Empire Company Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tamy Chen - BMO Capital Markets - Analyst : Hi. Thanks for the question. So sticking with the top line here, obviously we also see other macro data points that's still painting the consumer as under pressure, no material change. And I'm just wondering, can you talk about, are you finding the customers or shoppers at your banners, like are they skewed a bit more to higher income, and so this cohort starting to feel better and earlier than the average consumer? Were there any differences in the comp in your different regions or certain banners like IGA? Can you talk a bit more in those respects?

Question: Tamy Chen - BMO Capital Markets - Analyst : Okay, got it. I mean, on your last point, I remember a couple of quarters ago you saw some encouraging behavior, but then it appears the consumer retrenched. I get the sense what you're seeing now, yes, it's small, it's gradual, but it sounds like you're quite encouraged that this may be a somewhat, consistent trajectory. Is that fair to say?

Question: Tamy Chen - BMO Capital Markets - Analyst : Okay, got it. And I also wanted to just ask on Scene+, so that number you provided, the 55% more, so is that the same members spend on your banner specifically? And I'm also wondering, I don't know if you can give any update on the penetration of your sales that are on Scene+ and where you might be at in your journey on more and deeper personalization. Thanks.

Question: Tamy Chen - BMO Capital Markets - Analyst : Thank you.

Question: Irene Nattel - RBC Capital Markets - Analyst : Thanks, and good afternoon, everyone. Really appreciate all the color that you're sharing in terms of consumer behavior is quite helpful. I actually had a question. You intrigued me with your commentary on Voila around the work that you're doing. Should we be expecting you to announce some kind of partnerships, perhaps in the non-food area, on the e-commerce side to sort of leverage or trying to understand what you're hinting at?

Question: Irene Nattel - RBC Capital Markets - Analyst : Okay. Fair enough. Understood. Thank you. That's very helpful.

Question: Irene Nattel - RBC Capital Markets - Analyst : Yeah, no, that's a great clarification. Just sort of one last question on consumer behavior. You noted that penetration of promotion is stabilizing. Maybe there's a little bit less on cross-shop. What are you seeing sort of on a category basis with respect to trade down to private label or in the protein categories, that kind of thing? Are you also seeing early green shoots there?

Question: Irene Nattel - RBC Capital Markets - Analyst : That's great news.

Question: Irene Nattel - RBC Capital Markets - Analyst : Absolutely. Thank you.

Question: Chris Li - Desjardins - Analyst : Good afternoon, everyone. Michael, I remember last quarter you mentioned that all it takes is for you guys to have your customers add one or two items more to your basket to kind of make the math work. Are you starting to see that in the quarter?

Question: Chris Li - Desjardins - Analyst : Okay, that's helpful. Thanks, Pierre. And then the question I have is your two-year stack food saver sales for the quarter was quite strong, around 5%. I'm not sure if this is the right way to look at it, but I'm curious, is the two-year stack level, are you still seeing that 5% continuing for quarter to today? Is that a fair statement?

Question: Chris Li - Desjardins - Analyst : Yeah, okay. That's helpful, Matt. Thanks for that. And my last question is, as the consumer sentiment continues to improve, are you seeing a corresponding increase in e-commerce penetration just for the industry as people have more money, they buy more online? Is the pie getting a little bit better for e-commerce?

Question: Chris Li - Desjardins - Analyst : Okay, that's helpful. Because I was asked, because you guys are posting double-digit sales growth, so it seems like it's more market share gains that's helping driving that growth and not so much the market growing, per se.

Question: Chris Li - Desjardins - Analyst : Okay, great. Thanks and all the best.

Question: Michael Van Aelst - TD Cowen - Analyst : Yes, thank you. So I wanted to go back to the gross margin comment that you made. For a few quarters, I think you've said 10 basis points to 20 basis points is the long-term kind of target expansion on an annual basis. But you had some bigger improvements that started in the second half of last year in Q3, Q4, and then we saw it again this quarter. Should we just assume that you've got another quarter of lapping these higher level of gross margin contributions before we start seeing that 10 basis points to 20 basis points more normal run rate kicking in?

Question: Michael Van Aelst - TD Cowen - Analyst : Okay, so that's helpful. -- yeah, that's definitely helpful. So, if we were to take a look at just the big building blocks to get to your 8% to 11%, the operating income growth seems to be at a level that you're comfortable with right now. The gross margin expansion is still solid next quarter, but then let's assume that it falls into that 10% to 20%. Beyond that, I guess you need -- it's the top line that we really need to see to drive the earnings growth if we kind of normalize or flatten out the quarterly differences in the other inequity income, right?

Question: Michael Van Aelst - TD Cowen - Analyst : No, that's great. That's very helpful. Thanks very much.

Question: Vishal Shreedhar - National Bank - Analyst : Hi. I was interested in your comments where you mentioned that your conventional banners are outperforming their peer set and the discount banners are outperforming the peer set, and that is coupled with square footage growth, which is relatively modest. So, is it fair to say that this is happening from organic same-store sales growth versus the industry?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. And with respect to square footage growth looking forward, how should I think about it?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. So for this fiscal year, maybe around the status quo and then expect that to gradually build. That's fair?

Question: Vishal Shreedhar - National Bank - Analyst : Got it. Okay, I appreciate that. And with respect to the type of stores being added or the, is there, you know, Empire has engaged in the past in a discount conversion and notwithstanding management's comments, feeling more confident about the outlook and unconventional, at least with the data that it's seeing now. Can we think about the mix, and is management content with where the mix is at now, recognizing that you made some acquisitions which shifted the mix back more towards conventional?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. And I'm risking bumping up again --

Question: Vishal Shreedhar - National Bank - Analyst : Thank you for that. And the innovation that you were referring to, is that relating to smaller format discount stores or is it to be seen?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. Thank you.

Question: Mark Petrie - CIBC - Analyst : Yeah, thanks. Good afternoon. I just have a few follow-ups. First, maybe on Scene+, is personalization sort of the next leg of opportunity or are there other notable ways you can sort of expand the scope and impact of the program?

Question: Mark Petrie - CIBC - Analyst : Yeah, understood. Okay. And then I just wanted to clarify a couple things that you had said and maybe just get a little bit more color. The slowing increase in promo penetration, is that across banners, like across channels, or is that in sort of concentrated?

Question: Mark Petrie - CIBC - Analyst : Okay. And, Michael, I think it was your opening comment that sort of implied the gap between full service and discount is closing or the relative growth rates. I just wanted to confirm that's what you're seeing. And, again, does that vary across regions at all?

Question: Mark Petrie - CIBC - Analyst : Yeah. Yeah, absolutely. Okay, understood. And then just last, I wanted to ask specifically about Quebec, and just because it's obviously been a dynamic market with regards to square footage actions and conversions from some of your competitors. And, you know, based on your comments so far, I don't think you're observing any notable changes with regards to the competitive environment, but hopefully if you could just confirm that. And then my question is just if you could give us a sense of the nature of your conversations you're having with your franchisees and what kind of feedback you're getting from them and maybe how that's evolved over the last sort of 6 or 12 months. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 5:00PM, EMPa.TO - Q1 2025 Empire Company Ltd Earnings Call

Question: Mark Petrie - CIBC - Analyst : Okay. I really appreciate all the color Pierre. Thanks a lot all the best.