Q3 2024 Dollarama Inc Earnings Call
Yeah.
All participants, please stand by. Your meeting is about to begin.
All participants please standby your meeting is about to begin.
Good morning and welcome to the Dollar Rommel Fiscal 2024-3rd Court of Results Conference call. Neil Rossi, President and CEO , and Jolianne Calrone, Vice President, Corporate Finance and Treasurer, will make a short presentation, followed by a questioning and superior open exclusively to financial analysts.
Speaker Change: Good morning, and welcome to the dollar Amo fiscal 'twenty 'twenty four third quarter results conference call.
Speaker Change: Neil Rossy, President and CEO, and Joel Yang Cao round, Vice President corporate Finance and Treasurer will make a short presentation, followed by a question and answer period open exclusively to financial analysts.
The press release financial statements, the management's discussion and analysis are available at dollarroma.com in the Investors Section, Relations Section, as well as on Cedar.
Speaker Change: The press release financial statements and management's discussion and analysis are available at dollar on the Dot com in the investors section relations section as well as on SEDAR.
Before we start, I've been asked by Dalarama to read the following message regarding four Someday, we soon reach we across the Moon
Speaker Change: Before we start I've been extra dollar Rama to read the following message regarding forward looking statements.
Balarama's remarks today may contain four looking statements about his current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments.
Speaker Change: Colorado remarks today may contain forward looking statements about its current and future plans expectations intentions results levels of activity performance goals or treatments or any other future events or developments.
for looking statements are based on information currently available to management. And on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstance.
Speaker Change: Forward looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances.
However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could-
Speaker Change: However, there can be no assurance that such estimates and assumptions will prove to be correct.
Many factors could cause actual results.
Levels of activity, performance achievements, future events or developments that defer materially from those expressed or implied by the four looking statements.
Speaker Change: Levels of activity performance or achievements future events or developments to differ materially from those expressed or implied by the forward looking statements.
As a result, the Alarama cannot guarantee that any forlooking statement will materialize and you're cautioning that the place undue reliance on these forlooking statements.
Speaker Change: As a result, all around but cannot guarantee that any forward looking statement will materialize and you're cautioned not to place undue reliance on these forward looking statements.
For additional information on the assumptions and risk, please consult the cautionary statement regarding for looking information, contain the $1,000 MDNA dated December 13, 2023, available on CDAR Plus.
Speaker Change: For additional information on the assumptions and risks. Please consult the cautionary statement regarding forward looking information contained in <unk> MD&A dated December 13th 2023.
Speaker Change: On SEDAR plus.
Speaker Change: Forward looking statements represent management's expectations as at December 13, 2023, and except as may be required by law, Alabama has no attention and undertakes no obligation to update or revise any forward looking statement, whether as a result of new information future events or otherwise.
Speaker Change: I'd now like to turn the conference call over to Neil Rossy.
Neil Rossy: Thank you operator, and good morning, everyone.
Neil Rossy: <unk> financial and operational performance in the third quarter of fiscal 2024 and year to date.
Neil Rossy: Flex sustained consumer demand for our broad range of affordable products and the overall convenience, we strive to provide everyday.
Neil Rossy: For Q3, we generated a six consecutive quarter of double digit sss growth compared to the same quarter last year EBITDA grew 24% and EPS over 31%. We also delivered an industry, leading gross margin, which now reflects the normalization in the supply chain.
Neil Rossy: Sure inbound shipping costs.
Neil Rossy: On the operational front, we opened 16 net new stores, bringing the total number of net new stores opened in fiscal year to date to 55, and our total store count to 1541.
Neil Rossy: Having successfully taken some of the historical pressure after a busy last quarter of the year. We are on track to achieve our annual target of 60 to 70 net new stores.
Neil Rossy: Importantly, we entered the fourth quarter, our highest sales quarter, historically with well stocked well merchandised holiday ready stores.
Neil Rossy: This speaks to the strong and disciplined execution of the team from head office to logistics to field management and store associates.
Neil Rossy: The dollar city team in Latam is also executing right on plan from both the financial and operational perspective.
Neil Rossy: They just celebrated the opening another 500 stores subsequent to their last quarter end.
Neil Rossy: For some perspective on their progress when we first partnered with dollar city in early 2013, they had 15 stores in two central American countries.
Neil Rossy: By the time, we acquired a 51% equity interest in 2019, they had over 190 stores delivering a localized version of dollar am a value proposition and shopping experience in three markets.
Neil Rossy: Here today here, we are today capping off 2023, with 500 stores and counting in four countries huge kudos to the entire dollar city team on reaching this impressive milestone in such a short period of time.
Neil Rossy: Ultimately dollar Armours performance across the board continues to reflect the relevance and strength of our compelling value proposition and simple growth oriented business model.
The last few years have truly reinforced the fact that dollar armor is a key shopping destination for all Canadian consumers.
Neil Rossy: Our model resonates with those looking for value for their hard earned money and for convenience and a time pressed world.
Neil Rossy: But we aren't taking any of this for granted.
Neil Rossy: Keep both our long standing customers and new customers coming back we must stay true to the fundamentals of our business, our convenience and value promise.
Neil Rossy: This is anchored in our proximity to our customers and our procurement logistics and merchandising expertise and an unwavering commitment to being a price follower.
Neil Rossy: These remain relevant regardless of the macroeconomic context, but more important than ever and a challenging one.
Neil Rossy: As we head into the crucial fourth quarter and gear up for next year, our focus is on preserving and strengthening our role in the shopping habits of consumers, we will do so by focusing on the elements within our control.
By continuing to offer the best relative and year round value across our product offering and in each of the categories in which we compete.
Neil Rossy: Regardless of how consumer behavior will evolve in what remains an uncertain context, what is certain is our commitment to be there for all Canadians as they adapt to the economic environment.
Speaker Change: <unk> over to you for a closer review of our financial results. Thank.
Neil Rossy: Thank you Neil.
Speaker Change: That's real Domino Chitra results and expectation for fiscal 2024.
Speaker Change: If that sounds grew 11, 1% in Q3 over and above than 8% growth for the same period last year, primarily driven by sustained customer traffic.
Speaker Change: While consumer product sales growth continues to be stronger than they have been historically, we are seeing higher sales across all categories.
Speaker Change: For example, we had a great auto wins this year, which is a good indicator of the value proposition across all departments.
They've been Sss today, we are increasing our full year <unk> guidance from a range of down to 11% to a range of 11% to 12%.
And is it better gross margin expansion through the second half of the year as long as they're realizing.
Speaker Change: Three well delivered an exceptional margin of 45, 4% of sale. This fully reflects millwork up at our cost and was also boosted by lower logistic cost.
Speaker Change: Looking at the full year, we expect it will be in line with the Iran of our annual gross margin guidance range of 43, 5% to 44, 5% itself.
Speaker Change: <unk> was 14, 5% of sales for Q3 compared to 14, 1% in the same quarter last year.
Speaker Change: Jenny as a percentage of sales script uptick year over year due to higher startup costs and the timing of certain store expenses, mainly maintenance.
Speaker Change: Higher labor costs reflect more hours distributed in preparation for the busy holiday season, I was glad of wage increases taking effect.
Looking at the full year, we expect to be in line with our annual SG&A guidance range of 14, 7%, So 15, 2%, but likely delawarean ask them together.
Speaker Change: Our 51% shares of dollar city's net earnings was 18 million compared to 9 million photo same period last year continuing to reflect our strong execution.
Speaker Change: That's a better Rama EBITDAR grew 24% to $478 8 million or 32, 4% of sales and dividend net earnings per share increased by 31, 4% to 90% from 75.
Speaker Change: On capital allocation, we remain active on the upside in the quarter with the repurchase of over one 7 million shares for 166 billion.
Speaker Change: The board also approved a quarterly cash dividend of 7087 per share.
Speaker Change: As part of the active management of our capital structure, we completed a bond offering during the quarter for proceeds of 500 million.
Speaker Change: Proceeds of our venues such as they've gone through the quarter and to pay it off.
Speaker Change: That came due this November.
Speaker Change: Following the offering and the repayment the effective blended interest rate on our outstanding senior unsecured notes remain substantially unchanged.
Speaker Change: Turning now to our outlook for fiscal 2025, the path of the economy and its impact on future consumer behavior remains hard to predict.
Speaker Change: We're looking closely at all the key holiday season, and already 2024 play out as what I'll call the economic environment evolves as we set the expectation for fiscal 2025.
Speaker Change: As a result, we will provide guidance for next year in conjunction with the release of our Q4 results in March.
Speaker Change: Based on what we see so far our sentiment is that normalization in sss trends will continue as we lapped two years of double digit sss.
Speaker Change: The next few months, we'll be determining factor as we develop our fiscal 'twenty to 'twenty five outlook on this key metric.
Speaker Change: Importantly, we have strong conviction in our fundamentals and the relevance of the value and convenience we offer consumers in any economic environment. Our performance to date reflects that and we will keep our focus on delivering on our value provided to Canadian consumers from coast to coast.
Speaker Change: That concludes our formal remarks, I'll turn it over to the operator for the Q&A.
Thank you.
Speaker Change: To ask a question. Please press star one one of your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Please stand by while we compile the Q&A roster.
Okay.
Speaker Change: Our first question comes from the line of.
Speaker Change: Irene <unk> with RBC capital markets. Your line is now open.
Speaker Change: Thanks, and good morning, everyone great quarter again.
Speaker Change: Wondering what Q4 to date is looking like what youre seeing in terms of consumer demand across categories, and whether youre seeing any meaningful.
Speaker Change: Slowing or weakness is not on a year over year basis, but just in general.
Speaker Change: As we're heading into the all important holiday, whereas we're coming towards the end of the all important holiday period.
Speaker Change: Good morning Irene.
Speaker Change: So far.
Speaker Change: It's business as usual, there's not been any.
Speaker Change: Surprises.
Speaker Change: But I think that's all I'm allowed to say.
Speaker Change: We're seeing strong customer demand.
We got it as historic customer demand, but Irene as you may.
Speaker Change: Recall, we had a very strong quarter last year are about 616% Sss. So we're comping a very strong quarter. So we continue to see normalization in the U S et cetera, which is already embedded in the full year guidance that we updated but.
Speaker Change: But I think it's important to see that to say that we see strong thoughts about events across all categories, but we'll need to see the next few weeks with our key for the for the rest of the sorry for the full year at the end of next year.
Speaker Change: That's helpful. Thank you often you will give us the quarter to date.
Speaker Change: Will you give it to us this quarter.
Speaker Change: It's embedded in the full year guidance range. So if you you imply youre too for you you'll get a good sense of the caito.
Speaker Change: Thank you.
Speaker Change: And then just on a completely different topic on dollar city had very strong demand very strong results in Q3. It was a notable step up.
Speaker Change: How should we be thinking about sort of the seasonal progression.
Speaker Change: Dollar city and what were the drivers of that number and how should we be thinking about it going forward.
Speaker Change: I think one of the takeaways is that.
Speaker Change: The dollar city business and the dollar AMA business seem to reflect a many similarities with regards to <unk>.
Speaker Change: Trends in consumption overall, we don't disclose details within the dollar city business itself, but there their progress continues.
Speaker Change: Continues to be very much based on.
Speaker Change: The market acceptance and store openings were extremely pleased with the execution.
Speaker Change: From the leadership team.
At dollar city and.
I think that covers it.
Speaker Change: That's great. Thanks Neal.
Speaker Change: Thank you.
Speaker Change: Yeah.
Thank you.
Speaker Change: Our next question comes from the line of <unk>.
Speaker Change: The LIFO with BMO capital markets. Your line is now open.
Speaker Change: Hi, Good morning, Thank you and here in place for Tammy.
Speaker Change: So just looking further out the the trade down traffic that we saw coming into dollar online.
Speaker Change: Over the past 12 to 18 months lets say you know when the economy gets better again and that trade down traffic goes back up some and then may retrenched back to other retailers.
What he is.
Speaker Change: It's all around Mas.
Speaker Change: Toolbox to.
Speaker Change: And leavers that you can pull to keep comps positive.
As we come through.
Speaker Change: Just trade down effects.
Speaker Change: Well.
Over the history of time, the trade up and trade down effects can both have positive effects on dollar AMA.
Speaker Change: When theyre trading down.
Speaker Change: People people.
Speaker Change: Consumers turn to.
Speaker Change: Look at dollar am I as a solution to having to trade down and when the market.
Speaker Change: And the economy are strong there are just more dollars to spend so dollar on my guess its share of those dollars. Even if the percentage is smaller than it would be when there is a trade down.
Speaker Change: And I think thats part of the strength of our business model is that it's as resilient on both sides.
Speaker Change: The refresh of our merchandise.
Speaker Change: And.
Speaker Change: Proper execution, our key also and keeping the consumers coming back.
Speaker Change: The economy shifts in different directions.
Speaker Change: And I think.
Speaker Change: When customers come to us during the highs and the lows.
Speaker Change: The most important thing is that we convert them into believers and all around Ma value and convenience so that they keep coming back regardless.
Speaker Change: Great. Thanks, and also just a.
Speaker Change: Second question.
Speaker Change: How would you describe the current pricing environment that you have now or are you starting to see any pushback in terms of price markups and how about what he's seeing a competitive space.
Speaker Change: Generally speaking.
Speaker Change: The space is stable on some of the core consumables I think the market is tightening up a little bit and pushing back on pricing, but it's a very difficult situation because the domestic manufacturers and vendors as I.
Speaker Change: Explained on past calls continue to push costs up.
Speaker Change: And retailers are doing their best not to push those.
Speaker Change: Cost onto the consumers, but retailers can only absorb so much imports are fairly stable and and I think whatever you know.
Speaker Change: Deflation, what's happening has come to a normalized <unk>.
Speaker Change: And if if domestic manufacturers and suppliers continue to push on costs for whatever their reasons are.
Speaker Change: Retailers will have to continue to pass on those those costs and higher retail for now I think.
Speaker Change: It's fairly stable.
Speaker Change: Alright.
Speaker Change: Much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Vishal Street <unk> with National Bank. Your line is now open.
Vishal Street: Hi, Thanks for taking my questions.
Vishal Street:
Vishal Street: Just wondering looking at the traffic trends in the basket trends, obviously traffic very strong and from management standpoint is there a mix between traffic and basket that is preferable for you or or or.
Are you is it is it leaning too much one way or the other in your eyes or you'll take it how you got it.
Speaker Change: We will take it as we get it.
Vishal Street: Okay.
Vishal Street: Following along the lines of that question just given that the basket size increase was.
Vishal Street: Seemingly less than inflation I presume less any inflation in your in the system does that suggest that the number of items in the basket has reduced and customers are coming more frequently to the stores than they otherwise might have is that's what's driving the traffic or is it also market share gains can you give us context on the two.
Okay.
Vishal Street: I mean as you know we were.
Speaker Change: We're not providing any information on.
What is coming from units versus the SP, what do we see as a consumer coming.
Speaker Change: I mean, and Enbridge, our thing and we see a strong performance across all categories. So for US, we're mostly focused on getting that customer in and making sure that defines what he needs in our in our stores.
Speaker Change: Okay. Thanks, I'll circle back.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of George <unk> with Scotiabank. Your line is now open.
George <unk>: Good morning, Neil enjoy.
Neil Rossy: Can you talk a little bit more about seasonal I think you've mentioned, how we are a strong and maybe how Christmas.
Speaker Change: It's trending quarter to date please.
Speaker Change: Okay.
Speaker Change: I mean, we're just at the beginning of this number I mean mid December I would say the next few weeks will be key for for Chris Smith, We did have a strong Halloween as I think we're well stocked. So I think it's too early to tell for Christmas what I can tell you is that we're very pleased with our Oh.
Speaker Change: <unk> positioned for Christmas and store.
So we are we feel we're in a good position well need to see all of the consumer is behaving in the coming weeks.
Speaker Change: To have a better idea on how Christmas with pro forma.
Speaker Change: Okay. I know, it's early days, but assuming kind of a consistent mix of consumables going into next year can we generate in like a healthy level of gross margin expansion from perhaps lower freight cost from perhaps some deflation in some of our product cost out of Asia any color how to think about that.
Speaker Change: You mean for fiscal 'twenty five.
Speaker Change: Correct.
Speaker Change: Yeah. So we're we're starting to benefit from lower freight costs are we said, it's a pretty interesting and other quarters that we would be seeing that benefit in the second half of this year are we are we expect some of that good tailwind to continue into next year at least in the first half too early to tell for the second half.
Speaker Change: Half of next year.
We'll negotiate our freight contracts.
Speaker Change: There are 242, one so we'll have a better idea when we provide guidance in March but some of the tailwind we see efficacy should continue in the first half of it here.
Speaker Change: Okay. Just last one for me real quick can you give us an update on shrink.
Speaker Change: That all worsened on a sequential basis.
Speaker Change: Shrink is as we said before we.
Speaker Change: We are it has increased but that's something we saw and that's 12.
Speaker Change: 12 to 18 months. So it's all embedded in the gross margin guidance a range that we have.
Speaker Change: Okay. Thanks.
Speaker Change: Okay.
Speaker Change: Thank you.
Our next question.
Speaker Change: Comes from the line of Edward Kelly with Wells Fargo. Your line is now open.
Edward Kelly: Hi, Good morning, everyone. Thank you for taking my questions.
Edward Kelly: First question I have for you is maybe just a follow up.
Edward Kelly: And to the gross margin.
Edward Kelly: It looks like implied guidance for Q4 would have a smaller year over year gain.
Edward Kelly: Then what you saw in Q3.
Edward Kelly: And I think also closed on a multiyear basis, and just kind of curious as to.
Edward Kelly: How youre thinking about.
The gross margin in Q4, maybe why you wouldn't see more of a game and what's implied in guidance there.
Edward Kelly: I mean, the the gross margin will be a factor of.
Edward Kelly: The sales mix in stores.
Edward Kelly: And Oh, Oh, it compares to where we were last year.
Edward Kelly: Feel very comfortable with the guidance range that we have and the implied gross margin it sounds like.
Edward Kelly: For Q4.
Edward Kelly: Despite a lower year over year growth if you will.
Edward Kelly: Okay.
Edward Kelly: And then I wanted to ask about SG&A, you've obviously had.
Edward Kelly: Quite a bit of SG&A growth over the last few quarters.
Edward Kelly: I guess a lot of it pertaining to wages.
Edward Kelly: I'm curious when do you think.
Edward Kelly: That the leverage point on SG&A would normalize.
Edward Kelly: I guess should we be thinking about that.
Edward Kelly: Back half of next year any any additional color there.
Edward Kelly: I wish I could give you that answer it's too early to tell at this point the SG&A, there's a big function of minimum wage increases that would affect that and right now where we stand we haven't had any announcement from.
Edward Kelly: New provinces on the minimum wage increase for next year. So.
Edward Kelly: We have no visibility yet for next year, So we'll need to wait until March hopefully you will get more.
Edward Kelly: Visitors.
Edward Kelly: Wage increases for next year.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Luke Hannan with Canaccord Genuity. Your line is now open.
Luke Hannan: Thanks, Good morning, just going back to an answer you gave to previous question I believe I heard you correctly you are not in consumables you are seeing some tightening up in the market. Some pushback on pricing and I believe you also mentioned that deflation is somewhat normalized is that specifically referring to consumables or is that other areas of the assortment youre seeing that as well.
Luke Hannan: And specifically I guess I'm asking about general merchandise what trends youre seeing there as far as price goes.
Luke Hannan: No general merchandise is that.
Luke Hannan: We haven't seen any change in the general merchandise at retail price points really just core consumables.
Speaker Change: Got it okay. Thank you and then I wanted to get a sense of if there was there was mentioned in the press release and in the MD&A that SG&A for the quarter. There was an impact from the timing of some operating costs in the period I'm curious to know what those were and be roughly what the quantum was and if there should be a benefit that we should be thinking about for some <unk>.
Speaker Change: Over the next couple of quarters as a result of those costs being recognized in Q3.
Speaker Change: Yeah, I would say, it's more a timing of maintenance expenses I would just add more volume this quarter.
Speaker Change: We're also seeing increased costs on the maintenance from similar to what you would see a new construction we've talked about it that they thought there was a quick run so nothing nothing of our ethanol red flag or anything like this it's more of a timing of the maintenance from.
Speaker Change: This quarter.
Speaker Change: Okay last one for me and then I'll pass the line Neil I'm sure, we'll get a little bit more commentary on this when you're when you're out with your Q4 results, but is your expectation going forward that.
Speaker Change: Every year I guess as much as possible that youll youll try to Frontload store openings is based on what you can see over the course of the next few months is that what the expectation should be for for fiscal 'twenty five.
Speaker Change: That has always been the desire, we're finally, achieving that and I feel confident that for the next.
Speaker Change: Yeah.
Next year or two we should be able to achieve the same type of timing.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you Sir.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Mark Petrie with CIBC. Your line is now open.
Yeah. Thanks, good morning.
Speaker Change: Wanted to follow up again on the comments with regards to inflation and just to clarify Neal when you say no change in in general merchandise you mean, no change in sort of the deceleration in inflationary trends or no change absolute change in price levels.
Speaker Change: No I would say the question. The original question was whether we're seeing.
Speaker Change: Tightening in the market and competition pushing back on on retails.
Speaker Change: And the answer was relative to that so we're not seeing any particular.
Speaker Change: <unk> reaction on general merchandise, but on on core consumables, we are seeing that the market is becoming more competitive.
Speaker Change: Okay helpful. Thank you for that.
Speaker Change: On the group.
Speaker Change: What that is.
Speaker Change: Briefly competitive in fact, yes, yes, okay. Good.
Speaker Change: And then on the on the gross margin.
Speaker Change: Obviously, the lower freight and logistics costs are the biggest factor, but that was product mix impacting gross margin today versus.
Speaker Change: Say a couple of quarters ago.
Speaker Change: I mean last year, we said you know when we talked about the trade down and it was all in consumables.
Speaker Change: Here, what we said is we're seeing actually across all categories. So, but it does have a little bit of a positive impact on the gross margin.
Speaker Change: But I would say the bulk is really lower freight costs are flowing through the gross margin and lower logistic costs are and keep in mind last year, we were rebuilding our inventory position.
Speaker Change: Position that processing, a high volume of good thought that the D C and in our warehouses. So.
Speaker Change: That justification if you would ask a stabilized so we don't have the incremental cost. This year. So it's really no more freight costs logistic costs and a little bit of the product mix.
Speaker Change: Okay. Thank you and one last question.
Just with regards to the availability of labor.
Speaker Change: I think you guys have sort of navigated that.
Speaker Change: Really well over the course of time, but hoping you could just talk about about the availability of labor both for stores and four for your distribution business.
Speaker Change: I'm very pleased to say that on the distribution side.
Speaker Change: Labor is stable and has not been a challenge the way it usually is at this time of year. So that's wonderful news.
Speaker Change: Store level is I would say stable for the last couple of quarters, it's a bit of a challenge, but it's manageable.
Speaker Change: And we've adapted systems and processes to try to streamline the hiring process to make it as easy as possible for potential candidates and Thats had a that has had a positive impact as well.
Speaker Change: Okay excellent to hear thanks for all the comments and all the best over the holidays.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brian Morrison with TD Securities. Your line is now open.
Brian Morrison: Hi, Good morning, Neil can we circle back to dollar city for a second I know you gave the answer with respect to Irene's question, but your new stores are up 21% year over year, but your equity income contributions up 95% I don't think its just typical leverage from scale, that's driving that what are the other drivers that.
Brian Morrison: That could have contributed to that such phenomenal growth and can you talk about what we should be thinking about in cadence looking forward.
Neill Rossy: I mean, I think neill touched on it but they're experiencing similar trends and what we see in Canada, which as you know strong consumer demand.
Neill Rossy: We're very pleased with their performance I would say youre starting to see also the benefit of the business is scaling there.
Neill Rossy: There are larger now so you're starting to see some of that benefit we won't provide guidance on where we think there'll be next year.
But again strong performance coming from the dollar city team and we're very pleased with that.
Speaker Change: You've never had growth such as just going back in any of your quarter should we think that this is sustainable.
Speaker Change: It's an excellent question and and and one that.
Speaker Change: We're gonna have to wait and see we hope that the answer is yes.
Speaker Change: And it might be yes, but but it's it's too early in the business and some of the new countries.
Speaker Change: And it's just too early to tell.
Speaker Change: Sorry, I don't mean to probably here, but with the Peruvian business be experiencing higher margins than you would've thought.
Speaker Change: We're very happy with the Peruvian business.
Speaker Change: Okay last question Julien are you under hedged I believe you are with respect to the U S dollar relative to the Renminbi I believe you just do a U S dollar CAD hedges and if so the appreciation of the U S. Dollar should we think that that should flow through to the bottom line.
Speaker Change: So we're we're edging I mean nine to 12 months that had for purchasing.
Speaker Change: And the reason why we hedge our habits to help us on you know the buying and the pricing strategy. So.
Speaker Change: It would all be embedded in our guidance for next year, when we come up in March.
Speaker Change: Okay. Thank you, but can you confirm that you're hedging just the U S. Dollar CAD, you're not hedging your purchases in terms of the Chinese currency.
Speaker Change: Correct, we're hedging a arguably yes.
Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Chris Lee with des Jordan. Your line is now open.
Chris Lee: Hi, good morning, everyone and Neil I know in the past you've mentioned that the pandemic has negatively impacted product innovation to certain extent and I'm just wondering.
Chris Lee: From where you're sitting today are you seeing some improvement in product innovation from your vendors and maybe related to that are you overall satisfied.
Chris Lee: That you are in terms of how you're leveraging your 425 plus price point too.
Chris Lee: Produce.
Chris Lee: New products into your into your stores. Thank you.
Chris Lee: It's a pleasure.
Chris Lee: The unfortunately, the situation with regards to.
Chris Lee: New modes, new new product development.
Chris Lee: Around the world is still.
Chris Lee: Fairly stagnant.
Chris Lee: With all of the global challenges.
Chris Lee: Happening.
Chris Lee: That being said as certainly the additional price points gave the buyers more flexibility on on adding items that they might not otherwise have had.
Chris Lee: The ability to add at what they thought was a competitive price point.
Chris Lee: And it just puts the onus on the retailers in our case are.
Chris Lee: Buying and sourcing team to be more creative and spend more time and energy.
Chris Lee: Developing new items ourselves.
Chris Lee: But but no I have not seen a change.
Chris Lee: Globally on the amount of creativity and new molds being made it's still tough from that perspective.
Chris Lee: Okay. That's helpful and maybe just on that.
Speaker Change: Neil you can you share some thoughts on how the consumer acceptance of the additional price point that I guess, it's been a year and a half how is that going overall relative to your expectations.
Neil Rossy: I think we're very happy with consumer acceptance I think as long as the execution from the buying team is what we always strive to achieve.
Cheap and Thats, great relative value.
Neil Rossy: Our buying team.
Neil Rossy:
Another tool in the toolbox to help them navigate some of the challenges because when you have fixed price points you're always.
Wayne the positives of of holding back on a on a markup on a price increase.
Neil Rossy: But the business is taking a beating when you do that.
Neil Rossy: And at other times, when you decided to take that Mark up you worry about lost sales so by having additional price points. It reduces the extreme nature. When you have very fixed price points of potential negative impact on sales.
Neil Rossy: Volumes, but it helps the buyers remain competitive for a longer amount of time. So it is helpful.
Neil Rossy: I wouldn't want to have limitless I think that the limited amount of price points that we have still creates a structure that forces as <unk>.
Neil Rossy: Certain rigor and.
Neil Rossy: A retail company and I think it's very helpful for the buyers to have that structure and I think it's also helpful for the customer.
Neil Rossy: To have that additional simplicity.
Neil Rossy: As opposed to an infinite amount of price points.
Speaker Change: Okay. Thanks for that and maybe one for you Julien.
Speaker Change: When I look at your updated take the high end of your updated full year same store sales guidance.
Speaker Change: It would imply Q4 is running around 4% to 5%.
Speaker Change: SG or on a two year stack basis is around 20%.
Speaker Change: I know theres still a lot of unknowns, but based on what you guys see today, if everything kind of works. The way you expect that to be for next year just in like a 20% two year stack for next year is an achievable number.
Speaker Change: I wish I could give you the answer is authority to tell for for next year at this guidance would need to wait until March for them.
Speaker Change: Okay.
Speaker Change: I'll give it a try thanks everyone.
Speaker Change: Policies.
Speaker Change: Thank you okay.
Speaker Change: Thank you. Our next question comes from the line of Martin Landry with Stifel. Your line is now open.
Martin Landry: Hi, good morning.
Martin Landry: Wanted to touch on your cash balance it's reached $730 million as of the end of October so.
Martin Landry: Just trying to understand how you expect to deploy this cash in the coming quarters is there a preference between buybacks versus dividends.
Martin Landry: So there was a although the 730 million 500 were used to repay a bond that came due this November remaining of that cash would be used in the quarter as we see fit historically, we've been active on our buyback we expect the cost.
Martin Landry: Seems to be active with declares a dividend as well and that's pretty much what I can say.
Martin Landry: Okay.
Martin Landry: And.
Martin Landry: Just trying to see.
Martin Landry: With the gain of share of wallet.
Martin Landry: Is there any way for you guys.
Martin Landry: I used to measure.
Martin Landry: The number of new customers coming into your stores.
Speaker Change: There are you monitoring that metric is there anything you can share with us.
Speaker Change: No we do not monitor that metric.
Speaker Change: Okay.
Speaker Change: Okay. That's it for me thank you.
Speaker Change: Thank you so much thank you.
Speaker Change: Thank you.
Speaker Change: I'm currently showing no further questions at this time. This concludes today's conference. Thank you for your participation you may now disconnect.
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