Groupe Dynamite Inc. (GRGD) Earnings Call Transcript & Summary

[Audio Gap] [Interpreted] Lachance, Chief Financial Officer; and Christian Roy, Senior Vice President, Legal Affairs and Corporate Secretary. Please note that this meeting is being translated simultaneously, and you may select your preferred language at the right of your screen. Also attending this afternoon's meeting are each of our director nominees, as well as [ Isabel Baradar ] from Deloitte LLP, the corporation's auditors. With the consent of the meeting, I will now hand over the floor to my colleague and Corporate Secretary of the Corporation, Christian Roy, who will guide us through the legal and formal aspects of this meeting.

[Interpreted] Merci, Andrew. Please allow me to briefly explain the format of today's meeting. We will first deal with administrative matters and then proceed with the official business of the meeting, namely, the presentation of the financial statements, the election of directors and the reappointment of the auditor. Once the formal portion of this meeting is concluded, we will hold a management presentation followed by a question period. The agenda of the meeting covers all business to be transacted at the meeting, namely, first of all, to receive our audited consolidated financial statements as at and for the fiscal year ended January 31, 2026, together with the notes thereto and the auditor's report thereon. For further details, please see the presentation of financial statements in our circular dated May 6, 2026. Secondly, to elect the directors of the company for the ensuing year. For further details, please see the election of directors in our circular dated May 6, 2026. And thirdly, to reappoint Deloitte as our independent auditor until the next Annual Meeting of Shareholders and to authorize the Board of Directors to set its remuneration. For further details, please see reappointment of auditor in our circular dated May 6, 2026. I now declare the Annual Meeting of Shareholders of Groupe Dynamite open. In order to expedite the formal portion of this meeting, I will, on behalf of the Chair of the Board, move and second all motions in my capacity as a shareholder of Groupe Dynamite. Unless there are any objections, [ Martin Gati and Teresa DeLuca ] of Computershare, which is the registrar and transfer agent of the Groupe Dynamite, will collectively act as scrutineers for this meeting. We would like to get this meeting to be conducted officially, effectively, and I would ask your cooperation in this regard. Instructions on how to ask questions and the voting procedure will appear on your screens. As with any technology, unexpected glitches may occur, but our service providers for this platform at Lumi are very experienced at running this type of meeting and will help us. Please note that only registered shareholders as of May 1, 2026 on the record date of this meeting or proxy holders who are registered with our transfer agent and who have obtained a control number prior to this meeting may participate, ask questions and vote at the meeting. All other persons may attend the meeting as guests. Registered shareholders and proxy holders who wish to comment with members of our management team in attendance today or who wish to ask any questions may do so by using the Questions tab in the virtual meeting platform. Questions may be submitted in writing during the meeting. Please also indicate to which member of our management team attending today you wish to direct your question. In order to respond to many questions as possible, shareholders and proxy holders are asked to be brief and concise and to address only 1 topic per question. Questions from multiple shareholders on the same topic or that are otherwise related will be grouped, summarized and answered together. We will not respond to questions that have already been answered or that are redundant, repetitive and unrelated to the company's business or to the items on the agenda of the meeting. The company will also not respond to any questions concerning nonpublic information about the company or that are related to personal grievances or that are otherwise offensive to third parties. Today's votes will be conducted by a poll. Each subordinate voting share entitles the holder to 1 vote, and each multiple voting share entitles the holder to 10 votes on each item of business identified in the notice of meeting. Shareholders who have voted in advance of the meeting do not need to complete the ballot or take any further steps to cast their votes unless they wish to change their vote. If you do vote by ballot today at today's meeting, then that will automatically revoke your prior vote or any prior proxy [ guaranteed ]. On behalf of the Board, I would like to wish -- I would like to thank all those shareholders who have submitted their proxies in advance of this meeting and to those in attendance. Today, the final voting results will be released after the meeting in accordance with applicable laws and stock exchange requirements and will be available under our profile on SEDAR+. Mr. Chair, I'd like to advise you that the notice of meeting and the form of proxy were mailed by shareholders on or about May 12, 2026, together with the company's audited consolidated financial statements for fiscal 2025 ended January 31, 2026 and the related management's discussion and analysis to shareholders who requested them. Service of the documents was certified by Computershare. Additional copies of these documents are also available on our website or under our profile on SEDAR+. Therefore, unless there are any objections I will dispense with the reading of the notice of meeting. A copy of the notice of meeting and the proof of service will be appended to the minutes of the meeting. The scrutineers have provided a report on attendance showing that the requisite quorum of shareholders present or represented by proxy has been reached and met according to the meeting -- accordingly, the meeting is duly constituted for the transaction of business. The scrutineer's report on attendance will be appended to the minutes before the meeting. Before proceeding with the meeting and any subsequent discussion about the future of Groupe Dynamite, as Senior Vice President, Legal Affairs and Corporate Secretary, I wish to remind you that some information discussed here today, whether in the context of a presentation or in response to questions may constitute forward-looking information. I therefore ask that you refer to the 2 relevant slides that will appear on your screen. The first item of business is the presentation of the company's consolidated financial statements as presented by Deloitte, the company's auditor for the fiscal year ended January 31, 2026, together with the auditor's report thereon, a copy of which was mailed to each registered or beneficial shareholder who registered. As so, our financial statements are available on the company's website or under our profile on SEDAR+. I now submit for receipt, the audited consolidated financial statements for Groupe Dynamite as at end of the fiscal year ended January 31, 2026, together with the notes thereto and the auditor's report thereon. And I move that the reading of the auditor's report be dispensed with. The next item of business is the election of directors. As indicated in the circular, the Board of Directors has determined to set at 8, the number of directors to be elected today. Each nominee's biography is included in the circular made available to our shareholders, the company's nominees being: Andrew Lutfy; Chris Arsenault; Hollie S. Castro; Linda Drysdale; Peter Iliopoulos; Andy Janowski; Marie-Josee Lamothe; and Angelic Vendette will hold office until the close of the next Annual Meeting of Shareholders or until their successors are duly elected or appointed in accordance with the articles and bylaws of the company. Each nominee has expressed their willingness to serve as a director of the company. I move that each of these individuals be elected to the Board of Directors of the company until the close of the next Annual Meeting of Shareholders or until a successor is duly elected or appointed. As there are no other nominations, I move and second a motion to elect directors. Are there any questions on this motion from registered shareholders or proxy holders present? As a reminder, if you have any questions regarding the motion on the nomination of each of the directors, please enter it now. We have not received any questions on this motion. If questions on this motion are received subsequently, they will be addressed at the end of the meeting. I would now like to move on to the next item of business. The next item of business is the reappointment of Deloitte as auditor of the company until the next Annual Meeting of Shareholders or until a successor is appointed and the authorization of the Board to set the auditor's remuneration. As indicated in the circular prepared in connection with this meeting, the Board of Directors recommends to cast the votes represented by proxy at the meeting for the reappointment of Deloitte as auditors. I move and second the motion that Deloitte be appointed as auditor of the company and that the Board of Directors be authorized to set the auditor's remuneration. As a reminder, if you have any questions regarding the motion on the appointment of our auditor, please enter it now. We have not received any questions on this motion. If there are questions received subsequently, they will be addressed at the end of this meeting. We will now vote by way of single electronic ballot. I remind you that items of business are: one, the election of directors; two, the reappointment of Deloitte as independent auditor until the next Annual Meeting of Shareholders and the authorization of the Board of Directors to set its remuneration. You will now be asked to vote on each item of business. We invite you to cast your vote by going to the Voting page. Once there, please first press the For or Against button next to the name of each director nominee, then press For or Withhold next to the resolution to reappoint Deloitte as independent auditors of the company. We now give registered shareholders and proxy holders approximately 1 minute to complete their electronic ballots. Once the electronic vote is completed, the Voting page will disappear, and your votes will automatically be recorded. [Voting]

[Interpreted] Thank you for your patience. This concludes the business of the meeting. The polls for all items of business are now closed. I'm now pleased to announce that according to the preliminary report presented by scrutineers, which is based on the proxies received prior to the meeting, all director nominees have been elected and the reappointment of Deloitte as auditor of the company has been approved, and the Board has been authorized to set their remuneration. The details of the final voting results for each individual director and the reappointment of the auditor will be set out in a press release and in the voting results filed in accordance with applicable laws as well as on SEDAR+ and on the company's website. Legal formalities are now completed, so it is therefore time to close the meeting and move on to the management presentations. I therefore declare the meeting officially closed, and I now turn the floor over to members of management in attendance, starting with our Chair of the Board of Directors and Chief Executive Officer, Andrew Lutfy, followed our President and Chief Operating Officer, Stacie Beaver; and concluding with our Chief Financial Officer, Jean-Philippe D. Lachance, who will make a brief presentation, after which we will give registered shareholders and proxy holders a brief opportunity to ask questions. Andrew, I will now turn the floor over to you.

Thank you, Christian. Welcome to the Groupe Dynamite annual general meeting. I appreciate you taking the time to join us today. As I reflect on our first quarter results, what stands out is not simply the strength of the quarter, but the trajectory of the business and the progress we've made over many years. Groupe Dynamite is a stronger, more capable organization with a proven ability to scale, enter new markets and drive profitable growth. The first quarter reflects that progress. Comparable store sales increased 22.6%, gross margin reached its highest level in 4 years, and adjusted EBITDA margin expanded to 36.8%, up 730 basis points year-over-year. Importantly, this follows a record 2025 and demonstrates that our growth is not coming at the expense of profitability. We continue to drive both simultaneously. Looking at the second quarter to date, we're pleased to see comparable store sales tracking in the plus 9% CAD or 11% in constant currency, supported by continuing strength in the U.S. While we remain mindful of the broader macroeconomic environment, we are encouraged with the momentum across the organization. These results are the product of strategic decisions we have made consistently over many years. We have invested in brand elevation rather than promotions, top-tier assets rather than pursuing growth at any cost, agility rather than bureaucracy and people rather than organizational complexity. At the same time, we have remained disciplined in capital allocation, focusing on investments that generate attractive returns and strengthen the long-term earnings power of the business. The United States continues to be and will remain an important growth engine. We now operate across 41 states, and recent openings in markets such as Las Vegas and Hawaii have expanded our reach to both local and international customers. We have also successfully entered the United Kingdom through GARAGE. Oxford Street was more than a store opening. It validated that our brands and operating model can travel internationally. It reinforced our belief that the capabilities we have built over the past 5 decades can resonate well beyond our home market. What underpins this success is a highly differentiated operating model. As we often say, we strive to take the fashion risk out of fashion. Agility remains one of our core competitive advantages. In an industry where trends shift rapidly and consumer preferences evolve continuously, speed matters. It is also one of the reasons we have chosen not to pursue a wholesale model. Maintaining direct proximity to the customer allows us to move faster, react sooner and preserve the agility that differentiates us. That agility has enabled us to protect margins, manage inventory effectively and capitalize on opportunities as they emerge. GARAGE continues to connect with customers through authenticity, speed and cultural relevance. It continues to gain market share across North America and now internationally. Dynamite continues to strengthen its position through compelling product, disciplined execution, and greater on-brand lifestyle engagement. Together, our brands serve distinct customers while benefiting from a shared operating platform that enhances efficiency, scalability and profitability. Equally important is the culture that supports our performance. Our Shared Success Program reinforces an ownership mindset throughout the organization. When employees think and act like owners, decision-making improves, accountability increases and performance follows. Today, more than 7,200 colleagues, many of which shareholders, contribute to our success across North America and the United Kingdom. Their commitment, discipline and entrepreneurial mindset remain key competitive advantages. Looking ahead, our priorities remain clear. We will continue investing in our brands, high-return store growth, digital capabilities, talent, development and, of course, technology. These investments are about building a stronger, more resilient business that can continue to outperform over the long term. Our brands are healthy, our balance sheet is strong, our teams are executing at a high level, and we believe the opportunities ahead are among the most compelling in our company's history. We entered the balance of fiscal 2026 with confidence and a clear focus on creating long-term value for our shareholders. With that, I'll turn it over to Stacie.

Thank you, Andrew, and good afternoon. Fiscal 2025 was a strong year for the business, and one we're really proud of. We entered the fiscal year focused [ on how the ] brand shows up across every touch point, and we're seeing that translate into the performance across both GARAGE and Dynamite. We stayed focused in our approach, aligning product, storytelling and the customer experience across digital and stores. When those elements combined together, we see a clearer response from the customer, and that's what drove the business this year. Before getting into each part of the business, I want to highlight the strength of our operating model. As you know, one of our key strengths is the agility of our supply chain, which allows us to read the business in real time and react quickly to buy closer to demand and to adjust our inventory in season. That flexibility allows us to reduce risk, stay relevant and move with the customer as trends evolve. You see that reflected in our results, with inventory turns reaching 9.85x this year. Now turning to our stores. Our store network continues to be the primary engine of new customer acquisition and growth. For the full year, we achieved $952 in sales per square foot. This productivity reflects our disciplined real estate strategy as we continue to prioritize higher-quality locations where footfall is stronger and our brands sit alongside premium and luxury peers. The U.S. remains a key growth driver for us, with 20 stores opened this year in high-quality locations that maximize our visibility. Examples including Somerset Collection in Troy, Michigan, which opened in May; and Oakbrook Center in Chicago, which opened in December. At the same time, we renovated and relocated 13 stores within existing malls, upgrading them into higher quality spaces. This included a relocated GARAGE and a new Dynamite 3.0 concept at West Edmonton Mall in Alberta, along with 2 additional Dynamite 3.0 locations at Promenade St. Bruno and Carrefour Laval here in Quebec. On the digital side, we're pleased to see e-commerce grow 44.2% in fiscal 2025, with penetration reaching nearly 19%. This performance was supported by continued investments in our platform and capabilities, including the rollout of our headless architecture on mobile app, a new refresh navigation on web and progress on personalization across multiple touch points, all improving speed, flexibility and the overall customer experience. At the same time, we see meaningful opportunities ahead as we continue to scale. This includes continuing leveraging AI to drive more personalized experience and conversion, further integrating the community and socials into this experience and building on the early momentum we're seeing from our U.K. store launch. Over the long term, we remain focused on increasing e-commerce penetration towards 25% of total sales as digital continues to play a central role in how we tell our brand story and engage with our customers. Another key fiscal 2025 initiative to highlight is our U.S. distribution center. We continue to ramp up in line with our plans, strengthening service levels for our U.S. customers while also adding important redundancy to our supply chain. From a brand perspective, we truly raised the bar this year and generating what we call brand heat. More specifically, we stayed close to culture and our community to create hyper-relevant products and campaigns. For GARAGE, this includes our Sour Cherry color drop and Perky Plum drop, which featured influencer Hallie Batchelder, among others throughout the year. Our community-led storytelling reached new heights with the Midnight Blue [ TLTs ] and Mint Julep color drops. These drops and brain moments drove significant top of funnel reach and reinforcing our fleece category as a top volume driver. This resulted in us more than doubling our media impressions for the full year. This momentum translated into strong customer growth with our total active customer base up meaningfully to last year, driven by both strong new customers and returning customers, both in frequency and in spend increasing double digits year-over-year. For Dynamite of our Hotel Dynamite campaign featuring Elsa Hosk firmly position the brand as a destination for holiday dressing, particularly in dresses. This campaign resonated strongly with customers, reinforcing our authority in social life wear and contributing to strong engagement and sell-through. The growth in our brands reflects the discipline and focus across our teams. We exit the year with a proven and improved playbook and the confidence to continue scaling our impact and deepening our customer relationships. As we look ahead to 2026, we're focused on execution and continued elevation of our brands across every touch point. As Andrew mentioned, the dedication of our teams grounded in our core values is what drives these results. I want to echo his gratitude to our 7,200 plus field associates and our head office teams for their agility and passion. They are the embodiment of our culture and their commitment is our greatest competitive edge. With the foundation we've built, we are poised to take our performance even higher. With that, I'll turn it over to JP to walk through the financials.

[Interpreted] Thank you very much. Thank you for being here with us today. Fiscal 2025 was a record year for Groupe Dynamite, demonstrating the strength and scalability of our luxury inspired business model. We delivered exceptional growth across revenues, profitabilities and returns while continuing to invest in our brands and our operating platform. Total revenue increased 36.7% to hit $1.31 billion, driven by comparable store sales growth of 26.7% on top of the 12.3% in fiscal 2024 and the contributions from new stores. Online revenues grew 44.2% to hit $247.8 million, reaching approximately 19% of total revenues. Over 4 years, the revenue -- or revenue has compounded at approximately 20% CAGR from $628 million in fiscal 2021. When it comes to our real estate strategy, this continued to deliver. We opened 20 new GARAGE stores in the U.S., strategically closed 11 locations and renovated or relocated 13 stores to end the year with 307 stores. Profitability also strengthened meaningfully. Gross margin expanded 100 basis points to hit 63.8%, supported by pricing discipline, lower markdowns and inventory management. Operating income increased 78% to hit $377.7 million, while adjusted EBITDA increased 57.6% to hit $477.9 million. Adjusted EBITDA margin expanded 490 basis points to 36.5%, driven by gross margin expansion and meaningful SG&A leverage as we scale the business, positioning our profitability profile alongside some of the world's leading luxury houses. Returns and cash flows remain strong. Return on assets at 36.2%, return on capital employed at 70.3%, and free cash flow more than doubled at $335 million, supporting continued investments in growth, primarily across our store network and digital capacities. Now looking to Q1 fiscal 2026 momentum has remained strong. Total revenues reached $310.6 million, up 37%, driven by 22.6% comparable store sales growth and contributions from 5 new stores. Online revenues grew 35.7% to reach $50.6 million. Gross margin reached a record 67.4%, up 530 basis points, and adjusted SG&A improved 190 basis points as a percentage of sales. Adjusted EBITDA margin reached 36.8%, up 730 basis points, reflecting continued operating leverage. When it comes to capital allocation, our top priority remains investing to strengthen our scale -- or strengthen and scale, rather, our omnichannel platform, opening stores in high-quality locations, optimizing existing stores and building our digital operational capacities. At the same time, we remain disciplined in returning excess capital to shareholders. During fiscal 2025, we repurchased 883,100 shares for approximately $34.7 million under our NCIB program at an average price of $39.28. Furthermore, we paid out a onetime special dividend of $2.30 per share in Q4 fiscal 2025, reflecting our commitment to disciplined capital stewardship. Together, our disciplined investment framework, balanced shareholder return strategy and prudent capital structure continue to place us in good position for the long term and for value creation. When it comes to our outlook for fiscal 2026, we expect another year of strong growth and margin expansion. We are guiding for comparable store sales growth between 11% and 14% alongside total revenue growth between 22% and 25%. From a real estate perspective, we are reiterating our expectation to open 24 to 26 gross new stores, including 5 locations in the U.K. However, we're revising our net new store additions downwardly to approximately 8 to 10 from our previous expectation of 10 to 12. This revision reflects the acceleration of 2 planned closures as we continue to optimize our fleet and focus on higher growth areas from a profitability standpoint. We increased our adjusted EBITDA margin outlook from our initial range of 37.75% to 39.25% to a revised range of 38.25% to 39.50%, spurred by gross margin strength, SG&A leverage and efficiencies from the ramp-up of our U.S. distribution center. Capital expenditures are expected to range between $100 million and $110 million, primarily supporting new store openings, store optimization initiatives and further investment in our digital and operational infrastructure. While the macroeconomic environment remains dynamic, our agile model, disciplined inventory management and open-to-buy strategy positions us well to execute. In conclusion, a brief look at the key levers driving our continued growth will take place now. First, driving comparable store sales through brand elevation, pricing optimization and store productivity. Second, disciplined store expansion, particularly GARAGE in Tier 1 to 3 in U.S. locations targeting 350 stores by fiscal 2028 with potential upside given the strong productivity trends. Third, e-commerce, currently approximately at 19% of revenues with a long-term target of approximately 25%, supported by continuous investment in our digital and omnichannel capacities. And finally, we are expanding our international reach. Fiscal 2026 marked the launch of GARAGE in the U.K. through both e-commerce and our first 2 retail stores near London and on Oxford Street, which rank as 2 of the best store openings in the company's history. We will remain focused on scaling the business thoughtfully and profitably over time. Together, these levers continue to position Groupe Dynamite to scale profitably and deliver long-term value. On that, I will turn the floor over to Christian for the question period. Thank you.

[Interpreted] We'll now be thrilled to take questions from duly registered shareholders and proxy holders. As a reminder, comments and questions may be entered in the Questions tab of the platform. This is now the end of our question-and-answer session. I will turn the floor over to Andrew for the conclusion. Thank you.

[Interpreted] This is now the end of our Annual Meeting of Shareholders for Groupe Dynamite. On behalf of the Board of Directors and the management team, I would like to thank you for participating in our Annual Meeting of Shareholders here today. We are extremely grateful for the work and dedication of our employees, the confidence of our shareholders and the support of all of our stakeholders. Thank you for joining us for our virtual annual meeting, and we look forward to seeing you again next year. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]