Operator: Good afternoon, and welcome to Savers Value Village's conference call to discuss financial results for the first quarter ending April 4, 2026. [Operator Instructions] Please note that this call is being recorded, and a replay of this call and related materials will be available on the company's Investor Relations website. The comments made during this call and the Q&A that follows are copyrighted by the company and cannot be reproduced without written authorization from the company. Certain comments made during this call may constitute forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance. Please review the disclosure on forward-looking statements included in the company's earnings release and filings with the SEC for a discussion of these risks and uncertainties. Please be advised that statements are current only as of the date of this call, and while the company may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulation. The company may also discuss certain non-GAAP financial measures. A reconciliation of each of the historical non-GAAP measures to the most directly comparable GAAP financial measure can be found in today's earnings release and SEC filings. Joining from management on today's call are Mark Walsh, Chief Executive Officer; Jubran Tanious, President and Chief Operating Officer; Michael Maher, Chief Financial Officer; and Ed Roma, Vice President of Investor Relations and Treasury. Mr. Walsh, you may go ahead, sir.
Mark Walsh: Thank you, and good afternoon, everyone. We appreciate you joining us today. We are pleased with our first quarter results as we once again delivered strong sales performance and continued our earnings inflection with the second consecutive quarter of year-over-year adjusted EBITDA growth. We increased segment profit in both of our major markets through a combination of continued strength in our U.S. comp store fleet, the ongoing maturation of our new stores, profit improvement initiatives and tremendous operational discipline. We also made continued progress on our innovation agenda, which is already delivering benefits to our business. Let me start with a few highlights from the quarter. Sales in our U.S. business grew 11.2% with comps up 6.4%, driven by both average basket and transactions. The secular trend towards thrift remains a powerful tailwind and our maturing new store fleet is in the early stages of contributing to comp sales growth. In Canada, our sales trends were largely as expected with a 0.6% comp decrease during the quarter, reflecting a roughly 70 basis point headwind due to an early Easter. I'm especially proud of our Canadian team's execution this quarter. Despite flat comps, we grew Canadian segment profit almost 24% as we tightly manage production levels and benefited from some significant and sustainable profit improvement initiatives. We opened 3 new stores during the quarter, all of which were in the U.S., and we continue to expect around 25 total new store openings this year. Our new store portfolio continues to perform in line with expectations, giving us confidence in our ability to drive profitable sales growth as these stores mature. Financially, we generated $44 million of adjusted EBITDA in the quarter or 11% of sales. And finally, we are reaffirming our outlook for 2026, which Michael will address in more detail. Turning to our results by geography. Let's start in the U.S., where we believe that we are still in the early innings of consumer thrift adoption. Our 6.4% comp despite some unusually disruptive weather was broad-based with strong growth across regions, categories and income cohorts. We continue to see the strongest growth in our younger and more affluent consumer cohorts, which speaks to the power of our model and its ability to resonate with shoppers across demos. We feel very good about our competitive positioning and value gaps as new clothing and footwear prices continue to face upward pressure. Additionally, on-site donation growth continues to be robust, which helps power our flywheel, enabling our compelling assortment. In short, the U.S. business is firing on all cylinders, and we are excited about our continued expansion in this market. In Canada, our 0.6% comp decrease was largely in line with our flattish comp expectation with the Easter shift negatively impacting our comp by roughly 70 basis points. Macro conditions remain stable but sluggish, particularly in our key Southern Ontario market, including the Greater Toronto area and Windsor, where we have roughly 35% of our Canadian store fleet. We do not expect a material change in the economic conditions in Canada in the near-term, and we continue to plan our business around a roughly flat comp. Having said this, our first quarter results demonstrated our ability to drive meaningful profit improvement in Canada despite limited top line growth. Canadian segment profit increased $6 million over last year and profit margin expanded 310 basis points, which we attribute to our continued focus on productivity and tight management, matching demand and production. We also have a number of tests and initiatives underway to drive meaningful improvements in sales yields and cost per unit in our off-site facilities. We are quickly sharing learnings and best practices across our central processing centers and expect incremental benefits in the coming quarters. Moving on to new stores. We opened 3 new store locations in the U.S. during the quarter and continue to be pleased with the results as they are performing in line with our expectations. As I indicated earlier, we are excited to continue growing our store fleet in the U.S. and believe we can expand at current rates for years to come. For 2026, we are planning to open around 25 new stores, over 20 of which will be in the United States across 11 states with a nice mix of infill and new markets. An upcoming highlight this quarter is our first North Carolina store as our Burlington location opens later this month. Repeating our theme, our new store growth remains the highest return and most important use of our capital, and we are excited to bring our value offering to more consumers. Shifting now to innovation where our key priority areas are strengthening our price value equation, driving efficiency and cost reduction and expanding our data science and business insights. Last quarter, we announced the launch of ABP Light, an asset-light extension of our automated book processing or ABP system. I am pleased to report that we have completed our rollout plans ahead of schedule with the vast majority of the fleet now leveraging our ABP capability. We expect these stores will now reap the proven benefits of ABP and think this is a great example of how we can deploy technology in a cost-effective and high-return way across our store portfolio. We also continue to significantly strengthen the foundation of our data science and business insights. The team has been working hard to transition to a more robust data estate, structuring operating data that allows us to translate and communicate insights to drive field action, thus improving our ability to: one, react to changes in sales trends; two, improve productivity; three, support margin discipline; and finally, to help us continually refine our value proposition for consumers. I would like to highlight the progress we're making through a strategic partnership with Microsoft. For several months, Microsoft has had a team of forward deployed engineers working closely with Savers to embed AI agents directly into our operating model. Our first Agentic AI capability monitors our loyalty program, empowering our field organization with insights to boost consumer engagement and drive productivity. Our loyalty program is a strategically important part of our business as it represents roughly 73% of our sales and is a key focus as we continue to grow our store fleet. This deployment also provides us an Agentic template for an agile future rollout of AI capabilities and insights across our enterprise. We have already identified several other use cases for AI agents across our business and are either deploying or finalizing for implementation as part of our broader innovation road map. We look forward to sharing more updates on future calls. I'd like to thank our nearly 24,000 team members for their efforts in driving a strong start to 2026 and helping us deliver our commitments to our customers, nonprofit partners and shareholders. Our mission is to make secondhand second nature, and that continues to gain momentum. We are well positioned to build on this momentum and deliver continued success. I'll now hand the call over to Michael to discuss our first quarter financial performance and the outlook for the remainder of 2026.
Michael Maher: Thank you, Mark, and good afternoon, everyone. As Mark indicated, we had a solid first quarter. Total net sales increased 8.9% to $403 million. On a constant currency basis, net sales increased 6.9% and comparable store sales increased 3.5%. We are especially pleased with our sales results in the U.S., where net sales increased 11.2% to $234 million. Comparable store sales increased 6.4%, fueled by both average basket and transactions, with broad-based gains across categories, regions and income cohorts. Given the breadth of our sales performance and the fact that we have yet to see a material lift from our new store openings, we remain very confident in our ability to grow the U.S. business. We also saw continued stability in Canada, where net sales increased 6.7%. On a constant currency basis, Canadian net sales increased 2% to $131 million and comparable store sales decreased 0.6%, reflecting an earlier Easter that negatively impacted comp by 70 basis points due to store closures on Good Friday. In the near-term, we do not assume any material improvement in the Canadian economy. And as such, we'll be planning our Canadian business conservatively. However, as Mark mentioned, we did successfully expand segment margins and grow profit contribution even without comp sales growth through strong execution, efficiency gains and the continued maturation of our new stores. All things considered, we believe this quarter is a good model for how we will continue to grow segment profit contribution even with limited sales growth going forward. Cost of merchandise sold as a percentage of net sales decreased 10 basis points to 45.4% due to comp leverage and efficiency initiatives as well as growth in on-site donations, partially offset by the impact of new store openings. Salaries, wages and benefits expense was $86 million. Excluding IPO-related stock-based compensation, salaries, wages and benefits as a percentage of net sales was roughly flat at 20.5%. Selling, general and administrative expenses increased 13% to $98 million and as a percentage of net sales increased 80 basis points to 24.4%, primarily due to growth in our store base, increased routine maintenance costs, namely higher SNO removal expenses and increased occupancy costs. Depreciation and amortization increased 18% to $23 million, reflecting investments in new stores. Net interest expense decreased 15% to $13 million, primarily due to the impact of our debt refinancing last fall. GAAP net loss for the quarter was $5 million or $0.03 per diluted share. Adjusted net income was $2 million or $0.02 per diluted share. First quarter adjusted EBITDA was $44 million and adjusted EBITDA margin was 11%. U.S. segment profit was $43 million, an increase of $4 million, primarily due to increased profit from our comparable stores. Canada segment profit was $31 million or up $6 million due to disciplined management of production and expenses and the CPC productivity and efficiency initiatives Mark mentioned earlier. Our new stores continue to perform in line with our expectations and mature on schedule as their contribution ramps. However, as we mentioned last quarter, a more balanced store opening schedule this year means more front-loaded preopening expenses. While we expect preopening expenses for the year to be roughly flat with last year at approximately $14 million to $16 million, first quarter preopening expenses were approximately $1 million higher than last year. Our balance sheet remains strong with $62 million in cash and cash equivalents and a net leverage ratio of 2.5x at the end of the quarter. We also repurchased 1.2 million shares at a weighted average price of $8.51. Our capital allocation strategy remains unchanged as we continue to prioritize organically funding new store growth, repaying debt as we target a net leverage ratio under 2x by the end of next year and opportunistically repurchasing shares. I'd like to now turn to our guidance and discuss our outlook for fiscal 2026, which remains unchanged from the previous full year guidance we gave back in February. We continue to expect net sales of $1.76 billion to $1.79 billion. Comparable store sales growth of 2.5% to 4%, net income of $66 million to $78 million or $0.41 to $0.48 per diluted share. Adjusted net income of $73 million to $85 million or $0.45 to $0.53 per diluted share, adjusted EBITDA of $260 million to $275 million, capital expenditures of $125 million to $145 million and approximately 25 new store openings. Our outlook for net income assumes net interest expense of approximately $50 million and an effective tax rate of approximately 28%. For adjusted net income, we're assuming an effective tax rate of approximately 27%. We're projecting weighted average diluted shares outstanding to be approximately 163 million for the full year. This does not contemplate any potential future share repurchases. Finally, I'd like to briefly touch on our expectations for the second quarter. We expect total revenue growth to be 100 to 200 basis points lower than the first quarter due to the impact of foreign exchange rates. We expect constant currency total revenue and comp sales growth similar to the first quarter. We also expect Q2 adjusted EBITDA growth to be similar to Q1 with the cadence of earnings through the balance of the year to resemble 2025. We plan to open 6 new stores during the quarter, in line with our goal of more ratably opening stores throughout the year. This concludes our prepared remarks. We would now like to open the call for questions. Operator?
Operator: [Operator Instructions] We'll go to our first question from Matthew Boss at JPMorgan.
Matthew Boss: Congrats on a nice quarter. So, Mark, can you elaborate on the step-up in comp trends that you're seeing in the U.S. business, in particular, 2 straight quarters of double-digit same-store sales on a 2-year stack. Maybe if you can touch on new customer acquisition, secular shift tailwinds. And just any puts and takes to consider with the second quarter comp trend maybe relative to the mid-single-digit full year guide?
Mark Walsh: Yes. Thanks, Matt. Look, I think it starts with what we've seen is widespread growth across geographies and merchandise categories. And that obviously plays into a great experience, value and selection winning. But on top of that, we're seeing accretive adoption trends amongst our younger and higher income households. We've seen that continue. So, we're seeing trade down, trade in. I would also say that demand is really healthy across a broad base of all income demographics. And I think that's a key difference versus Canada. The secular trend certainly remains a tailwind. And what's really great is basket and transactions have driven comp. And as we mentioned around the Agentic initiative, the loyalty program is an important element in how we consider and drive growth, and we've continued to see really nice growth in our loyalty program in the U.S.
Michael Maher: And then, Matt, to your question about how we think about Q2. So far, what we've seen in April in the U.S. is actually a little bit of acceleration in the U.S. comps. But we do expect those comps get a little tougher to lap as we progress through the year. So still thinking about a mid-single digit. And Canada really haven't seen much change, remains roughly flattish as we've now lapped the Easter shift.
Matthew Boss: That's great color. Michael, maybe just as a follow-up, could you update us on the new store waterfall and maturity curve? And just the expected contribution from the waterfall in this year's comp outlook relative to multiyear as more of the store cohorts mature?
Michael Maher: Sure. So, new stores continue to perform in line with our expectations and consistent with the waterfall, as you describe it, that we've laid out here over the last year or so. So just as a reminder for everyone, typically, in year 1, we see about $3 million in top line sales. We do lose money both from the preopening expenses that we incur as well as in the first year of operations as we're still ramping volume and developing, building that on-site donation foundation. Profitability, we typically pass breakeven in the second year and then continues to ramp as the sales improve. Ultimately, we target a 5-year -- excuse me, a year 5 top line of about $5 million and something close to a 20% contribution margin. So, so far, our new store classes continue to perform in line with that waterfall. And thus far, Matt, we don't -- we're still too early in that pipeline for those stores to be meaningfully contributing to our comp. So, the comps that we're posting in the U.S. really are mature store comps. Recall now that we only started opening new stores at this pace in the last couple of years and really only the 24 class at this point has entered the comp base. So, it's less than 50 basis points in total benefit to the comp, but we expect that's going to continue to build as more of those stores enter the comp base going forward.
Mark Walsh: Let me supplement Michael's answer, Matt. It remains the highest and best use of our capital to open up new stores.
Operator: We'll move next to Brooke Roach at Goldman Sachs.
Brooke Roach: I was hoping you could unpack the improvement in profitability that you're seeing in your Canadian business. How should we expect that to continue for the rest of the year? And then more broadly, can you help us understand what the quantitative opportunities that you see from your AI capability monitors and your agents in profitability as you look on a multiyear basis?
Jubran Tanious: Yes. Brooke, this is Jubran. I can take the Canadian profitability question. The first thing I'd say is it's actually -- it's driven by a few factors. It's not one thing. So, the first of which is some of our initiatives in CPC. Mark talked about those in his opening comments. Those continue to get better, more efficient, more effective through a variety of process improvements. And we've been very pleased with that and proud of the team. We're in the midst of expanding that to all of our off-site locations. So that's one. The second thing, and we talked about this on past calls, is striking the right balance in total pounds process, right, the amount of production level and maintaining a good equilibrium so that we are feeding customers, fresh product, but also doing it in a very healthy gross margin way. And we think the team did an excellent job at striking that equilibrium this past quarter. The third thing I'd cite is just ongoing refinement and improvement of our data and analytical tools. And that's important because as you think about converting pounds into items, those improvements have helped us better align items that we supply to the customer at the category level. So, it improves our ability to put the right thing at the right time in front of the customer, and that obviously benefits our sales yield. And then, Brooke, the last thing I would cite is just the ongoing on-site donation growth, which we are seeing improve in a broad-based way. This past quarter, over 3/4 of our supply came from on-site donation and Green Drop mix, nice year-on-year improvement and one that we expect to continue. So, you put all that together. And yes, we absolutely expect those trends to continue through the balance of the year, and that's all contemplated in our guidance for Canada.
Mark Walsh: Brooke, on your question around AI and the Agentic deployment, let me say that it's just one element of a much broader innovation approach that includes ABP Light, includes a number of process and efficiency improvements that we're driving in our off-site production centers and then applying data science and business insights to what is a data-rich business. So, from an AI-specific perspective, these efforts are primarily efficiency and productivity driven, and we will develop a better sense for how big of an impact it will be over time.
Michael Maher: Yes. And Brooke, Michael, just one closing thought on that. I think, first of all, as Jubran stated, what we're seeing in Canada really pleased with that. We do -- while we don't guide segment profit specifically, we do expect directionally that to continue, and we have contemplated that in the guidance for this year. I think longer term, to your question about innovation, I think it just gives us added confidence in that longer-term algorithm of getting back to that high teens EBITDA margin as we continue to see the new stores mature but also see the innovation initiatives really take root.
Operator: Next, we'll move to Randy Konik at Jefferies.
Randal Konik: Michael, I just want to jump off on the last thing you said there in terms of segment profit or geographic profit margins continue to move higher. Can you give us some perspective on where we sit with those Canadian margins versus history in the U.S.? And what are you going to -- are there things you're doing in Canada that you intend to apply to the U.S. business to kind of further take those margins higher? Just give us some thoughts on some of these profit initiatives you're working on and where they are in that kind of life cycle. How much higher can we go from here?
Michael Maher: Sure, Randy. Why don't I start and then maybe I'll let Jubran jump in and provide a little color, too. So, first of all, we've long seen that we have structurally higher contribution margins in Canada than the U.S. I actually think that gap probably widens in the short-term in 2026 because we continue to invest in growth in the U.S., which, as we have said now for a while, does create a short-term headwind. Long-term, it's absolutely value accretive. But we know that there's some short-term margin pressure as a result of opening new stores. Now we're generating nice comp growth, and we're seeing healthy gains from on-site donations and yield improvements in the U.S. as well. But you do have that headwind. Whereas in Canada, the focus really is on profit improvement and process optimization. We are not really investing meaningfully in new store growth in Canada at this point. We are a mature business there, much more highly penetrated, obviously, than we are in the U.S. And so that gives us a chance to really focus on the productivity and efficiency initiatives that Jubran described earlier and really see those flow through into the bottom line as you saw here in the first quarter and the improvement in our Canadian segment profitability. So, I do expect directionally that trend to continue this year. And I'll let Jubran speak to how we're thinking about leveraging that across both countries.
Jubran Tanious: Yes. Randy, it absolutely is. When we think about production, productivity and efficiency improvements, that cuts across borders. The team does a very good job of working collaboratively on discovery, leveraging best practices, scaling that across all of our facilities. So I'll take 2 of them that we talked about earlier, offsites. The improvements that we have made in offsites are going to benefit all locations, not just in Canada. Data and analytics, that refinement that I mentioned, where we have tools that are better than they have been in terms of putting the right thing at the right time in front of the customer, that cuts across all segments. So the short answer to your question is, yes, we expect goodness broad-based from that.
Randal Konik: And just a follow-up. It looks like you managed payroll well in the quarter. I think you've had some deleverage in that item in the last few quarters or the last 4 to 6 quarters. Is that something where now we're kind of turning the corner on that payroll side of things, we'll start to get some leverage going forward out into the balance of the year and into 2027 and beyond? How do you think about that?
Michael Maher: Well, Randy, a couple of things on the OpEx line. So remember that we are -- salaries, wages and benefits line, I think you're referring to. So we are continuing to step down the IPO-related stock comp in that line. We've got 1 quarter left of that here in the second quarter. That's roughly $4 million in each of Q1 and Q2. That falls away completely in Q3 and beyond. So you will see that. Incurring -- excluding those sort of nonrecurring items, though, yes, I think so. We do still have some pressure from new stores and those maturing and getting to scale there. So I think you'll see that kind of normalize as we go forward, get past the onetime items. But I would expect actually more of the improvement this year to come from gross margin rather than the operating expense lines as we continue to see the new stores mature and the benefit of that and their related on-site donation ramp flowing through to the margin line.
Operator: We'll go to our next question from Michael Lasser at UBS.
Michael Lasser: How long can you continue to grow the profitability in Canada on a flat comp? At some point, do you start to experience deleverage if the same-store sales do not grow and do you need to take action to reinvigorate the same-store sales growth in that market?
Jubran Tanious: Michael, Jubran, I'll grab the profitability question. Yes, I understand your question. Long-term, I think there is merit to what you're saying, but we think there is still a tremendous amount of opportunity, certainly for the remainder of this year on all the initiatives that we have to improve efficiency and effectiveness. And so the trends that we saw in Q1, we expect to continue this for the remainder of this year.
Mark Walsh: Michael, thanks for the question. Look, we're not satisfied with the flat comp at all. We continue to test differential marketing approaches, whether it be using our influencers to a higher degree, social, paid and then broadcast opportunities. We are investing in the core fleet as well. We've got some renovations teed up, and we've also got some relocations planned. And we just continue to focus on that price value equation and making sure that we're delivering a terrific experience to our Canadian consumers. So our goal is to not have that deleverage happen, and we're certainly not going to sit still with a flat comp.
Michael Lasser: Okay. My follow-up question is on the delta between your sales yield and what you are paying for donations. So a, what are you seeing with respect to the sales yield? How much of the improvement in sales yield is being driven by like-for-like pricing? And then on the payment for donations, are you experiencing any inflation as a result of the overall environment and some of the strains that charities are under around the country?
Jubran Tanious: Yes. Why don't -- Michael, this is Jubran. I'll grab your supply cost question first. So a reminder to the group that our supply costs, these are a set of contracts that we have with all of our great nonprofit partners across our 3 countries that are typically anywhere between 1 and 3 years. And they are deliberately relatively short- to medium-term because we are always evaluating what market is that we can stay very competitive in terms of what we pay for, whether that is a delivered goods, delivered product as we talk about, or on-site donation, which we have reliably continued to grow across all segments. So the short answer to your question is, are we experiencing any unexpected upward pressure or cost on supply? No, we're not. That's all very, very predictable. It's contract-based, and we can see it clearly. And we plan for it many, many, many months in advance. And then I'll just also take the opportunity to say that in terms of availability of supply, both for our comp stores and to feed new store growth, no concerns at all. The team continues to execute well. We see no ceiling on how high on-site donations can go, and that's what we're seeing in the business.
Michael Maher: Yes. And then, Michael, this is Michael. I'll take your question on the sales yield. So we were really pleased with the roughly 6.5% increase in sales yield that we delivered in the first quarter. There's an element of higher ASP in that. We strive to keep that, though, at or below inflation over time. And that's sort of a normal recurring thing. But really, what drove that outsized growth this quarter was kind of things Jubran talked about earlier, being very careful about how we're managing production and lining that up to demand, especially in Canada, but also the productivity initiatives in our off-site processing facilities, which is helping us to drive getting the right item to the right location at the right time and therefore, greater sales yields on those items as well.
Operator: We'll take our next question from Bob Drbul at BTIG.
Robert Drbul: A couple of questions for you. The first one is, when you look at, I guess, energy cost impact, is -- can you talk about how you're being impacted throughout the business from that perspective? And then I guess the second question I have is just, can you expand a bit more just new store productivity? And are you seeing any variations? And I think -- and as you more measured approach to this year, 5 in the first quarter, 6 in the second, like the benefits to a more measured rollout from an execution perspective, what you're seeing there?
Michael Maher: Yes, Bob, let me take the first question, and then I'll let Jubran take the new store one. So energy costs, Yes. The run-up in fuel costs came fairly late in the quarter for us. So not really a material impact to our first quarter. At these levels, we think there is some modest pressure for the balance of the year. Nothing that we think we can't mitigate, but obviously, a fast evolving situation that we'll just continue to monitor. Jubran, do you want to talk about the new store question?
Jubran Tanious: Yes. New stores have been very pleased, as Mark talked about in his opening comments, Bob. So in line with our expectations, I think our ability to pick winners and refine our modeling of new stores has just gotten better and better over the years, and we're seeing that in performance. So to your question of are we seeing any outliers, it's been pretty consistent. We feel very good about our ability to predict and then also execute all the things that have to go into play to make a new store open on time and be successful. And then in terms of our ability to prospect and find attractive new locations and fill up that pipeline, that has only gotten stronger as we think about the remainder of this year and what we have committed to in 2027, we are right on track with where we hope we would be.
Operator: We'll move next to Mark Altschwager at Baird.
Mark Altschwager: I wanted to follow up on the price value framework you've been building on here in the last few calls. With the U.S. comp now nicely in the mid-single digits and your competitive set continuing to take price, has anything in your testing changed your view on the AUR opportunity? Are you taking any incremental price tactically by category or by geography? And just how are you thinking about further opportunity if that value gap widens? Is it more about loyalty growth with new customer acquisition on that trade down? Or is there maybe some incremental AUR contribution to comp as we move forward?
Mark Walsh: Great question. Look, I think it starts with we are very focused on maintaining a super deliberate and very attractive price value relationship for our customer base. And that's U.S. and Canada. I mean we're focused on it. We've got a great data set that informs our approach on where we're putting category pricing in a given geography, critical, critical element. As we think about watching the item ratio or flow-through, that really informs us as to where there are certain opportunities in certain geographies and certain categories. So again, very analytically data science-driven approach to how we're deploying pricing across our fleet. And again, that's U.S. and Canada. The differences are obviously the geographies and the sensitivities to price relative to how quickly those garments or those goods sell. So it is very data science oriented. We're monitoring our approach carefully. And in this environment, we seem to be winning. I mean we're really pleased with the throughput that we've gotten in both countries when it comes to our price value relationship.
Mark Altschwager: And just a follow-up on the loyalty program, the loyalty file. Can you size up where that is today and how much it grew in Q1? Trying to get a better understanding of how much the U.S. strength is growth in that file versus deeper engagement with your existing base.
Mark Walsh: Yes. The file is growing quite nicely. We're a little north of 6 million total loyalty members across North America. We continue to see nice growth. We're very pleased with -- I think the thing we're most pleased about is that top loyalty cohort behavior really continues to outperform in both countries. And it represents roughly 73%, 74% of our sales. A great ability for us to connect with our consumers very cost efficiently at any given time.
Operator: Our next question comes from Peter Keith at Piper Sandler.
Peter Keith: Nice quarter, guys. I know it sounds like Q2 has continued the trend. But with the backdrop of higher gas prices, in the past, you have spoken to a lower income element as a portion of your customer base. So wondering if with the loyalty program, are you seeing anything of note as it relates to sort of trade-in versus trade out in this kind of evolving economic backdrop?
Mark Walsh: Yes, I'll take that one. So look, I think in both countries, we continue to see a real nice adoption trend amongst younger and higher income consumers. And when you think about higher income consumers, certainly trade in, trade down is part of our growth mix in our loyalty platform. There are some differences though between the countries. We see in the U.S. consistently that demand has remained healthy and broad-based across all income demographics. In Canada, where there is a little more of an economic sluggishness -- sorry about that. We see our lower household income cohort disproportionately impacted. So that's really the only difference we're seeing between the 2 countries and how they're engaging with us and through the loyalty program.
Peter Keith: Okay. Helpful. And then, Mark, to follow up on the prepared remarks with using AI and applying it to your loyalty program. I guess I was hoping you can kind of unpack exactly what you guys are doing. It sounds like maybe something that would enhance sales, but I'd like to just get a better understanding of what's happening.
Mark Walsh: Well, I think it's a really good question. So I think we're -- our goal is, and we're picking very important and critical strategic elements of our business model and what the stores do. So obviously, the loyalty program is an important element of our consumer engagement platform. Having our store managers, having our store leadership continually focus on this very critical element was a great starting point for us to kick off our agentic strategy. So what this agent is doing is basically communicating to our store managers, this is where you are relative to your peer set from a loyalty perspective, could be great, could be depending on where you are in that continuum. It gives you things to consider and actions to take relative to how you're engaging with the consumer at that moment when they could either sign up or the opportunity to get them signed up. We see this as the unlock for several more agents to come right behind that, again, to allow us to keep our team and our store managers focused on critical issues throughout the week, period, month and just -- and then providing the information upward so that regional district managers, regional managers, Jubran and the country leads can drill down when appropriate to ensure that those key disciplines are being met and focused on throughout the year.
Operator: We'll move to our next question from Jeremy Hamblin at Craig-Hallum.
Unknown Analyst: This is Will on for Jeremy. First, I was just wondering if you're able to quantify the weather impact you saw in Q1. And then you noted the 70 basis point headwind from Easter. I guess should we be considering a similar magnitude of benefit here in Q2 from the late Easter last year?
Michael Maher: It's Michael. So yes, I don't know if I quantify a weather impact other than to say it really was more about how the quarter played out. Very lumpy in terms of the comps just given the weather patterns this year versus last. February was our best comp because February last year had some really extreme weather. January was our softest comp because we had some really extreme storms in both the U.S. and Canada this year. Actually, I would say that some degree of extreme weather is just par for the course in Canada, in particular. It was probably more extreme than normal in the U.S. and therefore, arguably even a little bit more disruptive to our U.S. comp, which continued nevertheless to be strong. So again, we're focused on what we can control. And as we exit the quarter and see that all kind of normalize, we're pleased with the reacceleration in the U.S. comp. As far as the Easter impact, yes, that headwind of roughly 70 basis points to Q1 will flip and benefit us in Q2 by a similar amount.
Unknown Analyst: Got it. That's helpful. And then I just wanted to touch on the ABP Light rollout. It sounds like it's solidly ahead of case here. I mean it may be too early, but just curious if there's any quantifiable benefits you've been able to realize thus far from the rollout?
Jubran Tanious: Yes. This is Jubran. It is a little bit early to cite the results, but very pleased with the rollout between our traditional automated book processing ABP and now it's derivative ABP Light. We've rolled it to roughly 85% of the fleet. The rollout has gone well. Reminder, books is only about 5% of our business, but I think ABP Light is a great example of our innovative process, data-intensive stress testing and a smart rollout plan that we feel good about. So we'll continue to monitor it in the coming months.
Operator: We'll go next to Owen Rickert at Northland Capital Markets.
Unknown Analyst: This is Keaton Schuelke on for Owen. You called -- with the strength in the younger and more affluent cohorts, I was curious to hear how their basket size purchase frequency and category mix has been trending versus legacy customers. And curious how you expect that to trend going forward?
Mark Walsh: Thanks for the question. Pretty consistent. Nothing out of the ordinary in terms of the trend lines that we're seeing from that particular customer cohort.
Unknown Analyst: Okay. And then any early read on Tennessee and North Carolina stores? Are those markets ramping faster or slower than prior cohorts? And kind of what are you expecting out of those?
Mark Walsh: We're excited about those markets to be sure, we have not yet opened those stores. Our first store in North Carolina will open later this month. And then our first store in Tennessee will be several months beyond that, maybe end of this year, early next year, that sort of thing. So nothing to report on that. But suffice to say, very energized by the white space opportunity and the quality of the sites that we've secured.
Operator: And we'll go next to Dylan Carden at William Blair.
Dylan Carden: I guess I'm curious, is there any incremental or change in the competitive dynamic in Canada? I know that market tends to lag from an online migration standpoint, if that's a piece of it. And to the extent that there isn't, just the line of sight you have in some of the improvement in that market or if it's more -- if you're managing a business to a flat comp, that becomes more of a manifest destiny so you feel more comfortable with.
Jubran Tanious: Yes. Jubran, I can take a piece of that and then guys can jump in. No, in terms of longer-term expectation of growing the top line, I think Mark spoke to that earlier. We're not satisfied with the flat comp. We think there's a number of things that we can test and tinker with and trial. What we do know is that we can control what we can control now, and that is efficient and effective use of our material and labor to put the right thing at the right time and the right amount in front of the customer. So I think doing that well in a more sophisticated way allowed us to have the gross margin improvement that we saw in Q1. In terms of competitive landscape directly for us in Canada, nothing specific that we could point to that's materially changed that.
Mark Walsh: Not-for-profit is really our #1 competitive set in the Canadian market. And being within 12 miles of 90% of the population, we're fairly saturated. So we're highly competitive in every market in Canada. And again, we're not satisfied with our comp trend. We're going to -- we're doing a lot to try to improve those trends.
Michael Maher: Yes. Dylan, I think -- it's Michael. Just to kind of put a bow on that, to your point, and just to underline what Mark and Jubran said, we continue to work to drive the business in all facets, including top line. In the near-term, though, we are mindful of the macro environment, and we believe it's prudent to plan for a flattish comp for the balance of this year. And we continue to believe that even with that backdrop, we can drive profit improvement on the order of what we saw in the first quarter.
Dylan Carden: And then on the AI technology side of things, any incremental thinking on how you might use that from an inventory management standpoint, pricing, decisions on what to keep versus donate? Yes, I guess, sort of an open-ended question there.
Mark Walsh: Yes. We've got a robust innovative pipeline for sure. And we've got a lot of promising initiatives in test. We're pretty conservative, though, about bringing them public. So once we get to a place where we're ready to deploy, we will certainly be sharing those opportunities.
Operator: And that concludes our Q&A session. I will now turn the conference back over to Mark Walsh for closing remarks.
Mark Walsh: I just want to thank everyone again for their interest, and we look forward to talking to you in roughly 3 months.
Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.