Earnings call transcript: Groupe Dynamite Q2 2025 sees stock surge on strong earnings

Groupe Dynamite Inc. reported robust financial results for the second quarter of 2025, with significant revenue growth and a notable increase in net earnings. The company’s stock surged by 18.58% following the announcement, reflecting positive investor sentiment. Key financial metrics include an EPS of 0.57 USD and revenue of 326.4 million USD, signaling strong operational performance. According to InvestingPro data, the company maintains impressive gross profit margins of 62.4% and has achieved a remarkable year-to-date return of 112.29%, though current analysis suggests the stock may be trading above its Fair Value.

Key Takeaways

• Revenue increased by 36.5%, reaching 326.4 million USD.
• Net earnings rose to 63.9 million USD, up from 40.4 million USD.
• The stock price jumped 18.58% after the earnings release.
• The company launched new store concepts and collections.
• Guidance for full-year comparable store sales growth was raised to 17-19%.

Company Performance

Groupe Dynamite demonstrated impressive growth in the second quarter, driven by a combination of strategic expansions and innovative product offerings. The company’s focus on brand engagement and community-driven marketing has resonated well with consumers, contributing to a 28.6% increase in comparable store sales. The launch of new store concepts and collections further bolstered its market presence.

Financial Highlights

• Revenue: 326.4 million USD, up 36.5% YoY
• Net earnings: 63.9 million USD, up from 40.4 million USD
• Gross profit: 207.5 million USD, up 31.6% YoY
• Gross margin: 63.6%, down 240 basis points YoY
• Adjusted EBITDA: 120.5 million USD, up 49.1%

Market Reaction

Following the earnings announcement, Groupe Dynamite’s stock surged by 18.58%, closing at 41.29 USD. This increase places the stock near its 52-week high, indicating strong investor confidence. The market reacted positively to the company’s robust financial performance and strategic growth initiatives.

Outlook & Guidance

The company raised its full-year guidance for comparable store sales growth to 17-19% and adjusted EBITDA margin to 32-33.5%. Groupe Dynamite plans to open 8-9 net new stores this year and is preparing for its entry into the U.K. market. The management remains cautiously optimistic about the second half of the year.

Executive Commentary

CEO Andrew Lutfy emphasized the company’s commitment to customer satisfaction, stating, "We provide instant gratification. We make customers happy." President and COO Stacie Beaver highlighted the importance of speed-to-market, noting, "Our whole mantra is real-time speed-to-market on product." These strategic focuses are central to the company’s growth and market strategy.

Risks and Challenges

• Decrease in gross margin by 240 basis points YoY.
• Potential tariff impacts on gross margins.
• Macroeconomic pressures affecting consumer spending.
• Challenges in international market expansion.
• Supply chain disruptions impacting inventory management.

Q&A

During the earnings call, analysts inquired about Groupe Dynamite’s marketing strategy, store opening economics, and tariff impacts on gross margins. The company provided insights into its customer acquisition channels and expansion opportunities for the Dynamite brand, addressing key investor concerns.

Full transcript - Groupe Dynamite Inc (GRGD) Q2 2025:

Conference Call Operator: Morning, ladies and gentlemen, and welcome to the Groupe Dynamite second quarter fiscal 2025 results conference call. At this time, all participant lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require assistance, please press star zero for the operator. I would now like to turn the conference over to Alex Limosani, Manager, Investor Relations and Corporate Finance at Groupe Dynamite. Please go ahead.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: Thank you and good morning, everyone. Joining me on the call are Andrew Lutfy, Chief Executive Officer and Chair of the Board, Stacie Beaver, President and Chief Operating Officer, and Jean-Philippe Lachance, Chief Financial Officer. This morning, Groupe Dynamite released its financial results for the 13-week period ended August 2, 2025. The press release and related disclosure documents are available in the Investors section of our corporate website at groupdynamite.com and on SEDAR Plus. We will begin the call with short remarks by management, followed by a question and answer period with financial analysts only. A replay of this webcast will be available shortly after the conclusion of the call.

Before we begin, I would like to refer you to slide two of our Q2 2025 investor presentation, also available in the Investors section of our website, for a full statement on forward-looking information and to the presentation’s appendix for a reconciliation of non-IFRS to IFRS financial measures. I’ll now turn the call over to Andrew.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thanks, Alex, and good morning, everyone. Once again, welcome to the Groupe Dynamite second quarter fiscal 2025 results conference call. Granted, these are still early days as a public company, but one thing is for sure: our values-led culture has once again prevailed in delivering exceptional performance. As we often say internally, from an inventory perspective, we fly the plane 500 feet above the ground. Notwithstanding such, and going into the second quarter with a very lean level of inventory, we’re pleased to report comparable store sales growth of 28.6%. Furthermore, this amounts to an incredible 43% increase on a two-year stack. This performance was driven largely by an increase in traffic attributable to brand heat and an important increase in media brand impressions. We’re also very pleased to report Q3 to date comparable store sales are similar to those of Q2.

While quite incredible, we must be cautious as fall is upon us and with that, risks associated with new marketing or collections. Moving on to gross margin, our luxury-inspired business model prevailed through this very challenging quarter, as evidenced by an impressive gross margin of 63.6%. Despite tariff headwinds and supply chain pivots, this is the highest gross margin rate of the last four quarters. As we look at strategic initiatives for this fiscal year, focusing on store CapEx, we’re very pleased to report new store openings throughout North America are outperforming their plans. We’re also delighted to confirm the signing of five leases in the UK, advancing our international growth strategy. Those stores will all open through 2026, with the first in the spring.

As a reminder, we only invest in high-quality real estate, which we believe is part of a decade-long flight-to-quality shopping center or high street theme, which has seen recent acceleration. Also pleased to announce the opening of our first U.S. distribution center in Columbus, Ohio. This facility will ramp up over the course of the next 12 months. It’ll support growth and speed-to-market, reducing transit time to our stores, as well as e-commerce customers, and provide redundancy with our primary Montreal distribution center. I always say, first who, then what. From a people and culture standpoint, I’m very pleased to report our shared success program is fully deployed, whereby virtually all employees have been granted shares as well as the ability to purchase additional shares through our very generous purchase plan. Broadly speaking, we are convinced our leaders of tomorrow will be promoted from within.

We believe the shared values of ownership are reinforced with ownership. In closing, we’re often asked to elaborate on this luxury-inspired business model we’re so often referencing. It doesn’t mean being luxury in price, it means borrowing the discipline, scarcity, and brand positioning tactics of luxury houses and adapting them to a more accessible price point. Some of these pillars include engineered scarcity, brand elevation, operational and margin discipline, and experiential engagement. Dare I also say, many of these strategic obsessions go back a decade or more. There’s no such thing as overnight success. Now, let me hand it over to Stacie to share in more detail how we’re showing up and how we’re standing out.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Thank you, Andrew, and good morning, everyone. Q2 was about disciplined execution and agility. From product to stores to digital, our plans came to life and customers noticed. At the heart of this performance is the strength of our brand, our ability to create heat and momentum that truly resonates with her. Whether in store or online, the experience we deliver feels consistent, relevant, and true to who we are. That’s the standard we set, and that’s the standard we continue to deliver upon. Starting with our stores, in Q2, sales per square foot reached $820. This is an increase of 18.1% year over year. This momentum came from both strong product reception and steady progress in elevating the store experience, making it simpler, more engaging, and more aligned with how she wants to shop.

As Andrew has highlighted, our focus on premium real estate positions us very well to benefit from the long-term flight to quality. This is a trend we’re seeing in shopping centers as well as high streets. In the U.S., we added eight new Garage locations, including Somerset Collection Mall in Michigan and Ross Park Mall in Pittsburgh. We also relocated our Old Orchard location just outside of Chicago, as well as our Tysons Corner location, which is also just outside of D.C. Both locations relocated to stronger corridors within the mall, moves driven by data and designed to maximize visibility and traffic. In Canada, our Garage Ottawa Rideau Centre location also received an upgrade in size and styling. Also in Canada this quarter, we opened two newly renovated Dynamite 3.0 locations.

This provides us three flagship locations for this newest concept for Dynamite, which greatly expands our typical store square footage in size, look, and feel. Behind each of these stores are our people. Engagement is up and associate turnover is down. Our associates, as we like to say, are the embodiment of our brand. That’s why we continue to invest in them, whether through our ambassador program, training, or the right tools, so that they feel confident, connected, and ready to deliver a branded experience our customer can come to expect each time. They’re also building a sense of community inside these stores that goes beyond the transaction. Moving to digital, our online platforms remain where her journey with us often begins. As we know, she typically pre-shops or experiences the brand socially before ever stepping foot in a store, making the digital experience critical.

To this end, we continue to evolve our site and app to make them feel more intuitive, personalized, and effortless. We’re equally focused on how she first encounters our brand by pushing social and community-driven content that captures her attention and builds lifestyle relevance before she shops. We’ve been purposeful in making our social strategy more community-forward and brand accretive, leaning into influencer and community-led brand moments that generate authentic content, deepen lifestyle connections, and meaningfully expand our top-of-funnel reach. Finally, our loyalty program is evolving in parallel, transforming transactions into meaningful, experience-driven connections that keep her engaged well beyond the initial purchase. Now let’s look at each brand, starting with Dynamite. As we mentioned last quarter, our new concept store, which opened in Royalmount here in Montreal around this time last year, was the opening statement, a clear signal of what the brand is becoming.

This quarter, we carried that same elevated concept into Edmonton’s West Edmonton Mall and Quebec’s Promenade Saint-Bruno, with Carrefour Laval to follow in Q4. Each of these flagship builds on the Royalmount foundation: sophisticated design, stronger product storytelling, and an experience that feels modern, aspirational, and aligned with the brand’s next chapter. From a product standpoint, we anchor Q2 around dresses, a category core to Dynamite’s identity. We expanded our dress collection to cover more end uses and lifestyle moments in our customers’ lives. This expansion also enabled us to stretch our AUR offering with great success. Marketing activation of the quarter was also a dress focus entitled Court Edit, a campaign and collection timed with the major tennis tournaments in Montreal and Toronto this summer.

The designs were on trend, with polka dots as the featured print of the collection, and the creative struck the right tone, and the cultural moment provided added relevance. Customer response was strong from an engagement point of view as well as the sell-through of the collection. Turning to Garage, Garage delivered bold, connected storytelling in Q2. The standout was Sour Cherry, a capsule anchored in one color and brought to life across every channel, from campaign visuals to experiential events. The cohesion drove strong engagement and sales. Off-duty as a lifestyle continued to exceed expectations, with fleece and knits becoming wardrobe staples. Just two weeks ago, we launched Perky Plum, a limited edition collaboration with creator Howie Batchelor. Though early, the response has been encouraging, underscoring Garage’s DNA of co-creation with its community, product design not just for them, but with them.

For both brands, we continue to emphasize being part of the cultural conversation and woven into the communities we serve. This quarter, we saw meaningful progress in building brand heat, reflecting the strength of our connection and the momentum behind it. Media impressions grew significantly year over year, our active customer base expanded at a healthy pace, and our customers are returning more often and choosing to invest more with us than she did last year. These results highlight that our brand is resonating more deeply, strengthening its momentum and becoming an even more natural part of her everyday life. On the operations side, our new U.S. distribution center, which opened in July, is a real unlock. As Andrew mentioned earlier, over the next 12 months, the facility will gradually ramp up, boosting capacity, cutting delivery times, improving service levels, lowering last mile cost, and giving us smarter inventory control.

At the end of the day, this isn’t just about logistics, it’s about moving with agility. Rest assured, we will be carrying that same disciplined approach into expansion. Internally, we are continuing to plan our UK entry rigorously, which will be paving the way to our international growth story. To sum it up, this quarter, every part of the business, from product to marketing to our stores and digital, delivered at a high level. Our teams are creating experiences that feel relevant, differentiated, and rooted in community. Because we made the right investments early, we’re well positioned for the second half of the year, and we’re tackling it with the same discipline we’re known for. With the momentum we have, agility of our teams, Groupe Dynamite is on a strong path forward and ready to reach the next level in every market we serve.

I’d like to thank all employees for the tremendous results of Q2, and I’ll turn it over to JP to elaborate on the numbers. Thank you.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: Thank you, Stacie, and good morning, everyone. I want to begin by sharing that Groupe Dynamite was recently added to the MSCI Canada Small Cap Index, marking our first inclusion in a major public equity index. This milestone validates the progress we’ve made since our IPO and increases our visibility within the investment community. That visibility, together with our strong performance, has driven a notable improvement in the liquidity of our shares, an important step as we continue to broaden our investor base. Now, let’s turn to our financial results for the quarter. Total revenue for Q2 2025 increased by 36.5% to $326.4 million, driven by strong retail performance. This remarkable growth was driven by exceptional comparable store sales growth of 28.6%, over and above 14.7% in Q2 last year, along with contributions from new stores. Online revenue saw accelerated growth of 32.2%, reaching $46.7 million.

Gross profits for Q2 rose by 31.6%, or $49.8 million, to $207.5 million, with gross margin declining by 240 basis points to 63.6%, reflecting the impact of additional tariffs, especially early in the quarter, as some of the merchandise bought with a 145% tariff rate in China went through, partly offset by our mitigation efforts. With significantly faster inventory turnover than our peers, we’re seeing the impact of these cost pressures earlier. As mentioned on the previous earnings call, last year’s Q2 gross margin of 66% was elevated by favorable timing and lower occupancy costs, creating a difficult year-over-year comparison. Notwithstanding this, we are very pleased with the gross margin rate of 63.6% in Q2, as it is the highest we’ve seen in the past four quarters. Moving on to expenses, adjusted SG&A for Q2 2025 increased by 12.9% to $87 million compared to Q2 2024.

This increase was primarily driven by the company’s growing scale and activities, resulting in an increase in wages, salaries, and employee benefits, along with an increase in selling and marketing expenses, as both revenue and operations expanded significantly. As a percentage of sales, adjusted SG&A improved by a phenomenal 550 basis points compared to Q2 2024, demonstrating our ability to manage costs with discipline. Moving down the P&L, operating income grew by 61.4% to $97.3 million. Adjusted EBITDA rose by an impressive 49.1% to $120.5 million, with an adjusted EBITDA margin improving meaningfully by 310 basis points to 36.9%, the highest since we began reporting under IFRS, despite tariff-related headwinds. A clear reflection of our agility and of the strength of our luxury-inspired business model.

Net earnings reached $63.9 million in Q2 2025, compared to $40.4 million in Q2 2024, and adjusted net earnings increased by 51.8% to $64.8 million as a result of higher revenue and margin expansion. Looking at the cash flow statement, free cash flow increased by an impressive $43 million to $72.6 million in Q2 2025, reflecting strong cash generated from operating activities. Net leverage improved to 0.79x, compared to 1.59x in Q2 2024, reflecting higher adjusted EBITDA coupled with the repayment of all our outstanding commitments under the credit facilities, more than offsetting the increase in lease liabilities. We ended Q2 with over $151 million in cash and $312 million available under our credit facilities.

As part of our capital return strategy, we repurchased 355,300 shares in Q2 under our normal course issuer bid program at an average price of $19.70, totaling approximately $7 million, representing roughly 28% of the program. To date, we’ve completed approximately 41% of the total authorization at an average price of $17.78. We remain confident in the long-term fundamentals of Groupe Dynamite and continue to approach share repurchases with discipline, executing opportunistically when we believe the stock presents compelling value. Moving to key operating metrics, trailing 12-month return on assets rose to 24.1% compared to 22.8% in Q2 2024, and returns on capital employed rose to an impressive 45%, up from 41.9%, highlighting our capital efficiency and strategic execution.

As we look ahead to the back half of fiscal 2025, we are once again raising our full-year comparable store sales growth guidance to a range of 17% to 19%, up from 7.5% to 9%, reflecting strong year-to-date performance and sustained momentum in both transactions and basket size. With improved visibility into trade and macroeconomic conditions, at least in the near term, and recognizing that all costs related to the 145% tariff rate in China have now gone through the P&L between Q1 and Q2, we are also increasing our adjusted EBITDA margin outlook to a range of 32% to 33.5%, up from 30.3% to 32.3% previously, assuming trade conditions remain stable. In addition to the recently announced trade developments, we note the end of the de minimis exemption, which is truly immaterial and inconsequential for our business, as the majority of U.S.

e-com orders were already being fulfilled through our U.S. stores. Furthermore, we are modestly increasing our full-year guidance for store closures by one, resulting in net new stores of eight to nine for the full year. Our plans for store openings remain on track, with the bulk of new store openings slated for Q2 and Q3. New store openings to date in fiscal 2025 are tracking well ahead of our expectations, underscoring the strength of our real estate strategy. As always, we will monitor performance closely and maintain a disciplined approach to execution. With that, I’ll pass it over to Andrew for his closing remarks.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thanks, Stacie and JP. Closing out, I believe the Q2 results speak for themselves. With a heavy level of paranoia, we’re taking that enthusiasm into the back half of the year. While the consumer may be anxious or constrained, we play in that small subset of consumer discretionary, which is all about affordable indulgences that don’t require debt, but rather put a smile on your face. Call it the red lipstick effect, or in our case, the Sour Cherry effect. In any event, thank you for joining us. This concludes our formal remarks. I will now turn it over to the operator for the Q&A session with the financial analyst.

Conference Call Operator: Thank you. Ladies and gentlemen, we are indeed starting the Q&A session. Out of consideration for other callers on the line today, we do ask that you please limit yourself to one question and then get back in the queue. Thank you. If you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you’re on a speakerphone, please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from Michael Glen at Raymond James. Please go ahead, Michael.

Jean-Philippe Lachance, Chief Financial Officer, Groupe Dynamite: Good morning. Congratulations on posting some extremely strong results. Your results are substantially ahead of almost any specialty retail tier in North America right now. I’m just really trying to understand better where the outperformance is coming from. Can you give some insight into how the comp progressed through the quarter? Maybe a little more granularity on the traffic basket breakdown and maybe speak to some notable product categories where you’re seeing good strength right now.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Hey, Michael. Good morning, everyone. Michael, thank you, by the way, for initiating coverage. Very good of you and quite timely that we’re celebrating this milestone with great performance. Listen, where are we seeing it from? The results are really quite exceptional. I don’t know if anyone else is actually delivering these kind of numbers, not only because I did a little research myself. I was curious myself. As I think about where we were maybe a year ago or years ago, right? We pivoted from being a private company to a public company. I think pivoting to that public company brings on, it kind of reinforces our own internal values. One of the, probably the most important of our five shared values is this idea around ownership, accountability, right?

I could tell you management here has a very heightened sense of ownership and accountability in over-delivering or at a minimum delivering, but ideally over-delivering on commitments to our stakeholders. It’s a new paradigm 40-odd years later where we have these outside stakeholders, inclusive of yourself, and so everyone is rowing in the same direction, working towards that objective. Maybe we rowed a little faster than we thought we were going to row. First and foremost, I would say really it’s about the people, the teams, and leadership. Second, I would say there’s 20 years of engineering that have gone into what Groupe Dynamite is today, right? We do operate this luxury-inspired business model where it’s really an engineered success.

Part of all these pieces coming together are making it such that we’re reading customer data in real time, and we’re making merchandising and product decisions, as well as marketing decisions in real time. That empathy, that hyper empathy and customer centricity is, again, I believe, paying off. What I like about that is it’s a degree of engineered success versus crystal ball success when it comes to fashion, which never seems to work that well on a sustained basis. In terms of regions, I could tell you Canada and U.S. both overperformed. I could tell you within the U.S., we think of it often as five distinct markets. All markets regionally overperformed in the U.S. It’s not coming from one specific area. In terms of, as we keep double-clicking, I would say in terms from a product standpoint, listen, the collections were really, really tight.

Honestly, I must say, the success was really quite broad-based. Our markdowns, which were insignificant going into the quarter, were even further reduced, which is almost inconceivable. I would say, listen, with all of that, we’ve really stepped on the gas from a marketing standpoint. Whether it’s these, what we call big brand moments and strategic marketing and positioning, they’ve really worked out super well. The impressions have been very, very high. The engagement has been very high. With this kind of performance, one would have to imagine you’ve got to be firing on all cylinders. It is a broad base. It’s not one specific thing we can actually point to. Sorry for the long answer to a short question, but it is ultimately the truth.

Jean-Philippe Lachance, Chief Financial Officer, Groupe Dynamite: Thank you.

Conference Call Operator: Thank you. Next question will be from Irene Natel at RBC Capital Markets. Please go ahead, Irene.

Jean-Philippe Lachance, Chief Financial Officer, Groupe Dynamite: Thanks, and good morning, everyone. Let me add my congratulations to a truly stunning quarter. As we think about expanding the store base and geographically into the UK, I’m really intrigued by this idea of community that you keep coming back to. Can you talk about some of the marketing spend, how you’re preparing for the expansion in the UK, and your confidence around the ability to continue to see this pace of engagement through the balance of the year, but really in future years?

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Good morning, Irene. It’s Stacie. I’ll shoot you an answer to this one. Yes, we’re very excited about going into the UK and very optimistic about it. We feel like that market is very similar to demographic, university-based, and our target customer is similar to the U.S. I’ll touch a little bit on what Michael just asked as well, because that will also shed some light on why we have so much confidence. Our traffic is up with a strong, obviously, acquisition strategy at play, both digitally and in stores. It’s the frequency that she’s coming back. To Andrew’s point, we have strong brand momentum, strong brand moments, as we call them, and brand marketing that is creating this community and bringing our top influencers, our ambassadors, our loyalty customers, all into one segment. We’re watching how those teams and groups of people are talking about us.

We believe the more we take up of a conversation, we refer to it as brand heat, they’re coming back because they want to be associated. We’ve shared with you guys a number of times, we’re not selling anything she needs, but we’re selling things that we’re trying to create things she wants to have, and she wants to be a part of that community. We’re really dialed into the connection of the pyramid between influencer marketing, ambassador, localized, and more personalized push, and then our loyalty customers being a part of that journey. We will continue that same strategy as we enter the UK. Think of it more as a grassroots, again, dialing into our customers there. We know currently our third country of social following is coming from the UK area.

Jean-Philippe Lachance, Chief Financial Officer, Groupe Dynamite: That’s great. Thank you.

Conference Call Operator: Thank you. Next question will be from Andrew Lutfy at TD Cowen. Please go ahead, Andrew.

Speaker 0: Hey, good morning. This is Andrew on for Brian. In terms of maybe the new store openings, having visited some of the newer stores down south, it appears to be pretty heavy traffic that we’re seeing so far with those stores. Can you just speak to how these new store economics are trending and what this means with respect to your payback period for new stores?

Jean-Philippe Lachance, Chief Financial Officer, Groupe Dynamite: Hey, good morning, Andrew. This is JP. Thanks for the question. Look, we’re very, very happy with recent store openings. They’re all pretty much performing better than expectations, both from a top-line perspective and also from a bottom-line profitability perspective. Definitely seeing some good traction there. I definitely refer to the 2024 openings as well as the year-to-date openings this year. When it comes to payback periods, not going to lie, we’re improving. At the time of the IPO, we were talking about a two-year-ish payback, slightly under two years. I can tell you it’s getting better by a couple of months. Certainly we’re happy. All of our store openings this year are GARAGE locations in the United States, most of them being tier one, tier two high-quality locations. The sales per square foot that we’re getting out of these units is certainly way above the chain average.

Very pleased with the success from new store openings recently.

Speaker 0: Great, thank you. I’ll jump back in the queue.

Conference Call Operator: Thank you. Next question will be from Stephen MacLeod at BMO Capital Markets. Please go ahead, Stephen.

Speaker 0: Thank you. Good morning, everyone, and congrats on a very solid quarter. My question is really around the media brand impressions, which I know you called out as a key driver of the comp growth in the quarter, along with the brand heat. I’m just curious if you can give a little bit of color around how you’re approaching that media strategy and maybe some examples of where you invested either within the quarter or prior to the quarter, just to drive that increased frequency of impressions.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Good morning. Thanks again. On our marketing efforts, we’ve talked about this a few times as well. I would say prior to the end of last year, most of our marketing activities were more digitally focused, so paid media. We introduced the notion of these brand moments or brand marketing end of last year, and it’s really ramped up this year across both brands. It is an opportunity where we’re hosting a brand activation, bringing again that community back in. From loyalty customers to ambassadors, our store associates and influencers, that reach has been massive. Our impressions are up three times what they were last year, and we are going to continue to double down on what that looks like.

We’re sticking with our % of sales on marketing, but as you know, as we’ve guided before, we look at everything with the return on investment and pivot within those channels. The brand marketing one is overachieving right now, and it’s driven by the influencers, and you will see continued double down on those efforts.

Speaker 0: Great, great. Thank you, Stacie.

Conference Call Operator: Thank you. Next question will be from Vishal Shradar at National Bank. Please go ahead.

Speaker 0: Hi, thanks for taking my question. With respect to pricing, can you just talk about it? How much was in the comp and how we should expect that to evolve going forward? While you’re commenting on that, just give us the embedded thoughts on how tariffs are reflected in your guidance.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: We’re all looking at each other. Okay, who’s taking this one? Sorry for the pause. JP, why don’t you go?

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: I’m very happy to start with the guidance piece, obviously. We did revise our guidance ranges for the full year, obviously on the back of very strong Q1 and Q2 performance. We’re happy with our new comps guidance range of 17% to 19%. This does reflect the 21.8% comp per H1. It also reflects the strong performance we’ve seen in Q3 to date, which is five and a half weeks, in line with the Q2 performance, as always, as Andrew mentioned in his opening remarks. We are cautiously optimistic on the balance of the year as fall brings a new collection and new marketing, but certainly, you know, cautiously optimistic about the second half. We think 17% to 19% is the right range. Moving to the EBITDA margin guidance range, which we’ve also increased to a range of 32% to 33.5%.

Reality is, on a year-to-date basis, we are slightly above that at 33.9%, and all tariffs at 145% out of China have gone through our P&L. The good thing is we have more clarity on these tariffs. However, I have to note the end of the 90-day pause with China later in November. As a result of this, we have taken a cautious approach to our guidance. Certainly, if tariffs were to stay where they are today, I think the upper half of that range would be very much in play, but we don’t know what we don’t know. As a result of that, we’ve decided to be cautious with this new range, which still represents a significant improvement compared to prior guidance. I hope that answers the question properly.

Speaker 0: Thank you.

Conference Call Operator: Thank you. Next question will be from Chris Lee at Desjardins Capital Markets. Please go ahead, Chris.

Speaker 0: Good morning, everyone. Congrats on the strong results. You touched on this earlier already, but I was wondering if you can talk a little bit more about your key assumptions in terms of both consumer behavior and the competitive environment that underscore your expectation for continued momentum in terms of comp store sales in the second half of the year. Maybe you can talk a lot about Canada versus the U.S. as well. That would be quite helpful. Thank you.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yeah, hey Chris, it’s Andrew. I’ll take this one. Listen, so far as, let’s say, markets, going back to my earlier comments, we’re seeing success in both markets. I think part of it is, well, I mean, there are a few things at play, right? We are, yes, seeing success in all markets, Canada and USA. From a consumer standpoint, like, you know, I often make reference to the fact that we, of course, play in that realm of consumer discretionary. Within the realm of consumer discretionary, the majority of consumer discretionary requires debt. This is not, to me, an environment where the consumer is loading on debt. They’re not buying homes, big ticket items, furniture, and cars, and so on and so forth.

There’s something, and you know, even within, let’s say, apparel and fashion, where we’re at, we’re in a really interesting place where, you know, fundamentally, we provide instant gratification. We make customers happy. It’s the red lipstick effect, or in this case here, we had a big collection this past late summer called Sour Cherry, which did amazing. We really bring this, you know, for the price of a martini in a nice restaurant, we’re putting smiles on people’s face. We deliver this, I guess, this degree of happiness. I’m going to go even into our real estate strategy, right? Over the course of the last six years, I think we’ve shut well over 100 stores, well over 100 stores, just within Groupe Dynamite. I think we’ve opened about, I’m not sure how many stores, but we’ve opened a lot of stores.

As we keep closing these tier five stores and we keep opening in these investment-grade assets, what we’re seeing is we’re investing in assets that are gaining market share, right? We’re investing in assets where you can model probably a rate of growth, maybe twice the rate of inflation. This is just based on our own experience. We’re investing in real estate, in real estate that is growing faster than the broad-based rate of growth. Customers are, these are better assets. We end up being, I guess, the nicest house, sort of the nicest, the smallest house on the nicest street, the smallest house on the nicest street, meaning our price points are probably in the bottom quartile in terms of average unit pricing relative to the peers in these better assets. We might be benefiting from a customer that is trading down, right? It’s really hard to know.

I mean, listen, in Canada, we’ve had a closure of the Bay, you know, and in the U.S., there’s, you know, countless department stores that keep closing. Somewhere along the way, there’s dollars that are getting redistributed back into specialty. Are we benefiting? Probably to a certain extent, we might be benefiting. Again, hard to know exactly where and why, but I would say that these strategic moves that we have employed going back over the last five and ten years are paying dividends.

Speaker 0: Very helpful, Andrew. Thanks and all the best.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thank you.

Conference Call Operator: Next question will be from Luke Hannon at Canaccord Genuity. Please go ahead, Luke.

Speaker 0: Thanks. Good morning, everyone, and congratulations on the results. I wanted to ask about the gross margin during the quarter. It’s 240 basis points, the contraction year on year. It sounds like that was most or mostly or entirely related to tariffs, but JP, if you could confirm that. Maybe as a follow-up to that as well, the USDC, I know it just only went live. It’s going to be a 12-month ramp-up. How should we think about that as far as it’s eventually becoming additive to corporate gross margins over the course of those 12 months? Thanks.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: Good morning, Luke. Thank you for the question. I’ll take the first part and I’ll ask Stacie to take the second part. Gross margin, if you recall on the prior earnings call, I did warn the street that there would likely be a year-over-year decrease in gross margin rate. That was caused by two factors. Number one, you are absolutely correct. Tariffs would be one of them. Also, last year’s Q2 gross margin rate, and let me remind everyone that we were not public yet at the moment, was slightly on the high side as a result of positive timing due to occupancy cost. Basically, what I’m saying is the 66% last year for the same quarter was on the high side and created a bit of a high bar for us to match this year.

I think there’s a little bit of that, and certainly this year, especially as you think about the first portion of Q2, we did have some of these orders at 145% tariff from China go through the P&L. Again, one of our secret powers at Groupe Dynamite is really to turn quickly our inventory. What that means is with that level of agility, that means these tariffs went through our P&L a little sooner than some of our peers, and that is why the earlier part of Q2 was affected. At the end of the day, we are very pleased with the gross margin rate of 63.6%. It’s in fact the highest we’ve seen in the past four quarters, and again, this was fully expected. Stacie, over to you for the USDC.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Yeah, as you mentioned, the USDC opened for us mid-July, so we’re coming up on our second month. We have a team actually to continue to help onboard and implement our strategies down there, similar to what we’re doing up here in Montreal. We think the biggest benefit obviously is going to be speed. We talk a lot about agility around here. Last mile delivery will help tremendously, being able to ship faster to the stores and also to the customer via e-com through this DC. We expect to ramp up over the next 12 months and are excited about how things are progressing so far.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: When it comes, and just to complement that, just to illustrate what that means in terms of economics for the P&L, look, the introduction of the USDC is a positive for us. Obviously, we will be ramping this up operationally in the next 12 months, which means that the financial benefits will also be ramping up slowly over those 12 months, but it is a positive for us. There were certain inefficiencies in the supply chain from having only one DC in Canada. That new DC opens up more opportunities for us. It will be margin accretive, but again, we’ll ramp up both operationally and financially over the next 12 months.

Speaker 0: Got it. Thanks.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: Thank you.

Conference Call Operator: Next question will be from Martin Landry at Stifel. Please go ahead, Martin.

Speaker 0: Hi, good morning, guys. Congrats on your great results. I want to dig in a little bit into Canada. You know, your revenues are up 25% year over year, despite the fact that you closed six stores there. It’s a really impressive performance. I want to talk a little bit about Dynamite, the brand. You did say that you’re doing some pilot stores in Saint-Bruno, in Edmonton, and Laval. I’m wondering, at what point do you roll out that Dynamite 3.0 store design to the broader chain? Just a little bit of color on that. Also, what are you seeing in terms of sales uplift from that Dynamite 3.0 design?

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Good morning, all. I’m sure Andrew’s going to jump in, but I’ll take a stab at how things are going. Yes, we’re very impressed with Canada. When we look at the comps, they’re very equal to the U.S. Knowing that Canada is a more mature market, it’s nice to see that that customer is responding the same way as a growing market. Turning to Dynamite, as I mentioned earlier, Royal Mount opened just about a year ago, I think a year and a week at this point. That was the new direction, honestly, for Dynamite. That was putting that new direction forward, a larger square footage, more open layout, so the product can actually shine in an elevated customer service and fitting room experience. Obviously, as it was the first new store in that prototype, we had no benchmark. We were very excited to open up WestEd out in Edmonton.

We are seeing correlations back to the Royal Mount performance. Obviously, I can’t benchmark traffic, but traffic is phenomenal. That mall has a lot of, again, ingrained traffic, and then we’re able to capitalize on it. We like to say she’s walking by, seeing a beautiful store and coming in, and our lovely associates are able to convert. Saint-Bruno here in Montreal just opened a short while ago, and we’re seeing the same thing. Overall, with the three locations, we’re seeing a higher basket size, larger AOV, and more traffic. We think that will continue. We think it will level out as the stores are not as novel and new, but the AOV has been consistent throughout the year for Royal Mount. The big driver is just how much traffic can we continue to bring in.

Off to a great start and excited for Laval, again, here in Montreal to open end of November, early December of Q4.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: I’ll add, in terms of forward, we’re not in a rush. We’d like to be somewhat methodical in terms of these strategic decisions. We’ll keep watching and reading into it over the next six months and 12 months, and come back to you with something maybe at that time. What I would also add to Stacie’s comments is what’s interesting is it allows us these doors, if you will, the Dynamite 3.0, it’s kind of like the tail that wags the dog. It basically allows us to elevate the brand’s positioning. It allows us to be both insofar as product and product development, so more elevated product, more elevated product development, and even more elevated marketing. It’s an interesting continuum. More to come. We’ll keep you posted, but thus far we are enthused.

Speaker 0: Thank you for the call.

Conference Call Operator: Thank you. Next question will be from Mark Petry at CIBC. Please go ahead.

Speaker 0: Yeah, thanks, and good morning. When you look at your customer data and as your growth and customer acquisition in the U.S. accelerates, is it fair to say that the stores are the biggest factors? Is that sort of what’s bringing people in, or are more of the new customers coming in online? Any comment you can share just with regards to who that new customer is? Are the demographics shifting at all as your marketing is tweaked?

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: I’ll take a stab at this one. I would say our marketing efforts are what’s bringing her in. We still have a lion’s share of the business coming through stores, but I would definitely say she’s experienced us and introduced to us for the first time digitally, whether that be our website or social platforms. Congratulations and thanks to our marketing team. I think we’re showing up exactly how we want to be, and that’s resonating in new markets. Typically, our new stores have a line waiting for their 10:00 A.M. opening of the mall, and that’s unheard of in this day where we’re in the state for the first time. We are seeing a buzz and encouraging signs when we go into new markets, and typically their response is they’ve seen us on Instagram or TikTok, and I think the marketing team is doubling down on those thoughts.

Everything we’re doing is resounding in real-time customer information, and as you guys know, we speak the word agility. We’re buying very close in, but we’re also watching where she’s coming in at, what she’s responding to, and doubling down on that. I think all facets of the business are very agile at this moment and building into a strong Q4.

Speaker 0: Appreciate that. All the best.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Thank you.

Conference Call Operator: Next question will be from Adrian Hee at Barclays. Please go ahead, Adrian.

Speaker 0: Good morning. This is Mike Vu on for Adrian Hee, and we also wanted to share congratulations on your strong results, and thank you for taking our question. We wanted to touch on Dynamite, specifically related to the U.S. Can you frame what the opportunity is and what your learnings are from your existing stores there? I feel like there’s a great opportunity for that brand, so any color you could share on the growth opportunity would be helpful. Thank you.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Yeah, I would say our Dynamite U.S. business is very, very small. We were tied down there with three stores, so honestly, the e-com penetration down there is the highest to the brick-and-mortar business, which would make sense with only three locations. Our growth down there is, I would say, paused at the moment in trying to figure out the positioning of the brand in Canada. That 3.0 location in those bigger stores and repositioning in the brand that has known and loved us for almost 50 years was pivotal before we jumped into a brand new country and tried to compete down there, which we know the competition is more steep. Eventually, I’ll let Andrew answer, but I would love to copy and paste the success we’ve had in Garage. I think it’s very similar.

This flight to quality on real estate where you have built-in traffic coming in, as long as you can surprise and delight them with the product, I think the teams can convert. I see an immense opportunity at some point when we’re ready to jump the border.

Speaker 0: Thank you.

Conference Call Operator: Thank you. Next question will be from John Zamparo at Scotiabank. Please go ahead, John.

Speaker 0: Thank you very much. Good morning. I wanted to come back to the marketing strategy, and I wonder how you think about this longer term. The level of sales generation that you’re achieving enables or provides for more room to maneuver on the marketing side and more capital to spend. Based on the last couple of quarters, it seems as though your ROAS is significantly higher than what it’s been in the recent past. I appreciate the comment earlier about keeping ad spend at the same proportion. Do these results make you contemplate greater future investments on the marketing side?

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: I think it’s something to be discussed. Right now, we have plenty, like a pool of money, plenty, you know, to cover everything we want to do. I think you’ve just seen a shift away from traditional paid marketing media to more of brand marketing and activations and talking to our customers. Our whole mantra is real-time speed-to-market on product, real-time speed-to-market on what the customer is excited about, what’s trending down to, you know, which stylists are trending, which actresses, musicians, dance, everything. We are watching social culture very, very closely to respond to what is going on with our target customer. Again, wanting to respond to her as a friend or part of her community, not like an organization.

That real-time spreads across what we’re delivering in product, the color drops we’re dropping, the marketing, the faces you see that we’re putting behind the brand from models to influencers, et cetera. It’s the fun part of the job. It’s the pulse of culture. We have a whole team called a Brand Fashion Office marching towards all of that stuff, and they’re feeding the product teams and the marketing team.

Speaker 0: Okay, I appreciate the color. Thank you.

Conference Call Operator: Thank you. At this time, it appears we have no other questions registered. I will turn the call back over to Andrew for any additional closing remarks.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thank you. That great quarter, teams are all excited. We’re looking forward to the back half of the year. I guess that’s about it. I want to thank everyone for their questions today, taking the time and investing your time, effort, and energy into Groupe Dynamite. Thank you all on behalf of management here in the office with me. I wish you guys a wonderful day. Thank you. We’ll speak soon.

Conference Call Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we.

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