Earnings call transcript: Groupe Dynamite Q3 2025 sees 40% revenue surge

Groupe Dynamite Inc. (GRGD) reported a significant revenue increase of 40.3% for Q3 2025, reaching CAD 363 million. The company’s earnings per share (EPS) came in at CAD 0.72, reflecting strong financial performance. Following the earnings announcement, Groupe Dynamite’s stock price rose by 9.75%, closing at CAD 85.92. The company also raised its fiscal 2025 sales guidance, contributing to positive investor sentiment.

Key Takeaways

• Revenue increased by 40.3% year-over-year to CAD 363 million.
• Comparable store sales grew by 31.6%, outpacing Q2’s growth.
• Stock price surged by 9.75% following the earnings release.
• Fiscal 2025 sales guidance was raised, indicating continued optimism.
• Successful product campaigns and store expansions highlighted.

Company Performance

During Q3 2025, Groupe Dynamite demonstrated robust growth across its core business segments. The company capitalized on strong consumer demand, particularly in its dresses and denim categories, as well as in the off-duty lifestyle segment. The introduction of the "Made You Look" jeans campaign and new store concepts like Dynamite 3.0 contributed to increased brand engagement and sales.

Financial Highlights

• Revenue: CAD 363 million, up 40.3% year-over-year
• EPS: CAD 0.72, reflecting significant profitability
• Gross margin: 66.1%, highest in three years
• Net earnings: CAD 81.5 million, more than doubled from the previous year
• Free cash flow: CAD 119.5 million, nearly tripled year-over-year

Earnings vs. Forecast

Groupe Dynamite’s EPS of CAD 0.72 exceeded market expectations, which had anticipated a more modest performance. The company’s revenue of CAD 363 million also surpassed forecasts, signaling effective execution of its growth strategies.

Market Reaction

Following the earnings announcement, Groupe Dynamite’s stock price experienced a notable increase, rising by 9.75% to CAD 85.92. This movement positions the stock closer to its 52-week high of CAD 92.89, reflecting investor confidence in the company’s strategic direction and financial health.

Outlook & Guidance

Groupe Dynamite raised its fiscal 2025 comparable store sales guidance to a range of 25.5% to 27.5%, and adjusted its EBITDA margin outlook to between 35% and 37%. The company plans to launch a UK website in early 2026, followed by its first store opening in the region, signaling international growth ambitions.

Executive Commentary

"Our luxury-inspired business model, coupled with further brand elevation, has struck another big wave," remarked Andrew Lutfy, CEO of Groupe Dynamite. Stacie Beaver, President and COO, added, "We’re seeing a healthy, growing, active customer base." These statements underscore the company’s strategic focus on brand elevation and customer engagement.

Risks and Challenges

• Economic environment: Navigating a K-shaped recovery that may impact consumer spending patterns.
• Market saturation: Potential risks from expanding into new markets with established competitors.
• Supply chain disruptions: Ongoing global supply chain issues could affect inventory and costs.
• Currency fluctuations: As the company expands internationally, currency volatility may impact financial results.

Q&A

During the Q&A session, analysts inquired about the company’s store location strategy and brand positioning. Management confirmed that traffic growth and average unit retail (AUR) increases are key performance drivers, and discussed plans to enhance margin expansion through strategic investments.

Full transcript - Groupe Dynamite Inc (GRGD) Q3 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Groupe Dynamite third quarter fiscal 2025 results conference call. At this time, all lines are in the listen-only mode, and the conference is being recorded. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate 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 JP Lachance, Chief Financial Officer. This morning, Groupe Dynamite released its financial results for the 13-week period ended November 1, 2025. The press release and related disclosure documents are available in the Investor section of our corporate website at groupdynamite.com and on SEDAR+. 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 Q3 2025 investor presentation, also available in the Investor 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 will now turn the call over to Andrew.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thanks, Alex. I’d like to take a moment to welcome our valued guests and participants on the line this morning. We know your time is precious. Thank you. Our luxury-inspired business model, coupled with further brand elevation, has struck another big wave. That much being said, I’m so incredibly proud of our teams and the relentless pursuit of excellence, resulting in another outstanding quarter with Adjusted EBITDA margin reaching a record 40.2%, up 650 basis points year over year. And yes, you heard right, 40.2%. Despite coming into the quarter with a very lean level of inventory, I’m once again incredibly proud to report comparable store sales increased an incredible 31.6%, an acceleration from Q2’s 28.6%. I’m also excited to share Q4 to date, comparable store sales are comfortably in line with those reported for Q3, with Black Friday week being very robust and ahead of plan.

Both Q3 and Q4 to date are mainly the result of increased traffic and market share combined with higher transaction values. I’d like to point out these results can only be achieved thanks to our agile and well-engineered supply chain, which are part of this luxury-inspired business model we so often speak of. With most of our tariff-related volatility behind us, we are pleased to report best-in-class gross margin of 66.1%, our highest level in more than three years. While these results continue to exceed expectations, the initiatives driving brand heat are incredibly intentional. Building on this momentum, we are raising our fiscal 2025 guidance on both comparable sales and adjusted EBITDA margin. I do apologize for being suspenseful, but JP will shortly cover these upward revisions.

It’s always fun to be sharing good news and positive developments, but rest assured, these are the results of clear aspirational vision and a value-led leadership team that gets it, wants it, and can do it. With that, let me hand it over to Stacie, who will provide you some color.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Thank you, Andrew, and good morning, everyone. Once again, Q3 was a quarter of disciplined execution and exceptional agility. Across stores, digital, and social, the product and brands are resonating and strengthening customer engagement. This quarter, we’ve seen outstanding new customer growth in both Canada and the United States. Additionally, we have an expanding base of loyal customers who are returning more often and purchasing more than ever before. This customer reaction is leading to one of the things I’m most proud of, which is the comparable store sales results, as each quarter has shown significant sequential improvement, with Q3 at 31.6%. Our total sales per sq ft also grew 24.7% year over year to CAD 889. Our compelling product offering, visual presentation, and brand storytelling is resonating and further reinforces our belief that emotional connection to the brand is driving real value. A little color on each brand.

On the Dynamite side, our Q3 assortment was anchored around dresses and denim, and our Made You Look jeans campaign resulted in impressive increases in brand reach and engagement. On the Garage side, we delivered another powerful quarter rooted in multi-channel storytelling. Our assortment continues to focus on our off-duty lifestyle driven by knits and fleece. The two color drops this quarter, Perky Plum and Rouge Aura, which were brought to life through brand moments and extended across all social channels, resulted in outstanding brand reach increases and, in turn, double-digit traffic growth across the channels, underscoring the strength and growing awareness of the Garage brand. In the U.S., we opened eight new Garage stores this quarter, marking our first physical entry into three new markets of Louisiana, Virginia, and Washington State.

These are markets where we already saw strong brand reach and customer engagement through our social channels, and we’re now bringing the full in-store experience to meet that demand. Additionally, in Canada, we continue to elevate our fleet with three new remodels, including the conversion of Dynamite at Promenade St-Bruno here in Quebec to our new 3.0 concept. Early performance across the new and remodeled stores is encouraging, with positive traffic and conversion signals. Finally, I’m excited to share that just a few days ago, we converted another Dynamite store at Carrefour Laval, also here in Quebec, bringing us to four total 3.0 locations. Underpinning this store success are approximately 6,000 field associates. Engagement is up, turnover is down, and our teams are showing what it means to live our culture with intention. Their work is central to our competitive edge.

To every field associate, thank you for the energy, grit, and heart you bring every day, especially through a truly wild Black Friday weekend. Furthermore, we continue to make progress on our digital initiatives, resulting in an e-commerce penetration of 40 basis points year over year. This was driven by double-digit traffic growth and supported by a stronger platform performance and more intention around digital storytelling. Total brand reach more than doubled versus last year, proving the strength of our content ecosystem and our ability to shape conversations around the brands. The ramp-up of our U.S. distribution center is progressing well and continues to improve our capacity, speed, and service levels. This quarter, the DC began servicing e-commerce, which supports long-term scalability and enhances inventory efficiency across the system. To conclude, this quarter, every part of the business delivered at a high level.

With our foundation strong and momentum building, we are poised to take performance even higher. Our November launches of the Midnight Blue color in Garage and Hotel Dynamite campaign have led us into Q4 confident, aligned, and focused on delivering strong brand experiences and deepening our community connections. Once again, I want to thank all of our teams for their value-driven work, passion for our brands, and their commitment to excellence. And with that, I will turn it over to JP for the financials.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thank you, Stacie, and good morning, everyone. Total revenue for Q3 2025 increased by 40.3% to CAD 363 million, driven by our strong retail performance. This outstanding growth reflects the continued momentum in our business, highlighted by brick-and-mortar comparable store sales growth of 31.6%, an acceleration from the exceptional 28.6% we delivered in Q2, along with contributions from new store openings. We also saw accelerated growth in our online revenue, which increased 43.3% to CAD 63.2 million, with online penetration expanding by 40 basis points year over year. Gross profit for Q3 rose by 47.3% to CAD 240 million, with gross margin expanding 310 basis points to 66.1%, the highest in more than three years. This performance was driven by our pricing strategy, which has limited reliance on markdowns, partially offset by tariffs. Moving on to expenses, adjusted SG&A for Q3 2025 increased by 24% to CAD 94.1 million compared to Q3 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 an impressive 340 basis points compared to Q3 2024, demonstrating our ability to manage costs with discipline. Moving down the P&L, operating income grew by 90.3% to CAD 120.1 million. Reflecting this strong operational execution, our agile, luxury-inspired operating model delivered a record adjusted EBITDA margin of 40.2%, an expansion of 650 basis points year over year. Net earnings reached CAD 81.5 million in Q3 2025 compared to CAD 40.4 million in Q3 2024, more than doubling year over year. Adjusted net earnings increased by approximately 90% to CAD 83 million, driven by higher revenue and margin expansion.

Turning to the cash flow statement, free cash flow increased by an impressive CAD 77.3 million to CAD 119.5 million in Q3 2025, almost triple year over year, reflecting strong net earnings and changes in non-cash working capital components. Net leverage improved to 0.45x compared to 1.41x in Q3 2024, reflecting higher adjusted EBITDA and the resulting increase in cash balance, along with the repayment of our outstanding commitments under our credit facilities. These factors have more than offset the increase in lease liabilities and allowed the company to reduce leverage significantly. We ended Q3 with nearly CAD 254 million in cash and CAD 312 million available under our credit facilities. As part of our capital return strategy, we repurchased 123,800 shares in Q3 under our NCIB at an average price of CAD 63.11, totaling more than CAD 7.8 million and representing roughly 10% of the program.

To date, we’ve completed approximately 50% of the total authorization at an average price of CAD 26.44. We remain confident in Groupe Dynamite’s long-term fundamentals and continue to execute repurchases with discipline, leaning in opportunistically when we believe the stock presents compelling value. Staying on capital allocation and reflecting the strength of our profitability and cash flow generation, we also announced a CAD 2.30 per share one-time special dividend. We view this as an effective way to return capital to shareholders, consistent with our commitment to enhancing long-term shareholder value. On a pro forma basis, leverage would have been approximately 1.05x as of November 1, 2025, and we remain in an excellent financial position with roughly CAD 316 million in pro forma available liquidity.

Turning to key operating metrics, trailing 12-month return on assets rose to 27.2% compared to 23.8% in Q3 2024, and return on capital employed increased to an impressive 50.5%, up from 43.3% in Q3 2024, highlighting our capital efficiency and strategic execution. For fiscal 2025, based on strong year-to-date results and the continued momentum across the business, we are raising our full-year comparable store sales growth guidance by 850 basis points to a range of 25.5%-27.5%, up from a range of 17%-19%. With improved visibility in trade and macroeconomic conditions, we are also increasing our adjusted EBITDA margin outlook to a range of 35%-37% compared to our prior range of 32%-33.5%.

Turning to capital expenditures, we are revising our fiscal 2025 CapEx guidance to a range of CAD 85.00-CAD 95.00 million, down CAD 10.00 million from our prior range of CAD 95.00-CAD 105.00 million, mainly reflecting cost savings as well as timing. Finally, we continue to expect eight to nine net openings in fiscal 2025. As of Q3, we’ve opened 17 stores with three more expected by year-end and closed eight, with an additional three closures planned. These 17 high-quality new openings year-to-date in the United States under the Garage banner are tracking ahead of our expectations and are expected to generate approximately four times the annual revenue per store on an annualized basis compared to the eight closures also on an annualized basis. Before I pass it over to Andrew for his closing remarks, I want to provide some initial thoughts on fiscal 2026.

To be clear, this is not meant to be formal guidance. Our official outlook for fiscal 2026 will be provided with our Q4 2025 results, which are expected to be released next spring. Starting with store count, we continue to believe that approximately 18-20 gross store openings in North America is an appropriate way to think about next year over and above the five stores previously communicated for the U.K. Given the strong performance of the Garage brand in the United States, there is potential for a higher store count over time, which could ultimately bring our total fleet above the 350 store target communicated previously for fiscal 2028. Our goal remains to elevate the quality of our fleet and further strengthen our brands, and the best way to achieve that is by co-locating with premium and luxury retailers.

As it relates to organic growth or comparable store sales growth, our brand heat continues to drive higher traffic, which we expect to be a key contributor to comps. We also intend to raise AUR at roughly twice the rate of inflation, consistent with the continued elevation of our brands. Taken together, we expect comparable store sales growth in the high single-digit range in fiscal 2026, even following what is shaping up to be an exceptional fiscal 2025. Turning to margins, gross margins in the first half of fiscal 2025 were affected by the 145% tariff rate on Chinese imports. As a result, comparisons in the first half of next year will be against an easier period, assuming current conditions prevail. In addition, as our US distribution center continues to ramp, we expect marginal incremental freight savings to support further gross margin expansion in a reasonable manner.

On the cost side, a portion of our SG&A is fixed, allowing us, like other world-class retailers, to leverage those costs as we scale. Combined with revenue growth in line with the algorithm just outlined, this supports adjusted EBITDA margin expansion continuing into fiscal 2026 also in a reasonable manner. With that, I’ll pass it over to Andrew for his closing remarks.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Thanks, Stacie and JP. Now, turning to the consumer, much has been said about the K-shaped economic environment in which higher income segments remain resilient. This trend continues to work in our favor as we execute with discipline across brand and real estate, intentionally pushing the experience upward. Finally, and in conclusion, ownership and accountability are one of our leading shared values. I believe these results speak volumes to its legitimacy. I will remind you the vast majority of our employees are now shareholders, with an important percentage participating in our generous employee share purchase plan. These shareholders will, in their own capacities, continue to lead GDI into the future. 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 analysts.

Conference Operator: Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you’re using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Thank you. First, we will hear from Stephen MacLeod at BMO Capital Markets. Please go ahead.

Stephen MacLeod, Analyst, BMO Capital Markets: Thank you. Good morning, everyone. And congrats on a very strong quarter. Lots of great color on the call, so thank you. I just had a couple of questions. Just wondering if you think about the sort of Q3 comps and maybe what you’ve seen on a Q4 to date basis. Can you talk about, I know you mentioned it in your prepared remarks, but just maybe a little bit more color around the contribution from traffic versus price into those comps?

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yeah. Hey, good morning, Stephen and Andrew. Yeah. So yeah, the vast majority is definitely traffic. So call it traffic. Yeah. Traffic transactions. Absolutely. Those would be what I would say would be the leading inputs, and then followed by the AUR increases. And that applies. I mean, this has been a trend for the past couple of quarters, and we’re seeing it, let’s say, Q4 to date. So it’s a consistent trend, if you will.

Stephen MacLeod, Analyst, BMO Capital Markets: Right. Okay. Okay. That’s great. And then thanks for the initial thoughts on fiscal 2026. I think that’s helpful. Just as you think about kind of the store base now and heading into 2026 and I guess potentially 2027, 2028 as well, can you just give a sort of a snapshot of where you sit with respect to the number of stores you have or percentage of fleet in Tier 4 or 5 locations versus Tier 1 to 3 locations and kind of where you sit today versus where you were at the IPO and what that runway looks like for the store upgrading?

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: I’m just going to open that up, and I’ll hand it over to JP. What I would say is this: We keep opening these Investment-Grade sites that are Tier 1, 2, 3. And so just by virtue of the weight of these new stores relative to the overall % contribution of the Tier 4 and 5s keeps going down, even if we don’t close any of the stores, right? So just in terms of the weight, the dollars, and the impact. But in terms of, let’s say, store counts, which is less important, let me turn it over to JP.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Yeah. Sure. Good morning, so at the time of the IPO, in terms of store count, Tier four and Tier five locations were the majority of the fleet. Now that has shifted to the opposite, so happy to report that as of today, the majority of our stores are Tier one, two, and three, which we qualify as Investment-Grade. We are definitely close to a 60/40 split, and as we progress through time, this split will become even better, so at the end of fiscal year 2026, we expect to be in an even better position as all openings (call me a liar for one maybe) but certainly the goal is for all openings to be in those amazing Tier one, two, and three centers. And whichever store closures that may potentially happen next year would predominantly be Tier four and Tier five locations.

Stephen MacLeod, Analyst, BMO Capital Markets: Right. Okay. That’s great. That’s sort of how I was thinking about it as well. And then maybe just finally, if I could squeeze another one in, just you talked about the Dynamite 3.0 conversions in Canada. And I’m just curious if you have any initial or incremental thoughts on kind of rolling that out in a more broader way. I know at one point you were just looking for a leader for that business. Just curious if any updates there.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Yeah. This is Stacie. Good morning, Stephen. We are very excited about the rollout we have of the 3.0 locations. We just opened one last week here near Montreal in Laval. It actually opened last Thursday, Friday. But we are seeing higher traffic and higher conversion in all of our 3.0 locations. So now we have four in total, and we’re continuing to look at that for future growth.

Stephen MacLeod, Analyst, BMO Capital Markets: That’s great. Thanks for the color, everyone. Really appreciate it.

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

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

Irene Nattel, Analyst, RBC Capital Markets: Thanks and good morning, everyone. Let me add my congratulations. Andrew, I was very intrigued by your comment around the K-shaped economy and sort of the shift that you’re seeing in your customer base in conjunction with the shift in the store base. Can you talk a bit about what your data is showing you today with respect to, I guess, the complexion of your customer base, frequency of visit, loyalty, all those kinds of good metrics? Thank you.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: All right. Good morning, Irene. Listen, as JP just spoke to, the majority of our portfolio and the vast majority of our revenue is coming from these investment-grade assets, right? Tier 1, 2, 3. Tier 1, 2, 3 represents cumulatively 10% of, let’s say, the high street or shopping center universe. That means 90% of it is found in Tier 4 and Tier 5 with 75% in Tier 5 alone. Now, just by virtue of the fact that we’re in these investment-grade assets, right, creating in 10% of the addressing 10% of, let’s say, at least the shopping center opportunities or the marketplaces, we are by de facto, I guess, addressing a top quartile consumer, right?

What we’re seeing with this top quartile consumer, but again, it’s a self-fulfilling prophecy because we’re in these markets, is this consumer, at least in our experience, seems to have a fair amount, a reasonable amount of liquidity, as evidenced by our growth and same-store sales. They seem to have a fair amount of liquidity, but there does not seem to be much resistance in terms of price and pricing. If you think about this top 20% of the population, I’d say, generally speaking, they would be within households that may own homes, may probably own hard assets, may even have equity portfolios. That part of that segment of the economy that’s sitting on hard assets is feeling pretty good.

Conversely, that the bottom 50% that often is a tenant or renting and does not have equity in assets, they’re feeling the pressure with inflation and a bit of a softer, I guess, labor market. So super unfortunate for that segment and super empathetic to that segment. But we’ve been consciously moving the brand’s, I guess, more premium aspect up. We’ve been focused on, call it premium or even, dare I say, aspirational luxury for many, many years, and we’ve been executing against it. And it’s a bet that’s paying off.

Irene Nattel, Analyst, RBC Capital Markets: That’s great. Thank you. And then just as a follow-up, in the release, you noted that you continue to invest in various marketing and brand expansion initiatives. Can you talk about where you’re seeing the greatest success right now, biggest traction, and how we should be thinking about this as you move into 2026 with the opening of the stores in the U.K.? Thank you.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yeah. I’ll hand it over to Stacie for this one.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Good morning, Irene. I’ll touch a little bit on the marketing. As you know, we’ve called out the marketing spend that we use, but we’re continuing to build around 360-degree storytelling, bringing the brand to life at all touch points. A little bit to answer what you were asking about the customer, we’re happy to report that we are seeing a healthy, growing, active customer base. So she is resonating with the brands, which we tie back to the marketing, which we like to call brand heat. But we’re seeing strong customer acquisition in both countries. And the retention in both countries is also up with frequency driving an increase on top of just the retention in total. I believe we mentioned in the roadshow that the loyalty program rolled out in May of last year. So we’re about a year and a half into that.

Engagement there is also positive, and enrollment is also positive. So we attribute all of that back to what we are doing from a marketing point of view. But as we have also mentioned numerous times, just the connection with our community for both brands and trying to be part of their consideration set or conversation. So we feel like we’re hitting on those right now, and it’s something we continue to double down on and focus as we present the brands to the market.

Irene Nattel, Analyst, RBC Capital Markets: That’s great. Thank you. And just the U.K. twist to that, please, if you don’t mind, Stacie.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Yep. So we are planning to open the U.K. website or launch the U.K. website early 2026. It’s either going to be end of January, early February, and then the first store to come a couple of months later. We are already seeing what that marketing transition into that new country is going to look like, but we believe in our North American playbook. So we’ll be rolling it out. Nothing too unique for that country.

Irene Nattel, Analyst, RBC Capital Markets: That’s great. Thank you, and happy holidays.

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

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

JP Lachance, Chief Financial Officer, Groupe Dynamite: Good morning and congrats on your results. I’d like to touch a little bit on your brand awareness. I know it’s not easy to measure, but I got to assume that it’s growing. You’re entering into new markets. So I was wondering if you have any data points that you can share as to where it is now, how it’s evolved since the IPO, and where do you aspire it to be in the long run?

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Who’s going to take this one?

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: I’ll take it. Andrew, if you want to add in, you can. I would say, again, with our marketing efforts, we spoke to this also in the roadshow, but we had traditionally been pushing product versus building a brand. And I think we’ve come a long way on creating a brand and a community, as we like to speak. The total brand reach has more than doubled over last year. So that is people talking about us, impressions from influencers, ambassadors, any UGC we might get inherently from our customer base. So we know we are resonating with our customers. And I would just say, directionally, awareness and consideration are up in both countries and in both brands. Andrew, do you want to add anything?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Thank you. Maybe just another question for me. Looking at your results this quarter, extremely strong, pretty unusual. Was there a specific promotion or collection that resonated well that may be difficult to replicate next year? Just trying to understand a little bit how easy or hard this is going to be to copy next year. And if there’s any one-time sales bump that we should account for?

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: I’ll take this one. Listen, the short answer is no. I don’t think there was anything that was, let’s say, specific or outsized, if you will. And listen, I don’t think anyone. I’ll just put an overarching statement out there. I don’t think anyone would have anticipated these kind of results. And now it’s really a couple of quarters of pretty impressive results at that. Our summer results were good. Our fall results were good. Our Q4 to date results are strong. So it’s more than just an item or more than just a product or more than just a promotion, right? And I think what’s really changed is if you think about GDI leading up to being a public company, right? It was a company that was owned by one person, right? And myself.

And if you think about really what was accomplished over those decades, it’s really hard to imagine. At a certain point in time, it becomes rinse and repeat, and it’s almost not that motivating to keep talking to myself, especially when there’s not even a board. So I’m really talking to myself. And today, in my closing remarks, I spoke to this, our shared values, and the leading shared value is ownership, right? And of course, that is figuratively meaning taking ownership and accountability. When you commit to deliver something, make sure you deliver 100% of what you committed, maybe even 110%. Falling short is not an option because your output is someone’s input, and we all work together. But I go a step further, right?

If you think about this real point of differentiation going from a single owner talking to himself to now thousands of employees who are now shareholders, right? This was all done as part of succession planning and growth and all that kind of stuff. I think this culture shift whereby people are legitimately owners, right? And figuratively, we hold them accountable to it has really paid dividends, I would say. You’re really seeing the whole collective organization rising up. That’s the bigger piece that is at play. I believe that there are legs to this attitude, right? To the spirit, if you will, that is within the building. How it actually manifests into a number, who knows? But ultimately, it does please me to know where this is coming from, right?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Perfect. Yeah. Fully understand. Thank you for the call.

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

JP Lachance, Chief Financial Officer, Groupe Dynamite: Yeah. No, no. It’s great. Great caller. Thank you.

Conference Operator: Thank you. Ladies and gentlemen, out of consideration to other callers on the line and time allotted today, we would like to remind you to please limit yourself to one question. Thank you. Next will be Vishal Shridhar at National Bank. Please go ahead.

Vishal Shridhar, Analyst, National Bank: Hi. Thanks for taking my question. With regard to the special dividend, is this something investors should think that GRGD will consider regularly for the company? And how should we think about this special dividend within context of Andrew, you selling down ownership over the context of over 10 years or so? Does this have any relationship to the other, or does this signal perhaps a new way to get liquidity, or is it unrelated completely?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Good morning, Vishal. And thank you for the question. So those things are all unrelated. So I’ll just start with that. But back to the special dividend question, we are really a high-growth company, and that’s our priority. And this remains our first priority when it comes to capital allocation. So I think it’s very important to keep that in mind. We are absolutely committed to creating and enhancing long-term shareholder value. This special one-time dividend is exactly that: a special one-time dividend. And it makes sense, just given the size of our cash balance at the end of Q3. And it’s a great way to return capital to shareholders, which is very consistent with our commitment to enhance shareholder value. But also, furthermore, as a new public company, we really do appreciate the trust that was put in us.

It feels quite good to be able to reward investors who have supported us since the IPO. That’s really the story around the special dividend. That’s exactly what it is: a one-time special dividend, which we see as the right move at this point. No, that should not create a habit, to answer your question.

Vishal Shridhar, Analyst, National Bank: Okay. Thank you.

Conference Operator: Thank you. Next question will be from Brian Morrison at TD Securities. Please go ahead.

Vishal Shridhar, Analyst, National Bank: Thanks very much. So with the success of your brick-and-mortar growth, is there any potential for change to your e-commerce penetration outlook of 25% and the U.K. website that you’re going to open early in 2026? Do you plan to maybe get investment and scale perspective and maybe expand the capabilities into a greater international platform as you enter the U.K.?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Well.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: I’ll take the beginning of it, and then Andrew can chime in, and I’m not too clear on your UK piece. We might have to elaborate.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yeah. I’ll do the U.K.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: But on the e-com mix, we’re happy to report that we are actually higher than last year by 40 basis points as part of the penetration for the quarter. So it actually grew more than the impressive brick-and-mortar growth that we have reported in the comps and then overall sales. So there’s been a lot of work around the foundation of our website. The Headless Architecture was rolled out on the app this quarter. The web is to come in the summer of 2026. When we launch that U.K. website beginning of 2026, that will also have the same software. So the team’s been working on a lot to improve the experience, but also from a customer point of view, there’s been personalization added to both the product detail and product listing page. The homepage has been revamped. There’s new navigation.

So there’s some work still to be done on personalization, but we’re very proud with the efforts and the leap that the team took and the results that we delivered for Q3. So we still feel confident about the 25% penetration as a target.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: I’ll take the second part in so far as the UK. So listen, so UK is really a gateway to the world. We’re opening on Oxford Street. We’ve got three openings in London, two in Manchester that have been announced to date. We’re looking at other opportunities. But suffice it to say, London is, in fact, like a melting pot and a gateway to the world. So listen, we’re going to open. We’re going to see how it goes. We’re going to learn a lot. We are very much a data-led organization. So it’ll be interesting to see and meet our new customers and see where they ultimately are from, right? For those that are tourists. And surely, it’ll give us insight as to what country might be next and right for, I guess, expansion.

Early days, but London is most certainly the gateway to the rest of the world.

Vishal Shridhar, Analyst, National Bank: Thank you very much. Happy holidays.

JP Lachance, Chief Financial Officer, Groupe Dynamite: Thank you. You too.

Conference Operator: Next question will be from Michael Glen at Raymond James. Please go ahead.

Vishal Shridhar, Analyst, National Bank: Hey, good morning. Stevie, could you maybe just speak to the influence that these highly productive new stores that you’re opening do have on the comp? Earlier, you did reference that these stores in the Tier 1 to 3 are 4x more productive than some of the lower-tier stores. So how do we think about when these stores get rolled into the comp, the influence that they have on that overall same-store sales growth number?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Sure. Happy to do so. So you are right. A Tier 1 location, on average, is at least four times the revenue of a Tier 5 location. So the dollars are higher, which is exactly why we are favoring Tier 1, 2, and 3 openings. It does elevate the brand. From a comps’ perspective, the story is a little bit different. And let me elaborate on that. When we open up a new store and those remain non-comp for the first year, our stores actually start performing very well from day one. And therefore, there isn’t a huge learning curve at all. So when those stores roll into the comp base a year later, the comp percentage that we are noticing is actually somewhat aligned with the rest of the network.

Therefore, there is not a huge contribution to comp as a percentage because month number one was already very strong. So I think when we think about Tier 1 versus Tier 5, the dollars are significantly better. But from a comp standpoint, it doesn’t actually move the needle because that percentage is quite similar to the rest of the network. I hope this answers your question properly.

Vishal Shridhar, Analyst, National Bank: Just to be clear on that, the comp level that you see across your Tier one to three right now is consistent with what you see across Tier four and five?

JP Lachance, Chief Financial Officer, Groupe Dynamite: Broadly speaking, the answer is yes.

Vishal Shridhar, Analyst, National Bank: Okay. Thank you.

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

Conference Operator: Next question will be from Chris Li at Desjardins. Please go ahead.

Vishal Shridhar, Analyst, National Bank: All right. Good morning, everyone, and congrats on the strong results. Maybe just a quick follow-up to Michael’s question. Can you maybe talk a little bit about what are the key assumptions behind your preliminary comp store sales outlook for next year? I think high single digits. Because it does feel a little bit conservative since, I think, being able to increase pricing by twice the industry will get you most of the way there. So would appreciate sort of more colors on what you’re thinking about next year. Thank you.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yep. Absolutely. More than happy to. So the way we came up with a high single-digit range, and again, this is not guidance. This is meant to be color as official guidance will come out in the spring. So consistently to what we’ve been saying since the IPO, our AUR strategy is to increase our prices at twice the rate of inflation. And you are right. That gets you a good majority of the 9% or the high single-digit number. And then the balance would be your transaction growth. And that obviously comes from, or at least in part, the real estate strategy. So as we continue to have better location, as we continue to elevate the brand, we do see transactions continuing to be positive.

Of course, there’s more opportunity next year in the first half as the comps were, quote-unquote, "softer" in Q1 of this year at 13% and change. That’s how we came up with the high single digit at this point. Obviously, the year is not over. We will be happy to revise that high single-digit range in the spring when we provide official guidance. For the time being, that’s where we are coming from with this number.

Vishal Shridhar, Analyst, National Bank: Okay. That’s very helpful, and all the best in the new year. Thank you.

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

Conference Operator: Next question will be from Luke Hannan at Canaccord. Please go ahead.

Stephen MacLeod, Analyst, BMO Capital Markets: Thanks. Good morning and congratulations on the results. I wanted to follow up on the commentary that there is potential for you to exceed the 350 store target that you set out for fiscal 2028. You mentioned that part of that is just the strength that you’ve seen within the Garage brand today. But I’m curious to know if there’s anything that you can share. When it comes to the availability of that Tier 1 real estate, how much, if at all, has that changed over the course of, we’ll say, the last six months to a year? Are you finding that there’s still enough availability of that high-quality real estate? And specifically, when do you envision, I guess, giving more of an update on when you might be able to exceed that target that you’ve set up previously? Thanks.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Okay. Great. Listen, thanks for the question, and we’re going to split in two. I just want to clarify, as you call out Tier 1, Tier 1 is really, I mean, 1% of shopping centers fall into the Tier 1. So I wouldn’t make too much out of the Tier 1, and quite frankly, the performance Tier 1, Tier 2, Tier 3 are actually quite similar, and it’s a pyramid, right, so listen, I mean, a lot of it is also live and learn, right, and if you look at even at the brand and the evolution of the brand from even three years ago to today, you really see that we’re a little more athleisure, more off-duty. We’re following that lifestyle, I think, a little more tighter, more concise, and also more elevated, so we, as a brand, actually keep evolving.

So as we keep evolving the brand and keep opening up in brand new markets where, quite frankly, we live and we learn, we’re taking that customer feedback. We’re looking at the store performances, and we’re saying, "Okay. Well, listen, this is probably better than we expected." Consequently, those stores that would have been perhaps on the line of, "Yeah, does it make it or not make it?" Now they might make it. So listen, as the brand keeps evolving and as we keep seeing success in the markets, it certainly does open the aperture to some additional opportunities. I’ll hand it to you, JP, if you want to collaborate. Yep. Yep. For sure. The only thing I would add was around your point to availability. Obviously, it’s not easy. It’s not been easy.

We’re after the best locations, and we’re not alone trying to get our hands on these assets, so it’s never easy. I think the teams have done a very, very good job signing those leases for us, and we continue to push on that, but it’s never easy. When you’re looking at some of those best assets, well, the lease rates are very, very high. They’re busy. They’re occupied. They’re not fully available, so no, it’s not easy, but we’re not seeing any material changes. It’s not more easy or less easy. It’s basically status quo as we’ve seen it in the past few quarters, but I’ll just add to that, but it certainly doesn’t. Our performance, right, and same-store sales performance certainly does not hurt, right? As a landlord, right, all they’re trying to do is keep merchandising their shopping center, their asset, with higher quartile performance.

To the extent that we’re always in that top quartile of performance, we become very coveted and desirable. And so that’s been working well for us. For sure, the market is much more competitive than it was, say, five years ago or let alone 10 years ago. But our performance is also very much there and, consequently, we become a very desired brand, if you will. And there’s something interesting about our Garage brand, at least in the U.S., where we talk about an Alex who’s 24 years old. And realistically, I think we probably land on a 22-year-old. Well, that customer has a huge cross-shop payload, meaning as compared to maybe a 42-year-old customer, a 42-year-old customer may go into a shopping center and may shop one or two establishments, right, and leave. Or visit, actually.

Not even necessarily shop, but visit one or two establishments and leave. The 22-year-old has a bit more time on her hands, right? And going to the mall is a bit more of a lifestyle. There’s a lot more, many more other ancillary visits to other establishments within the mall. So not only are we desirable as a brand because of our performance, right, and we kind of lift the ship, if you will, in a certain way, but there’s also a nice halo of additional visits or cross-visits that benefit other merchants and other brands in the assets. So that kind of works in our favor in this competitive market. Appreciate the color. All the best.

JP Lachance, Chief Financial Officer, Groupe Dynamite: Thank you. You too.

Conference Operator: Next question will be from Adrienne Yih at Barclays. Please go ahead.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Great. Good morning. So I just wanted to say that this is, without question, one of the most successful IPOs during a very tumultuous time. And I wanted to commend the model, the culture, and the organization for kind of steering us through.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thank you. My first question is for Stacie. I want to talk a little bit about the product, the fashion backdrop. We’re clearly sort of in this moment of, I would say, a heightened moment, one of the most heightened moments of fashion newness, kind of coming out of the pandemic. What about the product categories that you may feel you’re underpenetrated in as we go kind of forward over the next one, two, and three years? Maybe it’s lounge or athleisure. And what are you chasing for spring? And then for Andrew and JP, maybe just some comments on the digital penetration. Were they very similar in terms of Black Friday? I mean, Black Friday was an online environment. So I’m assuming that that outpaced stores. But kind of what investments are you making to kind of push digital? Thank you.

No small question there. Thank you for the comprehensive question. I would just say, from the brand point of view, I’ll start with Garage as that’s the lion’s share of the volume. We’re very happy about our positioning. As Andrew mentioned, I think when you have success, it’s most important to keep editing. There are times when your brand can be hot and you can sell anything. And those are the times when you actually have to dig deep and say, "What’s worth having the brand or the logo on it and being sold within our store?" And that’s a luxury we’re sitting on right now. Because the business is good and we are growing in both countries, we’re having strong resonance against the marketing and the product. We’re really having almost even more product meetings. And I’m sure my merchants that are listening to this call are laughing.

But yeah, we double down hard when things are good because we want to edit even more because when you try to do everything, you really don’t stand for anything. So we know we’re in a critical moment of placing the brand in a white space that can stand out by itself. And that’s where we’re focused. So long answer to your question of, "Do we think we’re missing anything?" I would say no. We want to actually just hone in on what we think is driving our success right now, which is that off-duty lifestyle. If I flip to Dynamite, I would say we’re still trying to work towards elevating that brand. And the same thing, what do we want to be known for? We continue to work on what are those categories.

Right now, dresses is having a very strong moment for us, not only in comps year over year, but we’re seeing it as the acquisition category. We are doubling down on that as we go into spring.

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

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: You’re welcome.

Conference Operator: Next question.

Stacie Beaver, President and Chief Operating Officer, Groupe Dynamite: Next question will be from Mark Petrie at CIBC. Please go ahead.

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

Stephen MacLeod, Analyst, BMO Capital Markets: Yep. Hey, good morning, and thanks for all the comments so far. I think, Andrew, you actually sort of touched on my question, I think, in the previous question or two ago. I think you guys adjusted your target customer profile in the last few years, and obviously, that’s resonating, but I’m curious to hear how the actual customers you’re bringing in compares to your target and if that affects how you think about your assortment and marketing as a result, and then maybe related, I know you’re targeting a different customer between Garage and it’s early with Dynamite 3.0, but I’m just curious, based on what you’ve seen so far, is that what’s actually playing out? Thanks.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Yeah. Hey, good morning. Yeah. So listen, Garage. We target Alex, 24 years old, UCLA Masters, a little bit of a spoiled brat. And her parents sent her off with a G-Wagon, which speaks to that top quartile of, I guess, consumer. And interestingly enough, that’s pretty well exactly where we land. So when we look at our best customers, right, our more frequent customers in better markets, right, where there’s actually an abundance of choice, that’s pretty well where we land. So that’s really, really exciting. And I’ll point out that maybe seven years ago, I think we were landing at maybe 14 or 15 years old. We were targeting 16, and we were landing at 14 years old. So it’s a big, big, big difference. And obviously, a much bigger market that’s then available to us. So that’s on that side.

In terms of Dynamite, Rachel, 34 years old. In terms of our best customers in the better markets, I think we’re probably landing around 31 years old. But again, I’m just, don’t hold me to it, but approximately 31 years old, but directionally moving in that right direction, moving up that age profile. Heading really in the right direction. That’s kind of like where we’re at.

Stephen MacLeod, Analyst, BMO Capital Markets: That’s great. Appreciate the comments and happy holidays.

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

Conference Operator: Next question will be from Brooke Roach at Goldman Sachs. Please go ahead.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Good morning, and thank you for taking our question. Andrew, JP, you’ve delivered very strong margin expansion this year and over the last several years. As you look ahead, is there a ceiling to the margin profile of the business that you wouldn’t want to go above? And are there any investments that you would like to accelerate to fuel long-term momentum should the current comp profile of the business continue into 2026?

Listen, I’ll take the first part. In terms of the margin, I mean, part of it is also the math, right? As revenue outpaces cost, then you’re going to see margin expansion. Is there a ceiling? No, I don’t think there’s a ceiling, but I think we’re flying the plane at 36,000 feet. We get to 41,000? Yeah, probably. Maybe. Who knows? But I think the air is starting to get a little thin up here. But I’m always impressed and amazed by our own performance. So I really don’t know where we go from here, beyond, let’s say, JP’s earlier comments. But I would say, no, there is no conscious ceiling, right? It’s always about balancing out supply and demand. So I think that’s, to me, the bigger question, right? And also just taking stock of the competitive landscape, right?

What’s going on in terms of our competition and so on and so forth? In their mind, often enough, we’re competing against wholesale brands, meaning a brand that is available in DDC outlets as well as through wholesale channels. So their prices are certainly much higher because every one you’ve got two families that need to make money. We go direct to consumer. So we have, I guess, a little bit more opportunity than others. But listen, the market will decide.

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: On the second part of the question, on the investments part, so we are obviously making all the right investments that we need to make to grow the business and make it more profitable. That’s obviously our first priority when it comes to capital allocation, so the formal CapEx guidance that we had was CAD 95-105 million. We have revised it to a range of CAD 85-95 million dollars. The answer as to why that is is actually very simple. We have been able to generate savings in the world of construction, so we are certainly very happy with that. The team has done a great job managing costs on that piece, and then there’s also timing as certain projects will be paid for in Q1, so being mindful of that timing shift, we made the right decision to modify our guidance accordingly.

But internally, we are absolutely aiming for growth, and we will make all the right investments when it comes to opening stores, entering the UK, IT, digital, and to a lesser extent, maintenance to make sure that we can sustain the performance of our stores and also grow the performance. So this is definitely our first priority.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Great. Thanks so much.

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

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

Stephen MacLeod, Analyst, BMO Capital Markets: Thank you very much. My question’s on profitability, in particular, margin expansion. That stepped up significantly this quarter despite comps roughly the same last quarter. You mentioned several of the moving parts. I wonder if you can give a sense of the impact this quarter when it comes to tariffs, lower merchandise cost increases, lower markdowns, lower freight costs, and ultimately, how sustainable are these improvements?

Alex Limosani, Manager, Investor Relations and Corporate Finance, Groupe Dynamite: Yeah, that’s a very good question, John. Thank you. So if you look at the EBITDA margin expansion, that would be called at 650 basis points, which is divided half and half between gross margin and adjusted SG&A, which is certainly something we’re happy to see. Obviously, on the gross margin, this is the highest level we’ve seen in the past three years at 66.1%. I will remind everyone that typically, Q2 and Q4 have a little bit more markdowns compared to Q1 and Q3 because there is no end of season in Q1 and Q3. So structurally, the margins in Q3 are always a little bit higher. So that certainly led to a very good outcome in Q3 for gross margin. Tariffs were certainly not as impactful as they might have been in Q1 and Q2.

Given how fast we turn our inventory, we absorbed most of the 145% out of China in the first half of the year. So certainly, comparing Q3 to the first half, that was tailwinds for us in Q3. And then as I think about SG&A, the year-over-year improvements were mostly around scaling benefits. The top line was obviously quite healthy this quarter. So that allowed us to scale very nicely on SG&A as a good portion of our costs are fixed in nature. I think administrative costs would be the best example. So we see the performance in Q3 as strong, and there were no major significant one-time events that would have brought the margin significantly higher. So structurally, Q3 will be a good quarter for margins. So I’d be very careful applying the same percentages to the other quarters. But in a nutshell, that’s the story for Q3.

Stephen MacLeod, Analyst, BMO Capital Markets: Okay. I appreciate the color. Thank you.

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

Conference Operator: At this time, Mr. Lutfy, we have no other questions registered. Please proceed.

Stephen MacLeod, Analyst, BMO Capital Markets: Thank you.

Andrew Lutfy, Chief Executive Officer and Chair of the Board, Groupe Dynamite: Thank you so much. I just want to wish everyone a very, very, very happy and healthy holiday. It’s been a very busy year, I think, for everybody. Certainly very exciting times, volatile times. Looking forward to a really exciting 2026. Thank you so much. Thanks for your time and your attention again today.

Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.

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