I would like to share an example of the significant progress we've achieved in integrating AI solutions into our everyday supply chain operations. AI-driven initiatives are already yielding tangible improvements across key areas of our business. We are streamlining our supply chain operations using AI-enabled tools that help us proactively manage inventory replenishment with vendors, optimize load building and manage our transport scheduling and communication.

Another AI initiative that I'm really excited about is currently being rolled out across our store network. Nicknamed Robin, we are leveraging agenetic AI in a custom-built tool to save time and enhance decision-making in our stores, using conversational action-focused insights based on real-time data. Robin provides a dashboard of KPIs, presents AI-generated insights and recommend solutions then tracks and execute to do list. Managers will spend less time on back-end logistics and more time with their customers and staff while improving store level profitability.

The success of this initiative has spawned a second version of the app that is now being tested with district managers to help them better manage their store networks.

By the way, the speed at which we are developing and launching these new initiatives is impressive. These developments are actively driving efficiencies, which will translate directly into cost savings to date and the open opportunities for future applications.

In the quarter, retail adjusted EBITDA grew 6.7% and EBITDA margin increased by 10 basis points to 12.2%. PC Financial's revenue increased 2.7%, driven by higher sales in our mobile shop and higher insurance commission income. Our PC money spending and savings accounts are performing very well. Deposits are ahead of plan and now exceeds $700 million, enhancing customer engagement and lowering our bank's funding costs.

The bank's adjusted earnings before tax increased by $14 million or [ 87.5%, ] primarily driven by higher revenue, lower operating costs and lower credit card receivable charge-offs. We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our provisioning with a strong and well, very well-capitalized balance sheet.

On a consolidated basis, adjusted EBITDA increased by 7.4% to $1.8 billion. Free cash flow from the retail segment increased by $165 million to $640 million. And in the quarter, we repurchased $445 million worth of common share.

Our balance sheet remains strong, and we continue to improve key return metrics. Our return on equity sits at 24.7% and our return on capital at 11.9%. Both metrics continue to improve. Looking ahead to the second half of the year, we remain confident in our ability to deliver our outlook.

Our third quarter is off to a good start, carrying on the momentum from the first half of the year. New stores will continue to drive top line growth, and the second half of the year will see the bulk of our new store activity. Our relentless focus on retail excellence and on the execution of our strategic initiatives will allow us to keep delivering value to our customers and strong performance to our shareholders.

Today, we announced a 4-for-1 stock split effective at market close on August 18, 2025, and with shareholders of record at close of business on August 14, 2025, receiving three additional shares for each common share held. Essentially, our number of shares will be multiplied by 4 post-split. I will now turn the call over to Darren.

Thanks, Richard, and good morning, everyone. So I'm really pleased with our second quarter performance. Our very strong revenue growth reflects both our continued momentum in same-store sales performance and the absolute growth, and that's driven by our strategic investments in new stores and banner conversions. This top line growth will help accelerate future same-store sales and support our long-term earnings growth.

And our adjusted EPS growth of 11.6% was accomplished while we supported the opening and ramp-up of 61 new stores since quarter 2 last year, plus the ongoing transition to our new 1 million square foot DC in East Grittinbury. Most importantly, our offers are resonating so well with more Canadians every single day.

We remain focused on helping Canadians get the most of their budgets in a challenging economic environment. Our responsibility is to deliver value, quality, service and convenience and course every corner of our business. Whether that's through competitive pricing, meaningful promotions or personalized rewards to our PC Optimum program.

By being responsive to customer needs and innovating across our banners, we are reinforcing our position as a trusted partner for households across the country. As a result, more Canadians are shopping in our stores, Actually, traffic is up, unit sales are up and basket growth was positive in the quarter. This drove tonnage market share gains overall. And both our hard discount and supermarket banners grew market shares within their market segments. This success reflects not only on the strength of our strategy, but also the incredible work of our teams from coast to coast.

Another highlight this quarter is continued success of our new stores. This quarter, we opened another 10 new stores. That was nine new Maxi and No Frills stores and one Shoppers drug mart store. We have now opened 20 out of our planned 80 new stores for the year, and we are really pleased with the performance out of the gate, and we are excited about our continued sales growth momentum.

The global shift towards discount retail is a long-term trend, and we are leading it here in Canada. In May, we celebrated the opening of our 500th hard discount store with the community of Pincher Creek in Alberta. By expanding our reach into communities where affordability matters most, we are meeting customers where they are and delivering exactly what they need.

Our supermarket banners also had a strong quarter. Fortinos and TNT continued to perform very well, but our real Canadian superstores led with very strong comps growth in quarter 2. We rolled out our right-hand side refresh in three more superstores, and we remain pleased with customer reactions and our ability to transfer these earnings to our general merchandise offers in our smaller stores as well. We continued our leadership in supporting Canadian products and vendors. We have doubled down on our efforts and have onboard another 100 new Canadian vendors, adding 130 new Canadian vendors into our ecosystem, this year do strengthen our local supply chain and brings even more choice to ourselves, further strengthening our base of Canadian suppliers, that remains so important to us.

There's some misconception that the tariffs are no longer a factor in grocery. Nothing could actually be further from the truth. The retail is -- sorry, the reality is that the tariff countermeasures remain in place and about 1/3 of all supplier cost submissions have been tariff related. We continue to do our best to help customers navigate the impact of tariffs, including our T symbol program. This initiative unique to us, identifies the important items that are directly subject to retaliatory tariffs with a T symbol on shelf.

It has been successful on several levels as intended, it has helped our customers by clearly identifying tariff items supporting Canada and saving money. Behind the scenes, it has also incentive suppliers to mitigate the tariff impact to avoid the T label designations. Sales volume on T items declined in the quarter. The trend is accelerating, we are now seeing weeks with a declining by more than 15%. Our data shows that Canadians are responding positively to these initiatives.

Shifting gears. So in our drug business, we delivered continued positive momentum in our front store. Our prestige cosmetics continue to be very strong, supported by fragrance and derm categories.

In pharmacy and health care services, our specialty drop and new prescribing services categories are delivering strong double-digit growth, showing continued strength in acute and chronic scripts. We have opened 23 new pharmacy electronics this year, and we remain on track to have 250 clinics providing expanded scope of care services to Canadians by year end.

Our digital business continued to generate double-digit growth, driven by continued strength in our PCX delivery channel. And I'm happy to see our weekly engaged user growth continue to be strong and customers are spending more time in the app. In digital, our focus remains on enhancing optionality and convenience across our business.

In the quarter, we strengthened our collaboration with DoorDash allowing customers to now earn PCO points. Innovation remains core to how we improve operations. We reduce costs and enhance the customer experience at Loblaws. Our enhanced MyShop functions within the PC Express is just another great example. Improving our customer experience means personalization is increasingly important.

We're using advanced AI models to analyze each customer's behavior and preferences and deliver the right products, content and promotions at the right time on an individual level. For example, our PCO app and websites are increasingly being powered by algorithms that present customized deals product recommendations and contain unique to each service need. We have even now like meal suggestion based on customers' dietary profile and purchase history. With relevant ingredients also added to the card. We're excited about the opportunities ahead. These innovations represent an exciting step forward in how technology can transform how we work and how efficiently and effectively we serve Canadians.

In closing, I would like to thank all members of the Loblaw team for their tremendous effort during this quarter. your passion, hard work is what allows us to consistently deliver the value quality and service at the Canadian they rely on every day. So as Richard mentioned, our third quarter is off to a good start. And we entered the second half of the year with confidence in our strategy and in our ability to deliver our -- on our full year plan. With that said, I will now open the floor for your questions. Thank you so much.

[Operator Instructions] Your first question comes from Irene Nattel with RBC Capital Markets.

Thank you, and good morning, everyone. It looks as though the momentum is in the top line is continuing to accelerate. And I was wondering if you could talk about what you're seeing across the banners in terms of magnitude. And also to what degree is the step-up both in same-store sales and revenue growth due to the new stores versus the rest of the network?

If I can start. So the new stores, we just started to ramp up. So I believe you will see more in the future more and more this year, more next year, more and more the following year. So it's not a significant part, but of course, it's contributing as we are adding more stores. Remember, we added 50 new stores last year. We're adding 80 new stores this year. And the second year comp of new stores are doing a really, really good job for us.

But so far, that's not the main. The main part is that we are we are doing well and customers, they like the offer that we're giving them. And that goes, as I mentioned, there's the Canadian Superstore doing really well for us. Our hard discount both on a comp level and on an absolute level is doing well. TNT, as Richard mentioned, the U.S. store, it's just a success story. We are taking so much sales and much more than we expected. So bluntly, basically, it's not just one part of our group in quarter 2. Everything delivered some nice sales momentum for us.

Yes, I agree. Nothing to add there, Irene.

And then just as a follow-up. Given the strong momentum that you're having year-to-date, can you walk us through why you chose not to revise upward your guidance for the year?

Yes, Irene, I guess two points, I guess. First, it's early, okay? It's early in the year to upgrade our guidance. And also, there's still a lot of uncertainty out there. So we thought it'd be more prudent to wait. So we'll update guidance when we release Q3.

Your next question comes from Mark Carden with UBS.

I wanted to just start out with the broader health of the consumer, just what you're seeing on that front, any shifts in buying patterns or trade across categories? And then just related to any changes you guys are seeing in the underlying competitive environment just from a pricing standpoint?

Thanks for the question, and I think that's more relevant than ever. So we're seeing more of the same compared to the past quarter. Customers, they are increasingly seeking values and value they can get that in many ways. Of course, our hard discount stores, they are doing well, and they're still leading and doing better compared to the rest of the portfolio. So their comp sales is better, and that's also what we are seeing here in the beginning of quarter 3. But also the rest of our portfolio is doing well. So customers, they are increasingly seeking to buy more promotions, buy more in the private label. And then, of course, they're also shifting.

I think probably a good way to look at it on our key products. So customers, they probably like a lot of their brands coming from the U.S. But now that we are seeing that in some weeks, more than 15% decline in volume for those products means that price matters to our customers, so they're shifting into other categories. So they're looking out for value more than we have ever seen. So I'm not varied. I think customers they are acting and acting in a good way. They are not trading a lot down, but it's probably much more the same as we have seen before and what we just say, there are some macro uncertainty out there. There are some uncertainty with tariffs, but it's not -- probably we are one of the businesses that are least impacted by that. Do you have anything to add?

Yes. And the only thing I would add is, like if you look at credit card industry data, you would note that the spend -- the growth in spend in Canada slowed quite significantly. And we have our own credit card data that also corroborates that information. So clearly, customers are more as attempt to spend and so that's been reflected in the growth we're seeing in our discount stores.

That's great color. And then your superstores contributed nicely to sales in the quarter. Would you say this is a broader reflection on just consumer behavior overall or more specific to some of your assortment changes how are you thinking about the balance of that just essentially the contribution for the balance of the year? And then would you expect it to remain an outsize contributor to your growth rate?

No, I think we are possibly surprised. And remember, the superstore business is 1/4 of our total business at Loblaw. So that's meaningful for us. But what the team under the leadership of Frank Gambioli have done, how they have been more close to the customers, how they are starting to do things on the right-hand side. Actually, that delivered another 35 bps plus to the growth. It's helping. Remember, we are really, really focusing on value. We're making small tweaks to the business. And probably, that's some of it, what we are seeing.

I was with the Board yesterday walking our Milton store. And that was the best superstore walk I've ever had. I really, really feel optimistic us after that walk. The store was receiving lots of customers engaging in our deals, we're testing some things like the PCO go where customers can do like the spin and win on certain categories, certain products, which gets them around our entire store. So I think what we do is starting to help in superstore and also elsewhere.

Your next question comes from Michael Van Aelst with TD Cowen.

So just looking at your food revenues, they're up 5.8%. And I think your -- and your same-store sales were up 3.5%. So there's a 2.3% delta there. your square footage growth was only up 1.9%. So is the performance of these new stores better than the average?

It's difficult to say but it's better than the average, but it is doing at least as well as we expected when we are making the business cases for each of them. And of course, the store in the U.S., the TNT store there is also in the mix and contributing well, which is also something we will see when we open the six stores that Richard talked about, and we have planned to add a few more to the test. So yes, they're doing well. One example would be that it's a small store that we opened at Richmond Street downtown Toronto. It's doing twice as much as we expected, and that's only on 8,000, 9,000 square feet. Just showing how much our customers they love the great offers that they can get at a hard discount and customers are looking to get that cheaper offer. So I think overall, yes, it's doing as expected and some stores even much better.

Yes. We're very happy with our 20 new stores open to date, like I just need to mention one too. We've opened a Maxi in -- last week. The store is already doing 50% higher than our planned sales. So definitely, we see discount resonating with customers, and it's showing up in like not insignificant sales growth.

Okay. That helps a lot. And you had an improvement in your OpEx rate despite the ramp-up in your in your store count. As you add another 60 stores in the back half of this year and accelerated, do you see or do you see Loblaw being able to maintain the OpEx rate as it is? Or -- and if so, how would you -- where are the other areas? Or what are the other levers you're pulling on?

Yes. The answer to that is yes. Like we've mentioned that our outlook was to have stability in SG&A rate for the year, and that's what we're seeing despite the ramp-up that's coming over the coming months.

Okay. And what are the some of the offsets, Richard, that -- to help prevent that from going up? With the new strategy.

As we've discussed over the years, like we always put in place plans to be relentless on cost and those plans implemented last year are allowing us to cover the increased costs that we're seeing on new stores and the ramp-up of our new DC.

Yes. And so we have plans in place for next year as well. So cost is a part of our strategy. So remember, our strategy is to grow it with hard discount, to grow with services, to grow with TNT and then really be hard focused on costs. So over time, that cost can be diluted. But of course, opening a bit of new stores and the DC adds a little bit of extra costs, and that's why we're deploying those initiatives.

Yes. Our plan, Mike, as we've discussed, is to showcase stability in gross margin, stability in SG&A rate and have our top line be the driver of earnings. And so that's what you saw in Q1. That's what you saw in Q2, and that's what we see for the rest of the year.

Your next question comes from Tamy Chen with BMO Capital Markets.

I guess I just wanted to revisit the broader consumer dynamic and how you're performing in there. I noticed you're saying your conventional banners have been improving. It doesn't seem to be taking anything away from the momentum in your discount banners. So specifically, I'm wondering about the Buy Canadian dynamic there. How would you characterize that trend now versus Q1, both proper local products but also Canadian retailers.

So Q2 compared to Q1 is a big step up. And when we look at the facts, which is the Nielsen data and compare our sales of Canadian products compared to the rest of the industry. We are several percent points higher, higher than average. And then, of course, it's not for me to judge who are doing better and we're doing worse. But at least, we are doing much better than the industry. So we feel very good on the Buy Canadian sentiment.

One thing I want to add, Tamy, like if you remember, last year, in Q2, we had some weakness in same-store sales, particularly in our conventional business. So we're obviously comping that, and so that is helping our comp in conventional. But despite that, our absolute performance has been better than planned.

Okay. Got it. And my follow-up is, are you seeing any change or any slight uptick in promotional intensity in the industry. I think we have recently seen a bit more price rollbacks by competitors. So just wondering if that's I'm trying to regain some lost tonnage during the whole Buy Canadian.

The promo pen is more or less the same as it has been for some time now. And of course, different players in the industry have different tactics, some do more everyday low price, some do more promotions. But what we do like having a great combination of good shelf price and good promotions. That's what we believe would resonate well with customers. And over the quarter, we have invested more back in self price, and that's why our -- that's also why our margin is stable, and we'll continue to be sharp on our prices. So we can compete both on shelf and on promotions.

Your next question comes from John Zamparo with Scotiabank.

I wanted to move to the drug side, and I wonder if you can address the recent loss of patent protection for Ozempic and Wegovy and what the implications are for Loblaw. And obviously, there's lots of unknowns here. But historically, this has been -- these types of transitions have been positive for EBITDA dollar generation. And I wonder if you're confident that that's the case here as well. And are there any other relevant metrics you could share?

It's a very relevant question. And for us, it's a little bit too early to say because we're in the middle of it, and we are trying now to discover how that's going to play out. We don't know yet. But one thing we know is that this is great news for customers. I think when prices come down, which we believe they will, I think we will have more customers that will be able to utilize this GLP-1 drug, more customers who need it and also more customers who can't afford to stay on it today. So good news for customers. And I believe a good news for us as well.

Okay. Understood. And then sticking with the pharmacy. On the clinics, can we get an update on how these are performing in terms of revenue generation, and you saw a meaningful acceleration in script count in the quarter on a same-store basis. I wonder if you think the clinics are contributing to that and traffic results at Shoppers.

Yes, they are. The clinics they're helping and they're building more scripts than the stores without clinics. And they're also giving a little bit more sales to the entire store, so helping the trips and helping the basket size, but that's minimal. But within the pharmacy care, they are helping, and they are delivering up to the plans that we have. And by the end of the year, we're still planning on adding another, I think, 76. So we will be just over 250 at the end of the year. But it's also worth to remember that in all our 1,800 pharmacies, we are providing primary care. But in the clinic, customers feel more confident that they have more privacy, and they are just doing the job that we expected them to do. So we feel really, really pleased with that, and we will continue building more clinics.

Next question comes from Vishal Shreedhar with National Bank.

With respect to the Buy Canada and anniversarying some of the media comments last year relating to grocers. Are you able to isolate the benefit on your comp or give us some sense? And should we expect that benefit, if you agree, there is some on a year-over-year basis to fade as we go through the year?

Very hard to measure, Vishal, like very hard to measure.

Yes, we were up against a little bit of a weaker comp, as we said before in quarter 2, but that's what we can say. And we still have good momentum in quarter 2 or quarter 3.

I think you look on an absolute basis, that's what you should focus on, like we were -- all of our businesses are doing well. So that's what we're really focused on and the noise and comp like is it's a bit noisy, but the business is definitely heading in the right direction here.

Okay. With respect to East Gwillimbury, you said it in the preliminary comments that it was ahead of schedule. So is 40% still the target by end of the year in terms of capacity utilization?

I don't have that number off hand, but the number I do have on hand is like we're going to be shipping over 6 million more cases than planned by year-end based on the trend we're in. And our budgeted costs are going to be down from budget by some millions of dollars. And so -- and just to cite our vendor, Vitran. Vitran has told us that this has been the smoothest and fastest ramp-up that they've seen in any of their facilities globally. So all of that and the way it's ramping up is giving us confidence to launch ambient earlier than expected. And so I suspect, yes, the number you have in your head is definitely going to be higher. But the beauty of this is because like the faster we ramp up, the more -- the faster we realize benefits. So we're excited because that's going to help us in '26 as this facility will be processing and more volume than expected.

Okay. And with respect to the real estate growth and the pressure associated with East Gwillimbury. I know in the past, people have asked about quantifying those pressures and you sidestep those questions. So maybe another way to ask it is, when should we anniversary that pressure and expect the real estate growth to start contributing on a P&L basis, on an earnings basis and the DC pressure to also inflect.

For sure. Once we cycle that, it's definitely going to help because opening 80 stores bring drag, ramping up at DC brings drag. So the drag of that DC will be over sometime next year. The drag from new store will no longer be a drag because we're opening more or less the same number of stores next year. And so that will help. And -- but we'll be opening a new DC in Caledon. We call it Tullamore. We started construction on that one. And so that will create another drag, but that one is later. It's more in '28. So -- but along -- before that, like we're going to start to see the benefits of that.

Your next question comes from Chris Li with Desjardins.

When you said that Q3 was -- is off to a good start. I'm wondering for food retail. Is it fair to say that the comp so far in Q3 similar to Q2? Would that be a fair comment?

Because of the ease that we had versus Q2 of last year, comp in Q3 in food will be slightly lower than what we have in Q2, but still very healthy. And our top line growth will also be very healthy.

Okay. That's helpful. I'm sorry if I missed it earlier, but the right-hand side impact on comp this quarter, was it minimal?

Negligible. Like it's only six stores like mathematically.

But overall, it's 35 bps. So overall, it's not the new 6 stores, but that's the way that we treat and we trade the right-hand side. So we're not just waiting for those new stores. We're also applying new trade mechanics to all of the stores. So if we get some early learnings on, for example, toys, then we try to deploy that to all stores. So that's -- some of that's helping. So we can't wait 3 years or 4 years. until we have finished all 180 superstores. But what I think is very encouraging for us feels more numbers and it still takes some time for us to deploy. But that's how we have managed to take some of the learnings from the first pilots in superstores and bring them back to the Loblaws and the Sears and the YIG stores. And we're seeing some really, really good numbers on the nonfood there in the first two, three stores. Again, early days, but it's good to see.

Yes. Just to be precise, I was referring to like the impact of the new renovation on our six stores. If you look at the normal drag we get from right-hand side, like yes, it's in the 30, 35 basis points. So getting better than last year.

Okay. That's great. And then maybe just a quick follow-up on the earlier discussion around sort of what's driving the tonnage growth in conventional. I remember attending a recent industry conference, and I think it was discussed that there's a lot of sort of blocking and tackling the enhancement you guys remain fresh, multicultural, natural organic foods are all kind of contributing to growth. I was just wondering if you can elaborate a little bit more on sort of what's driving the tonnage growth in conventional beyond the Buy Canadian or sort of the industry factors that were already discussed.

Fresh and multicultural that will be the two drivers. And of course, we're still doing well with our control brand across center of store. But except from that, is actually healthy, and it's all over the piece. It's not one category, but multiculture and fresh special produces. That's one of the areas where we're doing very well.

I get to be precise, Chris, like conventional as a sector is still trending a little bit negative. And -- but our tonnage growth versus our peers is really, really good. And like the absolute tonnage growth is all coming from discount.

Got it. Okay. That's helpful. Maybe just a couple of quick ones on Shoppers. Your beauty category continues to be very strong. And I think you made some investment in technology recently Again, wondering sort of what's driving that growth? And is the bay sort of exiting -- is that having any meaningful impact on that front?

Yes. So our investment technology, I think we're only in a few stores now, and that will help us over time, but it will take a little bit of time. So that's too early to judge. I think the bay we got some benefit last year. And of course, we are going to get some benefit this year as well. And you are right, it is overall the prestige, the harbor, the beauty category that's helping the growth in Shoppers.

Food is also turned in to be positive, but it's a marginal part. So it's been driven by locally the higher-margin categories. And the market in general for Beauty & Prestige it's just a good market to be, and it's growing over and above the food. And customers, it seems like they're not as price sensitive when they are buying fragrances compared when they're buying food. And I normally say that if we are -- if we are $0.10 off a loaf of bread, then customer, they won't forgive us, but they don't discuss frequencies. But that's also because our offers, our redemption offers in shoppers when they can go in and trade point like 30x a point or whatever, then we are the most competitive player in beauty in Canada. So that's resonating really well and continue to do so for our customers.

Over the last few months, Chris, like we've seen slowly building momentum in front store, and that momentum, we're seeing it again in Q3.

Okay. That's great. And my very last question, just maybe a follow-up on the discussion around the GLP drugs becoming generic. Is it fair to say just the gross profit dollars that you are on just generic version of those drugs should be higher than the patent drugs? Is that fair to...

I think it's probably what could happen, but we actually don't know right now because we're still looking at it, we're still negotiating, we've been talking to we don't know whether those players right now, whether they want to lower their prices, and it's something that, of course, we're on top of, but it's too early, too early to tell.

Vishal, I got your number to your question, 40% becomes 60% with advancing the volume in...

[Operator Instructions] Your next question comes from Mark Petrie with CIBC.

I just had one follow-up question actually. Just with regards to the square footage growth outlook. I think I heard Richard say that you expected about 80 stores again next year. Although I think I heard Per earlier in the call say something about accelerating impact, but maybe that was just from the ramp-up on stores the previously opened new stores. So if you could just clarify that. And then any commentary just about the mix of stores in 2026 or just generally going forward? And specifically wondering about discount and the mix of urban versus smaller market stores.

Okay. It's still early days, though, we have not like finalized the full numbers. So I was saying in the zone of, so we'll come back to you later as to the specific of the number of stores for next year. As to the makeup of it, I think it's going to look a lot like this year, like Shoppers or Mart and discount stores. There's going to be a few TNT stores and we might be able to slip one conventional or two in there. But like that should be what you should expect to see in 2026. But we will get back to you in a few quarters.

Yes. And the ramp-up, I was alluding to is just that I think previously when I've been talking is that I expected to see the second year comp sales to be much higher than the normal comp sales. And by measuring the first 60 stores that we have opened in the past year. We see that -- we're seeing that those second year like-for-like, as I call it, they're doing very well. So that was what I was talking about.

Understood. Okay. And then maybe just to clarify, Richard, just with regards to -- or follow up, the performance of this discount -- small format discount stores that you've opened so far. Would that be relatively consistent for those urban markets versus those more rural markets that you've also been opening sourcing?

I would say that the urban source, we are really, really pleased. We haven't really tested rural stores yet. I think we had the first one opening very soon. and there are lots of potential to go into rural, but it takes a little bit longer time to plan, to build because we had many more options downtown, the big cities where we can just go into existing buildings. So it takes more time to test the rural. But I do stay as optimistic as I have been -- when I came here a couple of years ago, ongoing into rural. But we haven't really tested enough yet to let you know.

Yes. Suburban is one where we're asking ourselves questions. So we need to do some more work there. But like definitely urban where every site we can put our hands on we're doing.

Yes. And suburban, we're only asking sells a question how big we're going to build them. not ask a question whether it works or not. So where 10,000 square feet store works well urban and probably also rural, then I think first indication is that we want to build them bigger in the suburban.

Your next question comes from Michael Van Aelst with TD Cowen.

I just want to ask about TNT because it seems like every story you open seems to blow the led off of your expectations. And I know you have, I think, 1 come in this fall and you mentioned six confirmed locations in the U.S. with more plan, but what are the key indicators you're looking for as you open up in the U.S. to make you confident or to give you confidence that this is a banner that can actually be expanded more aggressively throughout the U.S.

Yes. I think we are -- of course, we're looking for absolute sales. And the first store is so good and it's better than far most of the supermarkets in the U.S. to our knowledge. And what we are seeing that really is really, really encouraging. It's our offer in kitchen and bakery. So with our commissary and the way that we have our recipes for TNT. What Tina tells me is that this is a big, big part of sales and much more in the U.S. than in Canada. So that's a big driver of footfall to our stores. So basically, sales and margin, and it's all holding up and actually much better than we expected. So we stay very bullish. But again, it's early days. It's one store only, but we are so happy with the first stores that, as Richard said, we have approved six , and we're going to extend the trial with a few more stores. So we don't lose time ramping up.

Yes. And I think we need to add that the Canadian business is also very healthy. If you were to look at the absolute sales growth of TNT Canada, it's actually our most performing banner on the whole organization. And where we continue to fail miserably is in our ability to forecast the sales of these new stores. We systematically underestimate the sales of all the TNT we've opened so far.

So I guess what I'm trying to figure out, though, is at what point -- like how many success stories you have to have in these U.S. new store openings for you to get confidence that this is actually transferable to other parts of the country.

I think if we have -- if we're seeing the first six works, then it will work everywhere. So we are -- and if you ask Tina Lee, the CEO of TNT's, she's confident already now, but I think we need to see five or six and then we can talk to you about how to plan how to accelerate.

There are no further questions at this time. I will now turn the call over to Roy MacDonald for closing remarks.

Thanks for your time this morning, everybody. Let me know if you have any follow-up questions and put a circle on your calendar for Wednesday, November 12, when we will be releasing our Q3 results. Thanks very much, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.