Empire Company Ltd Q4 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, good morning. Thanks for the question. So it sounds like your customers, their behavior has not retrenched or gone back towards trade down. I wanted to ask if the way they're shopping is they're cherry-picking less and going to multiple banners and stores less. I think at one point you alluded to, you saw year over year traffic growth. So I'm wondering how you saw that it is what you're seeing is customers are shopping less at multiple banners. Unidentified Company Representative Very good question. Thank you. So the thing we're seeing is more back to normal behaviors compared to last year. Last year, people shut multiple stores more than usual. And this year, we're seeing back to normal behavior. So that means they're shopping less stores, and this is what we said that it's good for promote nutrition because when people are shopping less banners, the penetration is going down. And it was natural for customers to shut that amount of banners in the past because a inflation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call So we're really seeing a back to normal at behaviors, which is our business. And this is why we're seeing basket size going up. Transactions remains very strong. We continue to see that in the positive unit per basket is increasing. And like Michael said, we are seeing a trade-up compared to last year where people are shopping more fresh, where we're very strong here.

Question: Tamy Chen - BMO Capital Markets - Analyst : And my last question is with respect to the buy Canadian trends, specifically the preference for Canadian retailers. Certainly, that's been going on. But I'm just curious if as the month recently have gone past. Are you seeing that settling out or waning in any way? Thank you.

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

Question: Mark Petrie - CIBC World Markets - Analyst : Yeah, good morning. Thanks. Just a follow-up on the topic of sort of the consumer and competitive environment. I wanted to ask specifically about Quebec again. And any comments about all of the metrics that you were discussing earlier, if that's sort of more accentuated in Quebec or if there's any difference versus the other regions of the country? Unidentified Company Representative No. We're seeing the exact same year in Quebec, but people are shopping less banner, basket size is increasing there's some obviously variation across the country, but very, very little. But we're seeing the exact same trend across the country right now. That's something different in Quebec.

Question: Mark Petrie - CIBC World Markets - Analyst : Yeah. Okay. And I guess sorry, just a follow-up on that. I think previously, you had commented about trying to close the price gaps, specifically in Quebec. And I'm just -- so I'm sort of hearing that you think this is done and this is stable. Is that a fair interpretation? Unidentified Company Representative We are watching a work indexes. So both trigger and active and Quebec remains very, very competitive on both indexes, like every single region in the country. So there's no more gas by region Quebec is a very strong brand. The IG is a very strong diner, a very strong on fresh. So sometimes the perception is different. But the pricing itself, we're addressing pricing thing tackle and we're addressing pricing indexes in every single region. So we're following the same process and our indexes are very competitive compared to peers, and we're pleased with that. We're always focusing on the value proposition. So value is the right term. So we're focusing on value and pricing is one element of the value proposition. Our value proposition in every single banner is very strong. When we talk about assortment, where we are located, close to every community we serve. The service is an important component in the value proposition. So we're very strong in the radical proposition. And again, pricing is one element, but indexes are very strong right now. We're pleased with that. We made progress, gradual progress. We're following what's happening in the market, and we remain very competent. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call

Question: Mark Petrie - CIBC World Markets - Analyst : Yeah, okay. Appreciate all the colors. Thanks for answering the questions.

Question: Michael Van Aelst - TD Cowen - Analyst : Thank you. Just quickly to start on the CapEx side. So your budget, I think, last year was $700 million. You did -- I think it came in at $777 million. And now you're guiding to $850 million for this coming year. What's the incremental spend being allocated to? A few stores? Or is it supply chain or what is it?

Question: Michael Van Aelst - TD Cowen - Analyst : Okay. All right. Thank you. And then just getting back on the discount versus full service commentary. So it's clear that you're saying that full service banners are doing well and doing better. Is it -- are your full-service banners growing faster than your discount banners? Or are you just narrowing that gap? I guess that would be Part A. And then I'll come back to the second part of that. Unidentified Company Representative So the same-store sales growth in our full service banners been extremely strong in the last quarter. We're very pleased with that. We're gaining market share in every single format. So we're pleased with the discount performance. Discount into the discount channel is gaining share. Full service into the full service channels gaining market share, and in total we're gaining market share. So again, we are operating in different regions. We did invest a lot of capital of new stores and new conversion in Western Canada. We're very pleased with the results in Western Canada with the discount, but overall we're seeing the same strong plan in full service. And yes, the GAAP is narrowing and in some region it's the same, we have the same-store sales growth in both discount and full service. So the GAAP is narrowing, full service is performing well, and we're pleased with both channel in their respective channel.

Question: Michael Van Aelst - TD Cowen - Analyst : Yeah. I just thought with their affiliation with seeing that it would be a bit more representative of what you were seeing but -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call

Question: Michael Van Aelst - TD Cowen - Analyst : Okay. And then just finally getting back to your commentary around the LTIP an incremental LTIP costs that were $0.15 a share. And the majority of that seems to be tied to the higher share price. So I mean, if we just did some back-of-the-envelope math and tried to and said, okay, well, $0.10 of that $0.15 is due to the higher share price. And if we use a stable tax rate and stable other income, we'd probably be around 25% EPS growth. So it seems like your momentum is good. But is that -- are you suggesting that like if things continue to perform the way they are this quarter that in the next few quarters, we could still -- we could see that 25% EPS growth.

Question: Michael Van Aelst - TD Cowen - Analyst : Okay. Is there anything in that? Anything that compose that rough 25% that you would consider not necessarily repeatable. Unidentified Company Representative When we have a 3.8% same-store sales, when we grow our margin by 30 bps. When we have good control on cost, it's a volume business. And when growing at that size, this is the type of results we should expect.

Question: Chris Li - Desjardins Capital Markets - Analyst : Oh, good morning, everyone. My first question, maybe just to maybe use a baseball analogy. Just in terms of your reduction in non-theft shrink, what inning roughly do you think you are at on that journey?

Question: Chris Li - Desjardins Capital Markets - Analyst : Yes.

Question: Chris Li - Desjardins Capital Markets - Analyst : Okay. That's helpful, Michael. Thank you. And then just on SG&A expenses, maybe just a high-level question. As we look about fiscal '26, I mean, roughly speaking, is it fair to assume we should think about SG&A expenses growing more or less in line with the revenue growth? Or should we expect that to actually outpace revenue growth a little bit, at least in the near term as you accelerate the new store openings this year?

Question: Chris Li - Desjardins Capital Markets - Analyst : Okay. Got it. Okay, thanks. And maybe my last question, just in terms of your capital allocation framework. It wasn't mentioned in the press release. I wanted to just touch base on where this inorganic or M&A fit in, in terms of your capital allocation philosophy in the future?

Question: Chris Li - Desjardins Capital Markets - Analyst : Okay. Thanks. And Matt, I just want to say, again, best wishes to you and your family and you'll definitely be missed. Unidentified Company Representative Thank you, Chris. Appreciate it.

Question: Vishal Shreedhar - National Bank - Analyst : Hi, thanks for taking my questions. With respect to the CapEx, the $850 million, my understanding was previously that a good long-term number to use was $700 million. Does this $850 million reflects higher building costs or an expectation of higher CapEx in the future, given more opportunities? How should we think about the longer term in terms of modeling?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. And with respect to the buy candid -- with respect to the buy Canada comments that you indicated earlier, where you're saying you're seeing it sticky. Was that with respect to the actual banners, the Canadian banners versus the US grocery banners? Or was that also with respect to the products within the store and the Canadian produced products versus the US produced products?

Question: Vishal Shreedhar - National Bank - Analyst : I see. And so you're not seeing a waning of sentiment with regard to either of those trends?

Question: Vishal Shreedhar - National Bank - Analyst : Okay. And with respect to the shrink that you're seeing in the improvement, is that in part due to the accelerating sales growth and presumably even faster sales growth in fresh, given the comments that you made at the top and less associated spoilage or is that due to more concrete measures that you've implemented in the org to offset that strength? Unidentified Company Representative Both. We're working on initiatives like we did in the previous quarters. But again, when we have higher sales, it's easier to manage in and both are providing better results on shrink. And this is why we look to work initiatives and sales growth, it's easier to manage.

Question: Vishal Shreedhar - National Bank - Analyst : Okay. Thanks very much. Congrats on the quarter. Unidentified Company Representative Thanks, Vishal.

Question: John Zamparo - Scotiabank - Analyst : Thank you very much. Welcome to you Costa, and all the best to you, Matt. I wanted to ask about private label penetration. And based on your disclosure, it seems like this is growing well above the pace of overall sales growth. I wonder if you could talk more about that. Is that primarily from the increase in SKU count? Is it doing better with particular pro SKUs? Any color you can add there would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call Unidentified Company Representative Yeah. We are seeing continuous improvement on penetration. And as I said before, the nutrition is not the only metrics I'm looking for need to be relevant and it's a different strategy category by category, than in some category, private label is playing more important role in some other category left, but it's very important that we have lower retail and it's very important that private label continues to generate better [penny] profits. This is the golden rules we are using on the bank. But the appetite from customers on private label products is growing, and we're pleased because we have a very strong assortment. We did major improvement in our assortment over the last year. So it's a continuous improvement, and it's a continuous improvement in penetration and in all the golden rules I've just mentioned.

Question: John Zamparo - Scotiabank - Analyst : Okay. Thank you for that. And one more on square footage growth. When you think about the entire market, we've seen multiple grocers expand targets on this. I wonder if you could talk about the quality or availability of real estate opportunities that you're seeing. There's obviously, a finite number of sites. I'm wondering, does that mean higher leasing costs? Does it alter the strategy at all of what Empire is looking for in terms of real estate? How is this impacting your real estate strategy?

Question: John Zamparo - Scotiabank - Analyst : Okay. I appreciate the call. I'll leave it there. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call

Question: Mark Petrie - CIBC World Markets - Analyst : Oh sorry, I was struggling with the mute there. I was following up on the square footage growth a little bit further. Could you just give a bit of color with regards to sort of the channels that you might be versus your current penetration, the channels where you might be growing the regions sort of rural urban. Anything, any color you can provide with regards to sort of the mix and how this might skew the portfolio?

Question: Mark Petrie - CIBC World Markets - Analyst : Yeah. Okay. Understood. And then a separate -- I mean, similar topic, I guess, but a separate line of questioning. On Farm Boy, you guys have played around with the store size for that format. And I'm just curious if you're thinking -- how your thinking has evolved over time, if you're still sort of targeting that sort of low, mid-20s kind of are square footage size? Or if you think the larger format is a better fit?

Question: Mark Petrie - CIBC World Markets - Analyst : All right. Appreciate the color. Thanks.

Question: Chris Li - Desjardins Capital Markets - Analyst : Oh, thanks for the follow up. Just on Voila. As you look back at the last fiscal year, how did it perform relative to your internal expectations? Unidentified Company Representative We continue to make improvement in all CFCs and the decision we made to focus on the existing tree is paying off right now. So year over year, edit make progress. We continue to see double-digit growth in Voila. And performance has improved. Very pleased with the progress we've made for the last year, and we will continue to move in this direction. And the new partnership we have with [Hubert and Stockard having no impact on Voila, very different customer profiles, immediately versus plan trip. You were in Sahara] younger crowd. So it's very complementary.

Question: Chris Li - Desjardins Capital Markets - Analyst : Okay. And last one is just -- I know it's been, I guess, a year since you announced the pulse in rolling out in Voila in Vancouver might still be still early to ask, but when do you think you'll make a decision on whether to proceed or not?

Question: Chris Li - Desjardins Capital Markets - Analyst : Okay, great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 19, 2025 / 12:30PM, EMPa.TO - Q4 2025 Empire Company Ltd Earnings Call