This article first appeared on GuruFocus .
Release Date: September 09, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Consolidated sales increased 5.4%, driven by strong same-store sales gains across all business units.
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EBITDA rose 5.4% and adjusted net earnings increased 5%, despite a challenging inflationary environment.
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Gross profit improved by 8 basis points as a rate to sales, benefiting from Next 100 initiatives and private label expansion.
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Same-store sales in Canadian operations grew 7.4%, supported by government settlement payments and lapping prior-year evacuations.
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International operations saw same-store sales gains in all business units, with strong general merchandise sales, particularly in motorized categories.
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The company is investing in aircraft fleet renewal, which is expected to lower operating costs and improve efficiency over time.
Negative Points
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Higher fuel prices negatively impacted gross profit and expenses, particularly in northern markets with complex logistics.
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Selling, operating, and administrative expenses increased 6% and were up 13 basis points as a rate to sales, driven by wage inflation and higher staff costs.
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A non-comparable withholding tax expense reduced net earnings flow-through in the quarter.
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Labor productivity remains an area for improvement, with management acknowledging ongoing opportunities to optimize staff costs.
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The company faces ongoing inflationary pressures, including higher fuel-related utility costs and depreciation from store renovations.
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The timing and magnitude of future settlement payments remain uncertain, with potential for lumpiness in consumer demand.
Q & A Highlights
Q: What gives you confidence that the recent acceleration in First Nations child and care settlement payments will persist, rather than just being a temporary lumpy increase? A: Dan McConnell, President and CEO, explained that while optimism plays a role, the confidence stems from the large number of applications submitted versus the relatively few processed so far. With approximately 124,000 claims submitted and payments distributed in 54 of 63 impacted communitiesoften in small numbershe believes the system is becoming more efficient. He expects this to be a new baseline, though he acknowledged there could still be some troughs in the future.
Q: How much of the strong same-store sales growth was driven by passing through fuel surcharges versus other growth drivers like tonnage? A: Dan McConnell, President and CEO, stated that even excluding the pass-through of fuel costs, the sales increase remains healthy and higher than normal, indicating that the growth was not solely reliant on fuel-related price increases.
Q: Can you provide more color on the spending patterns and capture rate from the child and care settlement payment recipients? A: Dan McConnell, President and CEO, noted that the capture rate is in line with expectations and that ideal items typically purchased when recipients receive funds are moving well. He observed an uptick in payments starting late July into August and expressed pleasure with the trend, hoping it sustains or improves over the next few quarters, though he admitted predicting the exact cadence has been challenging.
Q: What were the main contributors to the SG&A increase, and which cost pressures are you most focused on managing? A: Dan McConnell, President and CEO, identified labor costs as the primary area of focus, noting that while staff productivity improved from Q1, there are still opportunities for improvement. He also cited higher depreciation from store renovations and increased fuel-related utility costs as contributors, but emphasized that labor is the key controllable cost they need to get their arms around in future quarters.
Q: How much pricing did you pass through in Q2, and what has the consumer reaction been to the fuel cost-driven inflation? A: Dan McConnell, President and CEO, acknowledged that consumer reaction to inflation has been negative. He stated that most of the inflation was passed through, except for essential items in key categories where they made targeted price investments. He declined to quantify the exact amount but indicated the same balanced pricing philosophy applies across both Canadian and international operations.
Q: Is the increased capital expenditure for aircraft purchases a pull-forward from future years, or a recent decision to buy versus lease? A: Dan McConnell, President and CEO, clarified that the decision is opportunistic and finance-driven. The purchases are accretive due to better productivity, reliability, and lower maintenance costs compared to expensive leases on less desirable aircraft. He emphasized that they are patient and disciplined, only buying when the right deals meet their hurdles, and noted this year's CapEx is a high watermark, not the new norm.
Q: How much of the fuel price and labor inflation pressures can be offset by the Next 100 initiatives? A: Dan McConnell, President and CEO, confirmed that Next 100 initiatives are providing a definite offset, putting them further ahead than they would have been without the program. While he declined to disclose the net differential, he expressed satisfaction with the program's execution and its role in providing tools to mitigate fuel-related pressures.
Q: Should we expect additional fleet upgrades and aircraft purchases in the upcoming years, or is this year an exception? A: Dan McConnell, President and CEO, stated that this year's level of capital expenditure is definitely a high watermark and not the new norm. Future purchases will follow the same disciplined, opportunity-driven approach, and they will not be excessive.
Q: Are you seeing any changes in the demand trajectory for the international segment heading into Q3, given the strong tourism environment? A: Dan McConnell, President and CEO, indicated that there are no current changes, but he remains optimistic as they head into the holiday season in Q3. The economic environment remains strong in most Caribbean and Pacific markets.
Q: Were the strong motorized sales gains isolated to the international operations, or were they also seen in Canada? A: Dan McConnell, President and CEO, confirmed that the strong motorized sales were seen in Canada as well, not just internationally, indicating broad-based strength in big-ticket categories across the business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
