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.

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 as 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, 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.

Also note, following 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.

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 50 cents, 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 program, 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 measured at the cash register, which was more or less aligned with our same-store sales 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 will 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, Zehrs, 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 continue 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 of 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 cost 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, as it will expand the benefits of our PC Optimum program and offer more ways for Canadians to earn rewards. As previously stated, Loblaw will 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 (low).

Our return on equity sits at 26.8% and our return on capital at 12.4%, reflecting our strong capital allocation discipline, focus 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 where the ramp-up of our East Gwillimbury DC and our investments in T&T US 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. I'm delighted that we're able to achieve this while making significant investments to grow our pharmacy and discount presence, expand our T&T banner into the US, and advance two new technology-enabled distribution centers.

Our performance reflects the 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 what Canadians need and investing where it matters. Our everyday focus remains steadfast on providing quality, value, service, and convenience for 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're 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 investments 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 the key driver of this success, reinforcing their vital role in helping Canadians manage affordability. We are also very pleased with our conventional performance, where our multicultural and prepared food delivered very strong growth.

Our conventional stores gained tonnage and share gains against against their peers. We also achieved strong e-commerce sales growth, led by PC Express 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 healthcare professionals play in in Canadian healthcare. This performance proves the strength of our healthcare 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 expanded Canadians' access to both nutritious food and essential healthcare services.

We opened 5 new hard discount stores and 8 new drugstores, further solidifying our our commitment to being where Canadians need us us most. Our commitment to modernization and was 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.

For everyone living in the GTA area, I hope you're 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 by many 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're continuing to advance our leadership with the 2.0 version coming soon.

Earlier this week, we were proud to announce that we are partnering with with Canadian technology firm, Securiti, 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 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 life's everyday essentials to families from 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. Thank you.

Thanks, Per.

Go ahead, Colby.

Thanks, and good morning, everyone. 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 Q2 today?

Thank you.

Thank you, Irene, and a great question that, of course, we're thinking a lot about. Honestly, what we're seeing right now is more of the same.

We are fighting back on pricing increases from our suppliers. Far, we're not seeing any price increases due to that reason.

Consumers, they're still doing what they did in the last quarter, they're trading down. For example, I just got an example this morning on chicken, where our consumers, they are buying more into the opening price point of chicken and they're buying less of the free-from.

It's a double-digit decline in the free-from and it's up in our opening price point, more growth in chicken. The same for steak.

Consumers are buying less steak, but they're buying more minced beef. They're still buying more on promotion.

We're not worried about the consumer sentiment because we do believe that the offering we have across our entire portfolio actually plays well to the consumer sentiment. More of the same than the last quarter, and it's also proven in that our internal inflation is slower than the external inflation.

The only thing I'd add, Irene, is we saw nothing in Q1, because actually when you look at gas prices, though, it's definitely more in Q2. Q2, we see a slight change, but not material.

As the example that Per mentioned are what we're starting to see now, but the trajectory of our business continues to be going in the same direction.

Thank you.

good morning, everyone. 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? Thanks.

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 continued to do well.

There was some Easter shift that drove a bit of sales, while cough and cold timing, inclement weather, and slower food sales in some regions moderated our performance. That was more of the negative than the positive in the quarter.

I stay very confident on the Shoppers front store performance going forward.

Perfect. Maybe just a follow-up, Per.

I know you mentioned before you've been doing some testing on the new food concept at some of the Shoppers stores. Wondering if you can provide us an update on how those pilots are performing so far.

What we're doing, we're adding about 1,500 100 products into the mix of Shoppers front store where we're doing a relay. What we have done now, we have finished the first three tests.

It's only three, we have agreed to do another 40. I'm sure that by the end of next quarter, we will be able to give you some insight on the 40.

If that goes well, then we're ready to deploy that to a significant number of stores and if it goes well, it will give us an uplift.

Great. Thanks, and all the best.

Thanks.

Hi, this is Matthew Rothway on for Mark Carden. Thank you for taking our questions.

Was hoping you could touch on the drivers of gross margin a little bit. You called out drug retail mix as a headwind.

Could you just detail a little bit more about what the driver was there?

It's actually pretty clear. On food, it was flat, okay?

Very flat, no difference versus last year. On the drug front, it was I guess twofold what we were talking about on front store like cough and cold.

If you remember, we mentioned that cough and cold happened this year in December, whereas last year, it was in January. We didn't get the same margin that we had in front store this year.

That was the other factor to mention.

Great. Very helpful.

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?

That was a one-time thing associated with the way the year ended. There were some costs that actually were booked in Q4 that were not in Q1.

Therefore, that improved our SG&A rate though. The bulk of the benefit came from operating leverage from higher sales.

Great. Thanks so much.

Hi. Good morning.

You talked about the ramp-up on the new store growth, and it's been pretty strong for about the last six quarters. We know that there's always that drag particularly in the first year on the new stores, but 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 maybe even positive?

We have built a little bit fewer stores this year than last year, but it's more of the same. Those from last year, they're now in the base, it's not dragging us down further.

Normally, a new store in discount would be profitable within 3, 4, 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 Maxis per year, and about 70 total including the Shoppers Drug Mart.

Where we're looking at what we're doing, and that's why we believe so much in our plan is that we are building in underserved areas. I can take as an example, in the beginning of 2025, we only had one No Frills in Vancouver Island.

At the end of this year, we have four, and we have planned and approved another three, so that will be eight. Another one is when I started in September 2023, I visited Sudbury of all places, with 166,000 inhabitants.

We had zero No Frills there. Today, we have two, and they're doing very, very well.

It's really, really working for us. Financially, Michael, you're right

though. The drag on new stores is no longer a factor.

That's not what's dragging. What's dragging now is essentially the ramp-up of East Gwillimbury, which is going to be completed let's say around Q3, and TNT US.

That's still dragging. What's not yet contributing is, as 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 two from now.

When these new stores start to contribute to earnings, this less drag is going to become a positive. We expect to see that over the next 24 months.

Great. That's what I was looking for.

Thank you. Then just to be clear on the DC side, when do you see that turning from a drag to a positive?

It's going to be a positive in the second half of the year. The drag on EPS though of both TNT US and East Gwillimbury this year in our plan is about 1%.

Slightly more than 1% EPS growth. That will be gone next year.

Then

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

Yeah. In '28, in '27, you're going to get a year of calm, and in '28, you're going to have the same thing we lived with with the first one.

By that time, hopefully our new stores are starting to drive earnings, and the drag of TNT will be behind us. It should be a better position than we are in right now.

Perfect. Thank you.

Thanks for taking my questions. With respect to the buyback, you suggested that some of the $600 million would be used for buyback.

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?

I'd say, Vishal, we haven't landed yet though, but 2.1 is probably as good a number for you to put in your model right now.

Okay. Thank you for that.

With respect to genericization of GLP-1 molecules and the developments that have happened, can you just quantify 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?

It's too early to tell what we know today, two two manufacturers have been approved, and we told you that we thought it would be P8, which is August, that we should be getting supply. That may come a few weeks before, okay?

The truth of the matter is when we release Q2, we'll know a lot, okay? We'll be able to give you more specific guidance.

We'll 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, clearly what's going to happen mathematically is you're going to have an impact on same-store sales, but you also got an impact on margin.

We talked about the drag on gross margin of Shoppers because of sales mix, it's because GLP-1 drugs right now are accelerating, but when the price is going to fall, it's going to go the other way. 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.

I would say this is a really, really good for Canadians because they're getting this drug much, much cheaper. It's about $350 depending on the doses today, and we don't know yet, but maybe the cost going to be a third.

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. Again, as Richard said, we can only be guessing right now, but for sure it's going to increase.

Again, looking forward to informing you more in the next quarter.

Okay. Thank you for that.

Thanks. Good morning.

I just wanted to 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 on the upfront investments. I think you mentioned that with the new format No Frills store.

Just hoping you could potentially quantify any of that. How does that affect the economics and the payback?

It's very simple though. For every dollar that we reduce our construction costs, it just drives up our IRR.

We've been working hard on this, as we've told you in the past. Construction costs are a number that have been moving up a lot over the last 10 years, but 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. Point I want to leave you with is this is a relentless focus on 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 we can just drive more IRRs and allow us to have stores that deliver great return with a lower sales threshold to start with.

Think about it that and when we get the cost down to build, and what we have done, and Richard's team have done that until now, we can get into smaller towns with a catchment areas that's significantly lower than today and still make the same IRR. Meaning that the accessibility to discount stores across the country will increase, and that's just basically solidifying our strategy.

We're very happy, Mark, with all our performance of our new stores. We said we opened a bunch since the beginning of the year, and all of the ones we've opened are doing really well.

For us, we just keep ongoing here.

Yeah. More about expanding the markets that you can get into, as opposed to necessarily improving or materially improving the paybacks.

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?

Without throwing an absolute dollar number, though, I'd say we've been able to reduce construction costs by 30% so far.

To your other question, it's not only about expanding. It's also about improving the IRR where we can get new stores, it's not only going into smaller catchments.

It's also lots of places with a big catchment areas where we can build more discount stores. Again, back to the example of Sudbury.

We only have two stores in a city with 166,000 inhabitants, and there are many, many places similar to that.

Yeah. Understood.

Okay. Appreciate all that.

All the best.

Thank you.

Hi, good morning. This is Emily for Etienne.

Thanks for taking our questions. Just wanting to focus back on any differences between discount and conventional.

We know the discount growth is really driving sales. Are you seeing any different behaviors within each of them, and are you seeing more or less trade-down within discount or conventional?

It's still more of the same, and we are positive both in our conventional business and in our discount business. Our discount business comps is significantly higher than the conventional business, but still it's not accelerating.

Customers, they're staying cautious. As I said before, maybe it's more conventional into price points for chicken, etc., free-from, the organic berries might see a decline, and then the conventional berries is increasing.

It is buying more on promotion. It's kind of the same mechanic that our customers are using, but we're not seeing it's increasing.

It is more of the same.

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.

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 results that you're seeing today.

Okay. Just to follow up, how would you 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. No notable differences.

Thank you.

Thank you. Good morning.

I wanted to come back to the GLP-1 side of the business, and I believe you said you're seeing this accelerate and 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 anything you can say about why you think 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're growing by 40%, but we don't have the same Nielsen data as we have on food, we can say something with the exact knowledge, but we're seeing a significant gain in GLP-1.

Not gain, but growth in sales.

I don't know why, to be honest with you. We were surprised when we saw the acceleration in growth in Q1.

As you said, we're not even generic yet, so.

Yeah. Okay.

Understood. Then back to the state of the consumer, and in particular, trade-down metrics, 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?

Yeah. 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 on No Name. We're doing well there, and customers, they like it.

It's a good alternative to the brands when they want to save money and have better quality.

Thanks very much.

Great. Thanks very much, everybody, for your time this morning.

If you have any follow-up questions, drop me an email or give me a call. Then please mark your calendar for Thursday, July 23, when we will be releasing our Q2 results.

Have a great day.