Good morning, ladies and gentlemen, welcome to the Loblaw Companies Limited 2025 Fourth Quarter and Full Year Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star, then zero on your telephone keypad, an operator will come to the line to assist you. This call is being recorded on Wednesday, February 25th, 2026. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead.
Thank you very much. Good morning, everybody. Welcome to the Loblaw Companies Limited Fourth Quarter and Full Year 2025 Results Conference Call. As usual, I'm joined here this morning by Per Bank, our President and Chief Executive Officer, and by Richard Dufresne, our Chief Financial Officer. Before we begin today, I'll remind you that today's discussions 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 our expectations. These risks and uncertainties are discussed in the company's financial materials filed with the Canadian Securities Administrators. Any forward-looking statements speak only of the date they are made.
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. Certain GAAP, non-GAAP financial measures may be discussed or referred to today. Please refer to our annual report and the other materials filed with the Canadian Securities Administrators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure. I will add that following the announcement of the sale of our PC Financial business to EQ Bank and that ongoing partnership, our PC Financial results are presented under discontinuing ops. It's important to note that we are not getting out of the financial services. As such, unless otherwise indicated today, our remarks will focus on the comparable, adjusted, consolidated results, excluding the impact of the extra week this quarter.
With that, I will hand the call over to Richard.
Thank you, Roy. Good morning, everyone. I'm pleased to report on another quarter of consistent financial and operational performance, reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service, and convenience to Canadians. As Roy mentioned, with the announced sale of PC Financial to EQB, the results of the bank are now presented in discontinued operations. It's important to highlight that we're not getting out of financial services by virtue of our interest in EQB. We will continue to focus on our consolidated results. When the transaction closes, the current discontinued operations business will be replaced by Loblaw's proportional ownership share of EQB profits. In the fourth quarter, on a 12-week basis, revenue growth was 3.5%, reaching CAD 15.5 billion.
Our top line growth was supported by the opening of 30 stores in the final quarter of the year. In the year, we added 1.5% square footage to our food retail stores and 2.1% to our drug retail portfolio. This growth was primarily focused on adding hard discount stores and pharmacies to underserved communities. Adjusted EBITDA increased by 4.8% to CAD 1.8 billion, and margin improved by 10 basis points to 11.5%. Adjusted diluted net earnings per share grew by 10.9%. On a reported basis, revenue grew at 11% and adjusted EPS was CAD 0.67, up 22% in the quarter. In food retail, we once again delivered traffic and basket growth, resulting in tonnage market share gains.
Absolute sales outpaced same-store sales by 160 basis points at 3.1%, reflecting our new store growth. Absolute sales also outpaced our internal inflation, which reflects our market share gains. Our food same-store sales grew 1.5%. It's worth indicating that we are lapping a strong Q4 last year when we increased promotional activity. As we progressed through Q4, 2025, our same-store sales growth accelerated, and this has continued in the first quarter of 2026. We continue to see positive momentum across key categories in the right-hand side of our stores, with continued accretive growth in toy, apparel, and home and entertainment. That said, with continued pressure in liquor, tobacco, and HABA categories, right-hand side resulted in 20 basis points of pressure on food same-store sales.
Our internal CPI, like food inflation metric, was significantly lower than Canada's grocery CPI of 4.4%, and that gap widened over the final two months of the quarter. Customers are seeking value and are finding it in our stores. This reflects our effort to push back on unjustified cost increases from suppliers and the effectiveness of our loyalty and promotional offers. As consumers continue to focus on value, our hard discount banners remain a key driver of absolute sales growth. We opened 15 new hard discount stores in the quarter, bringing our total opened in the year to 48. These stores are meeting expectations and will start rolling into comparable sales throughout 2026. In fact, 20 of the new hard discount stores opened in 2024 are already in our comps and are averaging healthy double-digit same-store sales.
We're also pleased with the momentum and performance of our conventional stores. In the quarter, this growth was led by our Fortinos and YIG banners. Across conventional, multicultural, natural value, and prepared foods continue to be growing categories. In drug retail, absolute sales increased 4.4%, while same-store sales grew 3.9%. Pharmacy and healthcare services grew same-store sales by 5.6%, driven by broad strength in prescription and new healthcare services. Our specialty prescription growth continued to lead our pharmacy performance. Patients continue to respond positively to the convenience and expanded level of primary care we offer to our more than 1,800 pharmacies across the country. I'm happy to confirm that we've achieved our target of opening 250 in-store clinics this year, improving access to healthcare services for Canadians in underserved communities.
Our front store same-store sales continued to improve, growing 2.2%, reflecting the ongoing strength of our beauty category. We saw an increase in our OTC sales as Canada was hit hard by the cold and flu season, with influenza cases reaching a three-year high. Flu season peaked in December, a shift from last year when it peaked in our first quarter. We continue to be pleased with the underlying strength and profitability in our front store business. Online sales continue to demonstrate strong growth, reaching over CAD 4.5 billion last year. In the fourth quarter, our digital sales increased by 19.6%, highest growth in the year. Delivery continues to lead that growth, particularly in discounts. In November, we launched another third-party delivery partnership across our grocery banners. Early results are very positive.
Our retail gross margin improved by 10 basis points to 31%, driven by improvements in shrink and drug, while food trading margins remained stable. Our retail SG&A rate was flat, with operating leverage from higher sales, offsetting incremental costs related to the opening of new stores and the ramping up of our automated distribution facilities. I'm very pleased with our ability to maintain a flat rate despite the additional costs associated with this growth. Retail adjusted EBITDA grew 4.6%, and retail EBITDA margin increased by 10 basis points to 10.9%. The ramp-up of our first automated distribution center in East Gwillimbury continues to progress well. Both cost and productivity improvements came in better than planned. This allowed us to roll out our ambient sections two months ahead of schedule.
We are 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 by the end of this year. PC Financial's revenue increased 3.1%, driven by higher insurance commission income and higher interest income. The bank's adjusted net earnings increased by CAD 12 million, or 36%. This was primarily driven by higher revenue and the favorable impact from lower expected credit loss provisions. The previously announced sale of PC Financial to EQ Bank will streamline the company's operation. We expect the transaction to close later this year.
Free cash flow from the retail segment was CAD 1.9 billion for the year. In the quarter, we repurchased CAD 592 million worth of common share for a full year total of CAD 1.9 billion. Our balance sheet remains strong. We continue to improve our key return metrics. Our return on equity sits at 26.3% and our return on capital at 12.4%. On a full year basis, our consolidated revenue grew 4.4% to CAD 63.7 billion, net earnings of CAD 2.8 billion, and EPS grew 10.7%. Including the impact of the 53rd week, EPS grew an incremental 2.9% to 13.6%.
Turning to 2026, we have a solid plan in place, allowing us to continue delivering consistent financial and operating performance while advancing our growth initiatives. New store investments will be similar to last year, with an increase in Shoppers Drug Mart stores. We plan to grow our grocery square footage in line with 2025. However, our drug footprint is expected to increase by three. In 2026, we expect the timing of the closing of the sale of PC Financial and the lapping of the 53rd week to impact the company's financial results. Excluding these impacts, we expect our retail business to grow earnings faster than sales and adjusted earnings per share growth in the high single digits. We plan to invest approximately CAD 2.4 billion in capital expenditures.
We plan to return most of our free cash flow to shareholders through dividends and share buybacks. We're more than halfway through the first quarter, and same-store sales are showing continued momentum. Looking ahead, our focus on retail excellence and on the execution of our strategic initiatives will allow us to keep on delivering value to our customers and performance to our shareholders. While early, 2026 is off to a good start. I will now turn the call over to Per.
Many thanks, Richard, and, good morning, everyone. I'm very pleased to share our solid fourth quarter results, which caps a very successful year for Loblaw.
We delivered revenue growth of 3.5%, reflecting both the success of our strategic investments in new stores and strong operating performance. This top-line growth enabled us to deliver the 10.9% adjusted EPS growth in the quarter. We accomplished this earnings growth while increasing our spending to support the opening and ramp-up of our two 1 million sq ft DCs and our new stores, including the successful opening of our second T&T store in the United States. This past year has truly showcased that we have the right strategy, we are executing well, and everything is grounded on an unwavering focus on our customers. More than ever, we have seen Canadians prioritize value. We know that affordability is so important for many households, and that's why we are expanding our hard discount network.
We opened 48 new No Frills and Maxi stores this year. These new locations were strategically placed in underserved communities. This year, we also invested to expand our e-commerce service for our hard discount customers, and are very pleased to see our digital penetration rate doubled in these banners compared to last year. This highlights the vital role that our Maxi and No Frills stores play in helping families stretch their budgets without compromising on quality, selection, or convenience. Our commercial banners, including the high-performance Fortinos and T&T stores, continue to attract and delight shoppers. Fortinos, which focus on fresh, local, and premium offerings, remained a community favorite, while T&T Supermarket continued its impressive growth trajectory. We saw really strong performance in areas of strategic focus, including our multicultural assortment and our right-hand side refresh.
We have now updated 34 stores and are seeing high single-digit sales growth in these stores, led by apparel, cosmetic, and toys. I'm actually especially excited by how well our toys category performed, with sales increasing almost 50% in Q4. Beyond value, we recognize our customers' desire for choice, quality, and a superior shopping experience, including a strong preference for supporting local manufacturers. I'm proud to share that in 2025, we added 267 new Canadian suppliers to our network, reinforcing our commitment to Canadian businesses. When Canadian businesses grow, communities grow. When local producers win, we all win, and we're actually just getting started. In drop, we continued our trajectory through quarter four, as we delivered our fourth consecutive quarter of positive sales growth momentum in front store.
This reflect continued strength in beauty and strength in our HABA OTC and baby categories. We're also seeing early shoot from our initiative to bring more value and sales productivity to front store. In pharmacy and healthcare services, we continue to deliver solid performance, led by growth in the specialty drug category. In line with our commitment to being where Canadians need us the most, we are actively building new pharmacies and clinics to provide essential healthcare services, especially in underserved communities. Q4 was very busy, as we opened a record of 15 new pharmacies in the quarter, bringing our total to 27 for the year.
Our pharmacists and healthcare professionals play an increasingly important role in the health and well-being of Canadians, and we are committed to supporting them with the tools and resources they need to provide exceptional care, making it easier for Canadians to manage their health closer to home. For Loblaw, investing to be at the forefront of innovation has always been key to building customer loyalty. To support growth and enhance our customer experience, we made record investments in the future this past year. These strategic capital deployments were focused on strengthening our foundation and expanding our reach across key growth areas. We significantly grew our store network with investment specifically directed towards new discount stores, additional pharmacies, and the continued expansion of T&T.
These investments are not just about stores, they're also about strengthening the backbone of our operations and investing in innovation to serve our stores and customers more effectively. I previously highlighted the significant success of our insider program. Building on these achievements, we remain deeply committed to continuous product innovation. This year, our investment in this crucial area have successfully brought more than 250 new products to Canadian households under our private label brands, like President's Choice, no name, and Farmer's Market. These exciting new additions have not only enhanced our offering, but have also generated nearly CAD 400 million in sales. Beyond our core retail operation, we also strategically grew our alternative businesses, including retail media, our logistics as a service offering, and significantly enhanced our healthcare services through clinics and the expansion of our Lifemark business.
We've talked about media and logistics in the past. I would like to spend just a moment on Lifemark. With over 4 million customers visits each year, Lifemark offers a range of rehabilitation services through 320 locations across the country. Lifemark is another small but quickly growing business that we expect will deliver CAD 100 million in EBITDA this year. Technology, too, plays a crucial role in our differentiation. We are not simply adopting AI, we are building an AI-enabled organization. We are experimenting with intent and discipline. Focusing on practical use cases that create real value for customers. Our recent partnership with OpenAI and Google were first in Canadian retail, and great examples of embedding AI into the tools Canadian already use every day, while also building purpose-built application where it makes sense.
We also continue to deploy AI inside our organization, optimizing operations, improving forecasting and assortment decisions, simplifying workflows for colleagues, and enhancing the shopping experience. None of these achievements would be possible without the incredible dedication of our 220,000 colleagues. The uniqueness and strength of our culture is a cornerstone to everything we have accomplished. To each and every one of you in stores, distribution centers, pharmacies, clinics, offices, I extend my sincerest gratitude. Your hard work, commitment, and passion for serving our customers are incredibly important to our success. We look to the future, we remain optimistic and determined. The foundational investment we made, coupled with our resilient business model, unwavering focus on the customers, and being where Canadians need us the most, positioning us exceptionally well for sustained growth and continuous market leadership.
We'll continue to innovate, adapt, and evolve to meet the changing needs of Canadians, whether that's through expanding our value offering, supporting local suppliers, or bringing essential healthcare closer to home. Our commitment to delivering unparalleled value, quality, and convenience remains steadfast, as does our dedication to our communities and helping Canadians live life well. With that, I'll now open the floor for questions. Many thanks.
Thank you, Per. Operator, if you'd please introduce the Q&A process.
Thank you. We will now begin the question-and-answer session. If you would like to ask a question at this time, please press star, then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, you can press star one again. We'll pause just for a moment to compile the roster. Your first question comes from Mark Carden with UBS. Your line is open.
Good morning. Thanks so much for taking the question. To start, just wanted to see how the consumer is faring overall. Are you guys seeing any shifts in spending patterns, any incremental trade down occurring? Has anything changed in the competitive landscape in your core markets? Thanks.
Thank you, Mark, and I would all say that customers are behaving a lot like they have done in the past, so not that much has changed. I would say, though, that the discount strategy for us is working, it's working very well. Promo penetration still stays high, and private label in the quarter four is outperforming national brands. We are seeing some category trade downs. I just looked at an example the other day where an impulse category like berries, the organic berries is down double digit, where the conventional berries would be up. More of the same, maybe one flavor more if I look at the discount.
Our discount, which I mentioned in my script, the penetration in e-commerce and discount has doubled. We are seeing more customers now that they have more access to our, to our discount e-commerce, they're choosing that. But within the stores, it stays the same. The gap between conventional and discount, I would say, staying the same. Still, still value-conscious customers, but more the same.
That's great. Thanks. Then as a follow-up, you guys noted that food retail same-store sales steadily improved throughout the quarter. How did the cadence play out month-to-month? I know there are some promo comparison there, and how have you trended thus far in Q1, Q2? Thanks.
Yeah, as I mentioned in my remarks, in 2024, in Q4, we were a little bit more aggressive than we were this year. That affected especially the first month of Q4. As we started to lap that month, we saw sequential improvement in same-store sale. We're actually seeing further improvement as we begin 2026. Definitely, we feel good about our same-store sale performance.
Great. Thanks so much, so good luck, guys.
Thank you.
Your next question comes from the line of Irene Nattel with RBC Capital Markets. Your line is open.
Thanks, and good morning, everyone. Just continuing with consumer behavior, how should we be thinking about the cadence of same-store sales and margin evolution as we move through 2026, and we normalize for some of the headwinds, notably at Shoppers, and perhaps see some of the headwinds from the right-hand side starting or continuing to diminish?
What I'd say, Irene, if you look, the way, the way we see it, like, big picture, is you're gonna see above normal top line growth, as we've talked about, because of new stores. You're gonna see that. You're gonna see stability in gross margin, stability in the GNA rate, maybe a little bit of increase in gross margin rate as the year progresses, as we continue to find more shrink benefits in Shoppers, and that together with all of the other efforts, should allow us to be delivering our a high single-digit EPS growth.
I would say that we are confident in our comp sales, in our total sales. Our new stores are working really well for us, and that's both our Shoppers and our hard discount. When we look at the second-year comp, we are seeing some really good numbers, actually better than we expected. Again, feel confident about our strategy, whether comp sale will be a little bit up one quarter and down another quarter, I don't think it's that key to our overall performance.
We will keep our guidance no matter whether it fluctuates a little bit, because of course, it can and have done. We stay very confident in our sales projection.
That's great. Just as a follow-up to that, how would you describe the spending in some of the more discretionary categories at Shoppers? I mean, Per, you made the comment just a second ago about organic versus regular berries, which is interesting. What are you seeing at Shoppers in terms of.
We're seeing that prestige beauty continues to be up. That's good. When that is said, there's not a lot of difference in Shoppers. Maybe I think in the beginning of the year, we're seeing that GLP-1 has increased a little bit in sales because prices are coming down, which is really good for customers, because now more customers have access to that drug. Of course, we all know that it goes generic in the second half, so hopefully more to come. We just don't know precisely when that's gonna happen.
Of course, spending, if you look at a big, big picture, is also depending on inflation. I just looking at an interesting store map here, that we got some information from Nielsen on inflation. It's different from area to area, because when we look at produce, inflation, it's flat to 1% only for Q4, where dry grocery is up by 4%, impacted by in our opinion, the unjustified price increases by the big CPGs. Meat, of course, because of commodity increase in general, is up by 7%, where frozen is at 2%. I thought that would be interesting, and that, of course, also impacting customers.
What customers they do, they actually mitigate that inflation by shopping differently.
That's helpful. Thank you very much.
Your next question comes from Chris Li with Desjardins. Your line is open.
All right, good morning, everyone. Just at a high level, Richard, as you look at your EPS outlook for this year, are there certain areas where there might be some conservatism being embedded? Vice versa, what areas do you see having higher variability or risk? Thanks.
For us, when we look at the 2026 plan, it looks a lot like the 2025 plan. It's pretty, if you look by quarter, no, it should be pretty similar all quarters and not much volatility amongst quarters. That's how we're seeing it for now. There's gonna be all the noise regarding when the PC Financial deal closes, for sure, and we'll deal with that when we know when that happens. Other than that, like, it's gonna look a lot like 2025.
One detail to add to that would be that this is the second year where we're opening around 70 stores. Last year was 77. This year, we project around 70. While we are ramping up, of course, it costs us a little bit more also because the new stores, they don't really improve and drops, for that example, don't get properly before, like between year three and five. We will have incurred a little bit more cost in the beginning, and we're seeing that this year as well. The 76 stores from last year, they're now in the base.
Yeah. Tailwind we talked about last year are more or less the same, like new stores and T&T U.S. Those are the tailwinds in our plan, and we've accounted for them.
Yeah, on sales.
Yeah.
Okay, that's helpful. My follow-up is just on, you know, with CapEx going up a little bit this year and doesn't look like there's any sort of funding from asset sale to partially fund the CapEx like previous years. Do you expect to maintain a similar pace of share buybacks this year versus previous years?
Yes. We've actually were saying it would be around CAD 1.8 million for 2025.
Mm-hmm.
We did CAD 1.9 billion, and so we plan to do about CAD 1.9 billion in 2026.
Got it. Okay, thanks very much.
Your next question comes from the line of Vishal Shreedhar with National Bank. Your line is open.
Thanks. Just a quick clarification. When you talk about the same store improving through the quarter, was that a comment specifically to food, or was that also related to shoppers?
It was food.
It was basically because we lapped, in the beginning, in our P11, we lapped a very high promotional period last year that we, for many obvious reasons, didn't wanna repeat.
With respect to Shoppers, the comment regarding the change in timing of the flu seasons, the implication is that it could be softer in Q1 for Shoppers on same store?
Could have a bit of an impact. We'll see as the quarter progress. Definitely, last year, P1 in cough and cold was very strong, and this year it finished in December. The business continues to be strong.
Okay. Richard and Richard, you know, obviously, 2025 has a high number of investments in terms of dollars flowing through the P&L, and Loblaw continues to hit its framework. I was wondering if you can give us some context on, you know, on a dollar value of the cost, if not a dollar value, just some qualitative commentary on the costs related to the new stores, the DC, the T&T ramp-up, and how these all might impact, and the degree to which you have to implement offsetting plans in order to grow.
I won't give you numbers, but like, we expect that 2026 will be the worst year from a drag on T&T Supermarket U.S. i.e., the drag will be more in 2026 than in 2025. Having said that, the ramp-up cost of e-commerce is going to be less. We think, Q1, maybe a little bit of Q2 of ramping up costs, and then we'll be done. All in all, the drag should be a little bit less than it was last year. Having said all that, we've accounted for that when we did our planning for 2026. I don't know if that's helpful.
Thank you.
Thank you.
Your next question comes from the line of Mark Petrie with CIBC. Your line is open.
Hey, good morning. Thanks for all the comments so far. You guys both touched on it in your script, but I wanted to ask more about prepared foods. It seems notable that the two best-performing full-service banners are leaders in that area. Could you just talk about where prepared foods ranks in your list of priorities? Obviously, some nice tailwinds in your favor as consumers prefer value, in food, but still want convenience and accessibility.
That's a really good point, and that's something that we are doubling down on at the moment, and it was accretive to our outcome sales in quarter four. When I look at the beginning in this quarter, it's also accretive to our overall business. Customers, they are looking for meal solutions more and more. I don't know whether it's because they eat less out for others to judge. We're seeing that it's really helpful for us. We are planning some good stuff that you will all see in our stores this quarter. I remember that we have some one-pan meals, supporting customers who want a single-serve meal or for smaller household.
I think that's important that we support singles and smaller households even more. We have the Korean fried chicken and bucket program. That's innovation in the Korean kitchen to create more convenience and excitement in our stores. The last example I can remember, we have halal chicken now expanded, it's expanded to all our stores across the market. Meaningful, and I'm curious to see how that develop over the next year.
Yeah. Okay, thanks for that. I also wanted to just ask about Shoppers at a very high level. I know it's early in Gregor's tenure as leader there, but curious to hear any comments on his initial take on the business and opportunities that he sees and focus areas.
I think there's not a lot of news since since we spoke spoke last time, it's still it's still an opportunity about about online. Our penetration for online shoppers is very low, I'm sure over the next the next years, we'll be able to do better there. Gregor, he comes with a with a wealth of experience within within beauty. So that will also that will also add to to the experience for our customers in Shoppers. It's not something you will see because it takes time before you load the assortment, before you you're gonna change the stores.
We aim to have a few stores with a new layout, being ready within his first year, but it's three weeks in, so I'm only quoting what we have discussed so far. We are, we're really positive on Gregor and his start in Shoppers and what he brings to the table.
Fair enough. Appreciate the comments. All the best.
Your next question comes from the line of Michael Van Aelst with TD Cowen. Your line is open.
Hi, good morning. You've been talking about AI, and specifically agentic AI, more in recent quarters. Can you go get into a little more specifics in terms of, you know, discussing the most rewarding applications of it, of agentic AI to date, and how it's helping you either drive your sales higher or lower costs and things like that?
Yeah. Big credit to our digital team, who have made two collaborations, both with OpenAI, which is the food part, and then with Google, which is more the health and beauty and the non-food. On the OpenAI, remember, if you, if you go in and search and try it out, write @PCX, and then you can state what you want and what you're, what you're looking for, because then with one click, you will be taken through, and you will be avoiding going from app to app and from product to product. It's more seamless for customers and actually very convenient for customers to use that.
When we look at it, there's like millions of Canadians who are searching more and more for meal solutions and products on OpenAI. First of all, for us, it's important to be first, as I'm aware of that we are Loblaw. We were first when we started the e-commerce in food, and that we are still benefiting from today because we have a significant higher market share on food e-commerce than we have in the past. That's good, that's good for us, good for customers. Being first is meaningful. I don't think it will be something that we can read in the numbers the next quarter or two, but over time, I think that's important.
That's one part. That's what's great for customers, and that's how we help customers. Another thing is our internal use of AI, which I think is going to be more and more important as we go forward. It's how do we make it make it better for our colleagues to serve and doing the right thing for customers? We have a tool called Robyn internally, where I think I mentioned that on some of our previous earnings call, that where the district manager, the store managers have access to data they can search, and they can make things right in stores faster than we have ever done before. All in all, I think it's gonna be meaningful over time.
It's not something you'll see in the next quarter. We are first in Canada with a lot of it, and we will continue to drive that agenda very hard.
All right. Thank you. That's helpful. Just a separate question. Can you explain how the tax impact holiday is having an impact on same store sales in the food side?
It's hard to measure the, with precision. Obviously, like, the price of certain items went down, okay? Now when they record the price this year, it's much higher, and so that's how it's, that's how it affect the, CPI. I suspect that unlike other retailers, the number of categories that we're taxing them for us were not as significant. That's why probably there's a big gap between our internal inflation measure and the CPI food that's measured by Statistics Canada. As we said in our remarks, the gap has expanded significantly over the last two months, and our internal inflation is not materially higher than what it was like a few months ago.
Perfect. Thank you.
Your next question comes from the line of Étienne Ricard with BMO Capital Markets. Your line is open.
Thank you, and good morning. To follow up on the transaction with EQB, I recognize it's still early in the process. How meaningful is the potential for additional PC Optimum point issuances? Because the way I see it depends on offering a wider range of payment services to the EQ Bank customers, or maybe also having a broader banking service to the PC Financial customers. What gives you the confidence that these customers would be willing to own more than one product in the new entity?
I think, Étienne, you're right, but that's more in the long term. The key driver for us, is more credit cards. We are not bankers, like, we're grocers, and so the way we've been managing the bank has been very conservative. A normal banking institution will be a little bit more liberal in its issuance of cards, and EQ Bank was quite confident that they could be issuing more credit cards than we did historically. And we know that customers who have the PC Mastercard are better customers from a customer long-term value perspective. For us, that's what's most strategic, and we have a number in mind that they think that they can increase the number of annual cards with, and that's gonna be the biggest driver.
More cards, more points, more loyalty, and over time, yes, you will see expansion in other products, but like initially, expect to see more credit cards, and that's what's going to drive the sales conversion in Loblaw.
Okay. Thank you, Richard. I appreciate the willingness to simplify the financial reporting at Loblaw. If we look past closing for this deal, should we expect long term the ownership in the EQB shares to remain at the Loblaw level, or could you still have a say in the program without directly owning within Loblaw?
There, there's no plan to do anything for the moment, look. We haven't even closed the deal yet, look. But suffice to say, there is, there needs to be the building a very strong and tight relationship between EQ Bank and our loyalty program. So that's gonna be the first task at hand, and so that's what we'll be focused on for the short to medium term.
Thank you very much.
Your next question comes from the line of John Zamparo with Scotiabank. Line is open.
Thank you. Good morning. I wanted to ask about the real estate picture. I guess first a clarification on the planned openings for 2026, are we right to assume that's gonna skew a bit more towards the smaller format? The broader question is, when we're seeing grocers increasingly taking up expectations for square footage growth, are you seeing any change in the quality of locations you're finding or the attractiveness of the lease terms?
First of all, in 2026, we opened a little bit more conventional, and I think we're opening one of our biggest superstores as well. Looking at the, looking at the discount stores, it's a, it's a good mix of normal size, 32,000 sq ft or down to 15, down to 10. I would say that in some of the underserved areas, we're doing more of the smaller stores. If you look at the mix, we open a little bit less discount, a little bit more Shoppers this year. It's just basically a coincident. Going forward, we are looking to do about the same number. Next, it's a little bit, it's quite easy to find good sites in Canada.
There are many underserved areas around the country where customers, they want discount.
Yeah, the only thing I'd add is our pipeline for 2027 is already pretty much full on both food and drugs. We still see a lot of runway for opportunities to build more stores.
Okay. Thank you for that. My follow-up is on the PC Express OpenAI announcement. I wonder if taking a step back, is there anything you can say about the state of profitability of Loblaw's e-commerce operations now, to help us better understand the bottom line impact of the overall greater shift to e-com? Not necessarily the OpenAI announcement, but the broader shift to e-com.
Yeah, no, it's a good question because when we go back a few years, it was diluting. Now, it's not, it's not diluting, very, anymore. It's a, it's a good support both to customers who want more of it, but also to our profitability. It's, it's actually, okay for us now. It's not diluting.
The key driver for it is us using third parties to do delivery.
Yeah.
That is dramatically altering the financial equation to our favor. That's why we like it.
Also because we don't have any fulfillment centers around the country. We pick in store. Not only is it helping our efficiency, it's also helping the waste and food waste that we have in stores, because customers who buy online, they buy more deep into the range. It's helping the overall store productivity when we see more online sales, and that's not something that you normally think of.
Okay, that's helpful. Thank you very much.
Your next question comes from Chris Li, with just Desjardins. Your line is open.
Thank you. Just maybe a couple of questions on pharmacy. First, is there any update on the genericization of GLP-1 drugs? Is the expectation that it's gonna be around this summer?
It has moved a few times, so we're actually not certain. Our best guess now would be around August. That's August, September, that's our best estimate right now, when it will go generic, because they still need those approval, and it's hard to say when they will get them.
Okay, that's helpful. My second question is just around your, the pharmacy clinics. How is the performance so far? I noticed the pace of the new openings is slowing a little bit this year. Is that because you're taking a more measured approach to the rollout to see sort of how the regulatory landscape evolves? Or are you starting to reach a bit of a saturation point in terms of the number of clinics? Thanks.
I'm glad that you asked that question because there's a good sound reason for why we slowed down, because we hurried up to do it in the provinces where we had expanded the care scope, which was Alberta and Nova Scotia. There we're done. We're basically waiting for the other provinces to open up. Where we can prescribe for more, then there we also need the clinic. We are not an urgent need in the other provinces. When that sets, all our new stores are built with clinics. We're good in the provinces where we are. You will see more of it.
The performance we're seeing is following the plan that we had. We're really pleased with the, with the performance. There's just no urgent need to hurry up. Since we have a very healthy, nice, different divisions who are competing for the CapEx, then we allocate the CapEx elsewhere, because CapEx is. We are fighting for that, which is good, because they're all giving us a very good return.
Great. Thank you, and all the best.
Thank you.
Again, if you'd like to ask a question, please press star, then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, simply press star one again. Your next question comes from Mark Petrie with CIBC. Your line is open. Mark, your line is open.
Oh, sorry, I was muted there. I just wanted to ask about T&T, and the growth plans there, both for Canada and the U.S. I guess, specific in the U.S., you know, two stores you've called out performing very well. How aggressively can you pursue that opportunity?
There's been no change in plans since we last saw you. We have 11 stores approved. There's a few more that we're looking at, but for 2026, there are three U.S. stores planned to open, three in Canada. I hope we open all the three, because the last one is scheduled to open, like, mid-December, so that could slip. If it doesn't slip, like, it's gonna be three, one in San José, one in San Francisco, and one in L.A., and the last one is the one in L.A.
Thank you. With no further questions in queue, I would like to turn the conference back over to Roy for closing remarks.
Great. Thanks, everybody, for your time this morning. you know where to find me if you have any follow-up questions. Put a circle on your calendar for Wednesday, May 6th, when we will be releasing our Q1 results. Have a great day, everybody, and thank you again.
This concludes today's conference call. You may now disconnect.