Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Andrew Peller Ltd (ADWPF, Financial) reported strong year-over-year growth in revenue, margins, and EBITA for Q3 2025.
- The company successfully expanded its distribution network in Ontario, adding over 4,000 new retail locations.
- Andrew Peller Ltd (ADWPF) gained market share in the total wine and VQA wine categories, with strong performance from brands like Gretsky, Gray Monk, Peller, and Trius.
- The company achieved significant working capital improvements, reducing inventory levels and improving free cash flow.
- Andrew Peller Ltd (ADWPF) continues to innovate in the 'healthier for you' wine segment, with Honest Lot being the fastest-growing brand in their portfolio.
Negative Points
- The company experienced anticipated declines in sales through the LCBO and company-owned retail stores.
- There are ongoing inflationary cost pressures in concentrate, packaging, and other raw materials.
- Selling and administration expenses increased by 11% compared to the prior year, impacting overall profitability.
- The potential trade conflict between the US and Canada poses a risk, with possible tariffs on US-sourced bulk wine and components.
- The personal wine-making business and company-owned retail stores are experiencing softness as consumers adjust to the new distribution landscape.
Q & A Highlights
Q: Can you provide more details on the big box rollout and the optimization of your commercial structure during the quarter?
A: Patrick O'Brien, Chief Commercial Officer, explained that retail modernization is still in its early stages, but Andrew Peller Ltd is performing well, particularly in Big Box and grocery channels. The company is leveraging its diverse portfolio to meet different consumer needs across various channels and will continue to evaluate and adapt its offerings.
Q: The margin performance was strong this quarter. Do you expect cost savings initiatives to increase in magnitude or scope over the next 6 to 12 months?
A: Paul Dubkowski, CFO, noted that the company has benefited from a $20 million, two-year savings program nearing completion. While some inflationary pressures remain, they expect margin expansion moving forward, despite seasonal fluctuations in Q4.
Q: How much of the strong sales in Big Box was due to channel load-in?
A: Paul Dubkowski acknowledged that while there was some load-in, the focus on Big Box has been strategic, and the company is winning in that channel. They expect further stabilization over time as they continue to meet customer needs.
Q: How do margins in the Big Box channel compare to your legacy retail business or LCBO?
A: Patrick O'Brien stated that while they expect to maintain strong margins overall, there may be increased costs as the market evolves and becomes more fragmented.
Q: Can you provide an update on the Port Moody development?
A: Paul Dubkowski mentioned that they are actively engaged with the city and developers, aiming for a 12- to 18-month timeline to move forward. While interest rates are becoming more favorable, construction costs remain high, and demand is variable due to restrictions on foreign investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
