Empire Company Limited (EMPA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Empire First Quarter 2024 Conference Call. [Operator Instructions] This call is being recorded on Thursday, September 14, 2023. I would now like to turn the conference over to Katie Brine, VP of Investor Relations. Please go ahead.

Thank you, Joanna. Good afternoon, and thank you all for joining us for our first quarter conference call. Today, we will provide summary comments on our results, and then open the call for questions. The call is being recorded, and the audio recording will be available on the company's website at empireco.ca. There is a short summary document outlining the points of our quarter available on our website. Joining me on the call this afternoon are Michael Medline, President and Chief Executive Officer; Matt Reindel, Chief Financial Officer; Pierre St-Laurent, Chief Operating Officer; and Doug Nathanson, Chief Development Officer and General Counsel. Today's discussion includes forward-looking statements. We caution that such statements are based on management's assumptions and beliefs, and are not subject to uncertainties and other factors that could cause actual results to differ materially. I'll refer you to our news release and MD&A for more information on these assumptions and factors. I will now turn the call over to Michael Medline.

Good afternoon, everyone. Fiscal '24 is off to a good start. This quarter, we delivered positive top line growth while maintaining strong control over margins. We also advanced our key strategic priorities, including making several executive leadership changes to enable our go-forward plans. Despite the market volatility we continue to face, the strong results delivered in Q1 exemplify our team's ability to consistently execute regardless of the macro environment. I'm going to keep my comments short to the point, as I believe our first quarter results speak for themselves. I'll focus on 3 topics today: our Q1 results and key market trends; an update on our strategic priorities, including the recent leadership changes, Scene+ and Voila; and the release of our Sustainable Business Report. First, our results and market trends. Our sales, excluding fuel, grew 4.8% this quarter with same-store sales of 4.1%. This was supported by stronger top line performance in our Full-Service banners as well as continued double-digit sales growth of our Discount banner. Our internal inflation was well below CPI, reaching the lowest rate we've seen in 17 months. We have positive indications this trend will continue. For example, in non-fresh categories, we implemented approximately 1/3 of the value of cost increases in Q1 versus the prior year. Nonetheless, the reality is that we continue operating in uncertain times with high market volatility, rising interest rates, and inflationary pressures. Customers are continuing to adapt their purchasing behaviors in this environment, including trading down to cheaper alternatives, and buying on promotion. Not surprisingly, in Q1, we saw greater uptake from customers of our flyer and in-store promotions in both our Full-Service and Discount banners. Our team remains focused on providing the best value in offering to customers, including growing our value size offering, increasing the number of products with Scene+ member pricing, and expanding our own brand assortment this quarter, which continued to outpace the market with double-digit growth. This quarter, we improved gross margin by 19 basis points, highlighting the discipline of our team while driving top line growth. With our solid sales performance and margin control, we delivered a 40 basis point increase in adjusted EBITDA margin, and an adjusted EPS of $0.78 in Q1. I'll move now to an update on our strategic priorities. With our turnaround era complete, we began fiscal 2024 focused on ensuring we are set up to deliver against our renewed strategic priorities. As part of this effort, we made several executive leadership changes in Q1. We placed a number of talented leaders into key new roles. This team will play a pivotal role in helping drive the next phase of Empire's growth as we enhance our stores' first focus. An update on another key strategic priority, Scene+. Just over 1 year ago, we launched Scene+ in Atlantic, Canada, and at the time, the program had approximately 10 million members. Today, we have successfully completed our national rollout and Scene+ has grown to over 14 million members. We have seen our active loyalty members' increase over 30% this year, and program awareness and affinity continue to grow. Through this partnership, Scene+ has become the second largest loyalty program in Canada and is not done yet. In August, Scene+ welcomed Home Hardware to the program. On to Voila. This quarter, we successfully launched our CFC3 in Calgary and seamlessly integrated Grocery Gateway into Voila. We are pleased to now be offering Sobeys, Farm Boy and Longo's products across Ontario. Grocery Gateway customers have quickly embraced Voila with strong repeat order rates, and customer conversions exceeding targets. We continue to see strong customer retention rates and order frequency across all of our CFCs, which helped contribute to our CFC's gaining national market share this quarter. Moving to my last topic. In July, we released our third annual sustainability -- sorry, Sustainable Business Report. We are the first grocer in Canada to have our Scope 1 and 2 near-term climate targets validated through the Science Based Targets initiative. As part of our commitment to continuous improvement and transparency, we also published our inaugural Taskforce on Climate-Related Financial Disclosures-aligned report. And with that, over to Matt.

Thank you, Michael. Good afternoon, everyone. I'm also going to keep my comments short before we open up to your questions. Frankly, our adjusted results are very straightforward, driven by a quarter of strong, consistent execution. We're happy with our Q1 results with an adjusted EPS of $0.77, which is $0.07 higher than last year. But before we talk about our performance, let me walk you through the items we excluded from our adjusted results as they were significant in Q1 and affected operating income, EBITDA, net income, and earnings per share. Firstly, we excluded the gain from the sale of our Western fuel business, which was completed on July 30. This transaction resulted in a pre-tax gain of $91 million, which is reported in other income. After taxes, the gain was $71.5 million or $0.28 of earnings per share. Secondly, we excluded expenses associated with our continuing plan to optimize our organization and improve efficiencies. In Q4 last year, we started with the merger of Grocery Gateway into Voila. In Q1, we began looking at our organization, and throughout fiscal '24, we will be incurring costs associated with these plans. In Q1, we incurred costs of $9.7 million pre-tax. After tax, these costs were $7.1 million or $0.03 of earnings per share. Lastly, we excluded a small amount of cyber insurance recoveries that we received this quarter. The vast majority of our claims are now with our insurers for their review. These are complex claims, and we continue to expect additional recoveries throughout fiscal '24. These 3 adjustments reconcile our reported earnings per share of $1.03 to our adjusted earnings per share of $0.78. Now let's turn to our financial performance for the quarter. We delivered same-store sales of 4.1%, which reflected stronger performance from our Full-Service banners, and continued momentum in Discount. Voila experienced a sales increase of 7.2%, compared to the same period last year. Our gross margin rate, excluding fuel, grew by 19 basis points versus last year. Last quarter, I noted that we were starting to benefit from lower supply chain costs, and these trends continued in Q1, which was a contributor to our gross margin expansion in the quarter. Our SG&A rate was 75 basis points higher than last year by showing an improving trend from Q4. As I detailed before on these calls, the higher SG&A dollar spend was mainly due to planned investments in business expansion such as Farm Boy, Voila and FreshCo. For this quarter also, higher retail labor costs, partially offset by improved leverage from our higher sales. Operating income from the investments, and other operations segment was $6 million lower than last year, as a result of lower equity earnings from Crombie REIT, partially offset by higher development income. And as Michael mentioned, our EBITDA -- adjusted EBITDA margin was 40 basis points higher than last year. Our effective income tax rate was 27.5% in Q1. The Q1 tax rate was higher than the statutory rate, primarily due to the revaluation of tax estimates, not all of which are recurring, partially offset by nontaxable capital items. Excluding any unusual transactions or differential tax rate for property sales, we continue to anticipate the fiscal '24 effective income tax rate will be between 25% and 27%. Our balance sheet remains solid, driven by strong free cash flow generation, and strong discipline on capital spend. We continue to strategically allocate our free cash flow to deliver the largest impact to our business. In Q1, our CapEx totaled $124 million, mainly spent from investments in store renovations, construction of new stores, investments in advanced analytics technology, other technology systems and our Voila CFCs. As of this week, we have repurchased approximately 3.3 million shares for a total consideration of $115 million. And with that, I'll hand the call back to Katie, and we'll open it up to your questions.

Thank you, Matt. Joanna, you may open the line for questions at this time.

[Operator Instructions] First question comes from George Doumet at Scotiabank.

I just wanted to -- can you help us dissect that strong same-store sales number a little bit? How did conventional perform? How much of that was aided by the Scene redemption activity? How much was that was aided by a competitor strike, perhaps temporary closure of some of the locations in Quebec? Maybe if you can just help us get a sense of that sustainability of that number on a go-forward basis?

First of all, thanks for saying that about our quarter, but the person who serves most of the thanks, he's going to answer, which is here, so.

Most of the progress we saw in our same-store sales are coming from continuous strong transaction count in our Full-Service business. So even in Q4 -- as Q4 was good, Q1 continued to be strong, but the biggest improvement is in the basket size. In our Full-Service business, our basket size is back to where it was last year at the same time. So major, major improvement in our Full-Service business. So we continue -- I would like to repeat that we continue to have higher transaction count. And now we are seeing improvement in our basket size. That's the main reason why same-store sales has improved during the quarter. Concerning the strike, it did not touch the quarter at all. So it's in the next quarter.

In next quarter, it's de minimis.

Yes.

We have 1,500 grocery stores, yes. It's not going to be....

Did not affect our Q1 same-store sales level.

And I guess on Scene+ redemption and maybe some [ closed ] locations from another competitor in Quebec?

We continue to do a very strong progress on penetration on Scene. Better than expected, we're above plan. The conversion has been very smooth, honestly, for a [ chain ] that size, very minimal disruption. We added new promotional tools with Scene+. Member pricing is resonating a lot with customer right now, and we're pleased with that, because it gives benefit to our best customers. So we really like the response to our customer with the new Scene+ program so far everywhere in the country. It's consistent across provinces and regions and banner, including Discount, which is new for them.

On Scene specifically, just following up on that. On the press release, you mentioned a next-generation recommendation engine. Can you maybe talk a little bit about what that means, what that can do and [ how ], I guess ultimately, that can translate to higher top line and margins?

Yes, that's the -- I mean, we're only in -- you guys used to ask me sports stuff, you don't ask me anymore. But if there's a baseball game, although my [ Js ] are struggling, this would be the first inning. And we got -- so this is an unbelievably powerful engine we now have in loyalty, which is making a difference, like Pierre said. But what we were referring to, and we shouldn't use so much jargon, I think, in our press release, is personalization. And we are early inning, first inning of a baseball game there in terms of being able to use that. Although it's starting, and we're making some progress, it is such an upside for us as we go forward to be able to use the data, and be able to serve our customers better. But I apologize for kind of -- if that's what we wrote. I had to actually think about it for a second what that meant, so -- but thanks for asking about it.

And just last one from me. I know this is maybe a less fuel question, but on the unlikely event that we maybe see deflation next year, just wondering how our strategy would change, if at all?

Please for Canadian sake let's see inflation stop and little deflation happen. We're so busy combating inflation every day. I'm not sure we have the whole plan on how to deal with the deflation. But I think, Pierre, you've thought about it a little bit when we talked.

We expect the inflation rate continue to go down, especially when we will -- across peaks of last year in inflation. So -- but we continue to see cost increases, not at the same magnitude than last year. Like Michael said in his opening remarks, something around the 1/3 of what we had last year at the same time, but kind of less in number and less in magnitude. So -- and we will cross very high inflation rate last year. So I expect to see a lower inflation rate in the next coming months. So that's what we expect. But businesses and the market is so volatile. Every time there is an announcement, we are seeing customer behavior changing. So we need to stay eyes on the ball and monitor that. We're not trying to predict, but it's very tough to predict. But the trend is in the right direction for us, and we are seeing positive results in our same-store sales and transaction counts.

The next question comes from Irene Nattel at RBC Capital Markets.

Just following up on George's questions. With respect to Scene+, can you explain to us the types of personalized promotions you're offering now, and where you want this to go -- where you want to take this? And then also, what is the current attachment rate or the percentage of your transactions that now have loyalty attached to them?

Yes. I'm going to ask Pierre to answer the first one, but he's going to be very cautious in terms of -- first of all, we don't want to tell competitors what we're doing. But the second one is we're basically already at the same level we were prior to Scene+, already in terms of penetration -- what we call penetration. That's what you're referring to.

Personalization is something that I think everybody can read it in different articles. So we have a better visibility on what our customers are buying or not buying in our network. And we would offer them promotion and product that we believe that will meet their needs. So could vary a lot, depend is it the family, is it a single person. We have a large range of data that we are using now, and we are learning from it, and we already started to do personalization at lower scale. We are piloting a lot of things, and merchandising team, and loyalty team are learning every day, and we continue to see progress on the results we're having with personalization, and it's where we need to go. The market will move from mass promotion to personalization. It's exactly how we should manage it going forward, and we see a lot of potential of switching gradually -- consciously, but gradually from mass to person.

And then just on a different topic. In terms of labor, obviously, we all see what's going on, is, as Canadians try and cope with very high cost of living. Do you have any significant contracts that are coming for renewal this year?

Yes, we have many labor agreements every single year coming due. We just have so many and this grocery industry is highly unionized. So in any given year, we have a lot -- and remember, last year, we unfortunately had the first strike we had in a long time with the Terrebonne facility, and we were able to come to a fair agreement with our teammates and get through it without really impacting customers at all. And so there's a bunch coming up. They'll be in the news, I'm sure, and usually we settled them. We are fair. But as you can guess, we don't take an unreasonable deal.

The next question comes from Mark Petrie at CIBC.

I wanted to just ask about gross margin. And just taking a look at the trends, excluding fuel, you guys have been delivering gains for quite some time, but Q1 moderated from what we saw last year. I assume it's just partly a reflection of the gains already being embedded in the business. But can you just discuss any other drivers? I know you called out efficiencies in supply chain, but any elaboration would be great.

Yes, so it's a very fair observation. During the past 6 years, we've been able to expand our gross margins significantly. But that was Horizon. And now we're at the point now where we have a very strong, sustainable, stable business. So it's not as easy to significantly increase the margin. There's a couple of things to call out. Number one is that most of our gross margin is not going down. And what that tells you, is that all of those initiatives that we've delivered over the past 6 years were sustainable, and continue to deliver that same level of performance. So that's number one, and that's the most important one. Number 2 is, yes, we still continue to expand our gross margins. So 19 basis points for the quarter, some of which was driven by supply chain. And we have other initiatives coming in gross margin. But the days of having those massive increases in gross margin are probably behind us. What we are looking to do now, of course, is to have the right balance between top line sales, and improving the underlying performance of the business, which is reflected in gross margin. So that's kind of what our expectation is moving forward. In addition, what we should see is a mix benefit as our Full-Service business continues to get better and get stronger. So we should get a mix benefit on gross margin, too. Hope that gives you enough color?

Yes, it does. And maybe just further on the sort of topic of mix, and specifically fuel. I don't know if there's anything you can help us with just with regards to the impact of the divestiture in Western Canada in terms of impact on sales, EBITDA or even just margin rates?

Well, it's not going to have a significant impact. It wasn't a big piece of the business. We can give some details offline. But the -- particularly with regard to gross margins, let's not forget the fuels are a very low-margin business. So it will have a small impact on gross margin, but nothing worth calling out.

And then, Pierre, just I guess, on a related question, just with regards to SKU count. Is there anything sort of notable there? Is that relatively stable? Are most of the changes there sort of fully flowed through? And then just from a supplier perspective, any change in terms of product availability or what you're seeing with regards to SKU count or innovation from your supplier partners?

That's a good question, because it's key for us in our Full-Service business, the assortment. And the thing we are seeing over the last couple of months and quarter, it's an improvement from our supplier to bring back the assortment that we're looking for, because it's key for our differentiation, and we're seeing improvement on service level in both, what we call the OTIF in the industry. So supplier are more -- are filling our orders, are more on time. We are seeing improvement in service level. And the SKU count is almost back to where it was pre-pandemic. There's some category where we are still working on, but it's a matter of time that will be back. The thing I'd like to also mention is we continue to expand our assortment in Own Brands. And in the next year, we will expect to expand our assortment in Own Brands because it resonate a lot with customer right now. Own Brand continue to over-perform the market. We continue to deliver solid margin with our Own Brand, and it's another element that contributes to our performance overall on both sales and margin. So we're almost back to pre-pandemic and we will expand our assortment and [ bringing ] forward.

The next question comes from Tamy Chen at BMO Capital Markets.

Pierre, I wanted to go back to the same-store sales. You said that the biggest driver is the basket coming back to essentially the last year level. And I was wondering if you could maybe opine a bit on what's driving that? Because your competitors are saying that discount just continues to be strong, and the trade-down behavior is still very much in play. But clearly, what you're seeing is shoppers to your Full-Service, they're bringing some more of the basket back to there. So what do you think might be driving that? Like what's going on there? Because we seem to be getting a little bit of a mixed messaging on both sides.

That's a good question. We'll continue to see a difference between Discount and Full-Service. So that's true. However, to explain our performance and our Full-Service business, I think I'd like to thank our merchandising team and operations team. They have been very good to showcase the value we can offer to customers in a period like we are dealing with right now. So in terms of promotion, we adjust our promotion. The promo mix is well under control. We are very competitive on our promotion. We are able to manage it through different promotion tools. We are promoting big size, Own Brands promotion. So -- value proportion, I think that it's a combination of many tactics that drive back the basket. So -- and they do magic. It's a little small things that drive this improvement, in my opinion, plus I think customers are adjusting their budget. And again -- I just want to call out that again, our customers remain in our stores. We continue to have strong transaction counts in our Full-Service banners across the country. They did trade down for obvious reasons, but we have been able to showcase the value we can offer outside their normal behaviors and normal purchases. So that's where the improvement is coming from.

So I know you said earlier that promotional penetration is elevated naturally, because the consumer is looking for deals. But how about promotional intensity? How would you characterize that? It sounded like from your answer to my question just now, maybe your intensity has gone up, or are you saying you're not necessarily on an absolute level, promotional intensity has gone up, but rather you're being a bit more finesse and strategic about your promotions in the Full-Service channel?

I don't think -- intensity, I don't see major changes. The thing we know, and the thing we are seeing in customer behavior is -- and it's not a surprise here, but people are looking more for deals. Our job is to offer them good deals. And maybe there are some deals that are less good than other. And I think that team has been able to find the right deal for their needs. And yes, we are seeing more promo penetration, but not more intensity, and the promo penetration is obvious for obvious reasons, as I said. But they have been able to balance all of it, and adjust their promotion plan to the customer needs. That's what I can say, but there is pressure on promo for sure, but not in the intensity, if I may.

The next question comes from Michael Van Aelst at TD Cowen.

Wanted to ask you about Scene+ as well, since you've covered a lot of things that I was going to ask. But now that you've got Scene in Ontario for about 1 year now, and you've got it across different formats, can you provide some insight as to how your customers are shopping multiple banners? And then as the customers look to, or can at least consider go back -- going more back into those conventional banners, what kind of tools or what kind of strategies you might be using to keep them within your own ecosystem?

So now we have the -- so first of all, we introduced Scene+ and Discount banner less than 1 year ago. So it's fairly new. Ontario, it's also new. It's not 1 year. We launched Ontario in November last year. So it's early days, but we know that people are shopping multiple channels, e-com, Full-Service, Discount, Longo's, Farm Boy and now we are seeing -- because we are offering all those brands in Voila. That's the intent. We want to keep customers in our ecosystems of brand. And now we have the tools with Scene+ to measure that, and to behave accordingly. So it's early, but definitely, that's the intention to keep our customers, and our ecosystem of brands.

Remember, we talked about how the -- when we introduced Scene as being the umbrella over kind of the omnichannel experience. So what we want is, as customers shop in each of those different channels, that they're shopping in an Empire channel. And the hook that keeps them there is Scene to having that loyalty program over all of our banners and channels. So I mean, it's early days, but that's obviously what the intention is, and we'll start to make progress in that regard.

And at this point in time, is it too early to see if this -- if the umbrella is keeping them within your ecosystem as they move -- as they start to change banners or segments of the market?

Yes. I don't -- I mean it's so early. I don't want to extrapolate -- I said before, we're really, really happy with the Scene's program, but I don't want to extrapolate from as little history and data as we have. And then I have to come back to you, and tell you it's better or whatever. I think that we obviously have a way better view of our customers than we've ever had before, but I'm not going to pretend we know everything they're doing at all times yet.

You sold your, whatever, 15% or so of your gas stations. I'm wondering what the plans are for the rest of those stations, and are there other assets that you might be looking to divest it, you might consider non-core?

Yes. I mean I think the -- our answer on this is consistently our fuel stations in the West were non-strategic and that they didn't have a big convenience store attached to them. They were literally just a few sites. Our fuel stations in the East have come with a much more refined and substantial convenience store. So it's a much more kind of strategic piece of our business. So right now, we have no plans to divest of that piece of the business. Yes, that's it.

And for other assets?

No, I think we're happy at the moment with our mixed assets.

The next question comes from Vishal Shreedhar at National Bank.

With respect to the customer changes that you indicated or suggested that would happen several quarters ago, they are happening. I think you suggested that when inflation stabilizes, you anticipate your conventional banners to gain some momentum. We're seeing that in the results. I'm wondering if you're seeing the same thing in your e-com business? And if not, maybe what's causing that difference?

I'll talk just generally and then Pierre will talk about the -- Voila reports to him now. Yes, I'd say -- I think we called it pretty well when we came out, what was it, 9 months ago. And we talked about that -- we were saying was, as we had a strong belief as inflation abates, we're going to do much better. I think it was a little tiny bit slower than we would have liked to see for Canadians and for our business. And I'd say that nothing is a straight line, right? It's choppy. The consumers are skittish out there. But the line, the trend, the momentum is exactly what we call a tiny bit slower than they would have liked. And -- but I think that I know Pierre is right to say before, we're not the Commons, we're not the government. Government knows everything. We don't know everything. And -- but I think we called it pretty well right, and we are becoming cautiously optimistic that the consumer is becoming -- is going back to the previous behaviors, and that inflation is going to greatly fall in grocery. I can't call every other industry, but we know grocery okay.

And just on the Voila piece of that?

So Voila itself in the last quarter grew market share. So we're pleased with that. Customer metrics continue to be strong. Summer is traditionally soft, and we are seeing customer back right now because of back-to-school, fall, et cetera. And we added SKUs in our CFC1 with Voila. We just launched the CFC3 in Calgary. So with fall and cold weather and better assortment, and we'll continue on this trend to grow market share with Voila. It's the best infrastructure to go after the e-commerce business, and we continue to believe in it strongly.

And regarding Voila, after the next CFC launches, is that it for substantial infrastructure investments for Voila? And if so, then what would be the next steps to add accelerate to that business so that the sales are where you want them to be?

That's pretty well the last stab at this time. But at the same time, I believe at some point, we're going to -- Voila is going to be booming and it will -- it may justify more investment or we'll fill up CFC1, and we'll need some more. Those are really good problem [ statikers ]. But after Vancouver, that's it. And so that -- the capital is invested, I'd say, 95%, 99% might do a few [ spokes ] here. That's about it. What we would cover -- Katie, what percentage of the population will those [ 4 ] cover now?

90% of the economy.

90%. So -- which is pretty good. [ Four shed ]. 90% of the population. And everything you look at strategically shows that this is going to grow. It's growing slower perhaps over the last couple of years than we would expect it, but I think we're in good shape.

And after that fourth CFC is installed and -- is there a period of time after which the exclusivity date -- And if it is, can you just remind me on how that works?

I have a confidential document. I'm not allowed to share, but I think I can -- you know us well enough that we're -- we like exclusivity for a long, long time. So that's all I'll say.

And last question comes from Chris Li at Desjardins.

Maybe -- I'd just maybe start off with a follow-up question on the basket size getting stronger. Just wondering if there are some categories that are helping that growth? And I know in the past we talked about -- fresh was one category where you saw more trade [ down ] in the beginning, but there's only so much frozen and [ canned ] food that people can eat. So as inflation moderates, is that sort of one category that stands out that you're seeing that basket being stronger?

A good question. I don't have the number in front of me by category. But one thing I can say is where we said the biggest trade down was in fresh categories. So it's where people may -- [ hardly ] cost a cut in. But now we are seeing adjustments and we are seeing fresh sales going up. Again, I think there is something also related to the efficiency of our promotion and the relevancy of our promotion that help bring back fresh sales. So -- but yes, I think because fresh has been more impacted with trade downs, it's fair to assume that part of the progress we made have been in fresh, because non-fresh has remained consistent even in high peak of inflation. While people may trade down, but overall, the non-fresh category remains strong in sales and in tonnage versus non-fresh. So I think it's mostly coming from fresh category where we made progress.

Maybe a related question is, I'm not sure, if you look at your own internal data, are you seeing any notable slowdown in restaurant sales these days as consumers looking obviously to save money? And if that is the case, is that shift benefiting your sales? And is that -- do you think that's one of the reasons that you're seeing stronger same-store sales?

I think it's a fair assumption. People will adjust their budget in getting a value restaurants. Not for everybody. Again, I like working with averages. It's -- every customer have different priorities, and I respect that. But yes, we are seeing good momentum in fresh category like deli, HMR, and people are coming back in our counter, it's a very good options to manage their budget at a low cost when they don't want to do cook-at-home. So -- and we have an amazing assortment of our store in HMR, because of our Full-Service presence across the country. So I think it's a fair assumption that this fall the restaurant business could have some challenges, but we're there to meet customer demands for sure, with our assortment.

And maybe I have a follow-up questions on food inflation. As you know, last week, Kroger in the U.S., noted that the pace of disinflation is occurring at a faster rate than they originally expected. When we look at Canada, at least with that kind of numbers, it seems like inflation is slowing, but it's very moderate. Likewise -- based on your internal data, are you seeing something over the horizon that would suggest that maybe the pace of [ slowing ] inflation can accelerate in the coming months? Are you seeing anything of that [ sorts ] to what Kroger is seeing?

Preface it by saying I'm not an economist, but everything we're seeing is a slowing inflation rate in Canada. We've hit the lowest inflation rate last quarter and in recent periods as we've seen in '17 periods. And we continue to see that trend. I'd say if you look back 1 year, I would have thought it would be lower than this. And I did say in my script that our inflation is quite a bit lower than what's being reported in CPI. So -- and I can only -- I only know us, but that's what we're seeing. So yes, we're -- I guess -- we've been bitten so many times lately that we get a little scared to say anything, but I think we're heading in the right direction.

And then my last question is -- I apologize if you had mentioned this already. Just wondering if you can comment on your same-store sales, how is it trending sort of fiscal Q2 today? Is it similar to what you achieved in Q1?

I think we're not going to talk -- like the quarter we're currently in, it's just a -- I don't think it's the right thing to do.

That's where at least I tried.

Good try, Chris.

There are no further questions. I will turn the call back over to Katie Brine for closing comments.

Great. Thank you, Joanna. We appreciate your continued interest in Empire. If there are any other unanswered questions, please contact me by phone or e-mail. We look forward to having you join us for our second quarter fiscal 2024 conference call on December 14th. Talk soon.

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