Q4 2024 Dollarama Inc Earnings Call
Unknown Executive: Question and Answer period is scheduled exclusively for financial analysts. The press release, financial statements, and management discussion and analysis are available at Dollarama.com in the Investor Relations section as well as on CDAR Plus. Before we start, I have been asked by Dollarama to read the following message regarding forward-looking statements. Dollarama's remarks today may contain forward-looking statements about its current and future plans, expectations, intentions, results, levels of activity, performance, goals, or achievements, or any other future events or developments. 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.
And answer period upon exclusively to financial analysts the press release financial statements and management's discussion and analysis are available at dollar Rama Dot com in the Investor Relations section as well on SEDAR plus.
None: Before we start I have been asked by dollar Rama to read the following message regarding forward looking statements.
None: <unk> remarks today may contain forward looking statements about its current and future plans expectations intentions results levels of activity performance goals or achievements or any other future events or developments.
None: 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 cause actual result.
Unknown Executive: Many factors could cause actual results, levels of activity, performance, achievements, future events, or developments to differ materially from those expressed or implied by the forward-looking statement. As a result, Dollarama cannot guarantee that any forward-looking statement will come to fruition, and you are cautioned not to place undue reliance on these forward-looking statements. For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A dated April 4, 2024, available on CDAR Plus. Forward-looking statements represent management's expectations as at April 4, 2024, and, except as may be required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information I would now like to turn the conference call over to Neil Rossy.
None: 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 dollar Rama cannot guarantee that any forward looking statement will materialize and you are cautioned not to place undue reliance on these forward looking statements.
None: For additional information on the assumptions and risks. Please consult the cautionary statement regarding forward looking information contained in dollar Ramos MD&A dated April 4th 2024 available on SEDAR plus.
None: Forward looking statements represent management's expectations as at April 4th 2024, and except as maybe required by law dollar around my has no intention and undertakes no obligation to update or revise any forward looking statement, whether as a result of new information future events.
None: Or otherwise.
None: I would now like to turn the conference call over to Neil Rossy.
Neil Rossy: Thank you for that exceptional introduction, Operator, and good morning, everyone. This morning, Dollarama released impressive fourth-quarter and fiscal 2024 results. For the quarter, comparable store sales growth came in higher than expected at 8.7%, and EPS increased by over 26%. For the full fiscal year, SSS came in at 12.8%, and EPS increased 29%.
Thank you for that exceptional introduction, operator, and good morning, everyone.
Neil Rossy: This morning dollar I'm Gonna released impressive fourth quarter and fiscal 2024, our results for the quarter comparable store sales growth came in higher than expected at eight 7% and EPS increased by over 26%.
Neil Rossy: For the full fiscal year Sss came in at 12, 8% and EPS increased 29% on the back of these results, we met or exceeded our annual guidance targets for all of our key performance metrics.
Neil Rossy: On the back of these results, we met or exceeded our annual guidance targets for all our key performance metrics. Our strong financial and operational performance once again demonstrates the enduring strength of our business model. Our compelling value proposition continues to resonate with consumers, and that keeps us motivated every day to exceed their expectations in what continues to be an uncertain economic context. I would like to recognize and thank every Dollarama employee for their contributions this year.
Neil Rossy: Our strong financial and operational performance once again demonstrates the enduring strength of our business model, our compelling value proposition continues to resonate with consumers and that keeps us motivated every day to exceed their expectations and what continues to be an uncertain economic context.
None: I would like to recognize and thank every dollar of <unk> employee for their contributions this year, where they are working in our stores in the field and our logistics operations are at head office.
Neil Rossy: Whether working in our stores, in the field, in our logistics operations, or at head office, your passion, entrepreneurial spirit, and solution-oriented mindsets are key to our continued success. On the real estate front, we opened 65 net new stores in fiscal 2024, bringing our total store count to 1,551. I'm very proud that we have now hit this annual net new store number for seven consecutive fiscal years, which speaks volumes to our team's execution. We will continue our efforts to front load store openings in this fiscal year while maintaining the same pace of annual net new stores of between 60 and 70. Heading into fiscal 2025, we have a solid pipeline of site opportunities across the country as we work towards our long-term target of 2,000 stores in Canada by 2031. Turning to Latin America, Dollar City continues to generate strong results, demonstrating solid execution on the financial and operational front as it continues to scale up. This is reflected both in their pace of new store openings and in their growing earnings contribution. They opened 92 net new stores in calendar 2023, ending the year with over 530 stores.
None: <unk> entrepreneurial spirit and solution oriented mindsets are key to our continued success.
None: On the real estate front, we opened 65 net new stores in fiscal 2024, bringing our total store count to 1551 at year end.
None: I'm very proud that we have now hit this annual net new store number for seven consecutive fiscal years, which speaks volumes to our team's execution.
None: We will continue our efforts to Frontload store openings in this fiscal year, while maintaining the same pace of annual net new stores of between 60 and 70.
Heading into fiscal 2025, we have a solid pipeline of site opportunities across the country as we work towards our long term target of 2000 stores in Canada by 2031.
Turning to Latin America dollar city continues to generate strong results demonstrating solid execution on the financial and operational front as they continue to scale up. This is reflected both in their pace of new store openings and then they're growing earnings contribution.
None: They opened 92 net new stores in calendar 2023, and in the year with over 530 stores.
Neil Rossy: This puts them in a very strong position to achieve their store target of 850 by 2029 in their four current markets of operation. On the ESG front, I am pleased with our progress this year, advancing meaningful projects across our priority areas. For example, on climate, we continue to increase our alignment with recognized standards and best practices. From a talent perspective, we invested in new technologies and programs to streamline our recruitment efforts, among other priorities, and the Supply Chain. We continue to enroll eligible vendors into our social audit program. We have also begun pursuing additional engagement work to gain better visibility on indirect vendors. We look forward to providing a comprehensive update on our progress across all our ESG priority areas with the publication of our FY24 ESG report ahead of our Q1 results in June.
None: Puts them in a very strong position to achieve their store target of 850 by 2029, and therefore current markets of operation.
None: On the ESG front I am pleased with our progress for the year advancing meaningful projects across our priority areas.
For example on climate, we continue to increase our alignment with recognized standards and best practices.
None: From a talent perspective, we invested in new technologies and programs to streamline our recruitment efforts among other priorities.
None: In supply chain, we continue to enroll eligible vendors into our social audit program. We also began pursuing additional engagement work to gain better visibility on indirect vendors.
None: We look forward to providing a comprehensive update on our progress across all of our ESG priority areas with the publication of our FY 'twenty for ESG report ahead of our Q1 results in June.
Neil Rossy: Over the last few years, Dollarama has truly solidified its position as an indispensable shopping destination for consumers across Canada, thanks to our ability to deliver compelling value and convenience year-round on a broad range of everyday and seasonal products within our low-fixed price range. Looking ahead, the path of the economy remains uncertain, both for businesses and consumers. This makes it all the more difficult to predict future consumer behavior.
None: Over the last few years dollar armour is truly solidified its position as an indispensable shopping destination for consumers across Canada.
None: Thanks to our ability to deliver compelling value and convenience year round on a broad range of everyday and seasonal products within our low fixed price them.
None: Looking ahead the path of the economy remains uncertain.
None: Both for businesses and consumers. This makes it all the more difficult to predict future consumer behavior.
Neil Rossy: In this context, our objective is to preserve and strengthen our role in the shopping habits of consumers by continuing to focus on our fundamentals and the elements we control. For example, the ongoing refresh of our merchandise and careful execution of our pricing strategy are key to keeping customers coming back as the economy evolves. Our objective is reflected in our fiscal 2025 annual same store sales growth target. We are setting a high bar on a key retail metric over and above two years of exceptional double-digit same-store sales growth. Our ability to achieve this target will once again be dependent on the continued execution by every member of the Dollarama team. I am very confident that we will once again meet our objectives and deliver on our value and convenience promise to consumers. Before I turn the call over, I would like to welcome our new CFO, Patrick, to his first earnings call with us. Patrick is a seasoned executive with extensive capital markets expertise and is already making his mark at Dollarama. We're glad to have him on board. So with that, Patrick, over to you.
None: In this context, our objective is to preserve and strengthen our role in the shopping habits of consumers by continuing to focus on our fundamentals and the elements we control.
None: For example, the ongoing refresh of our merchandize and careful execution on our pricing strategy are key to keeping customers coming back as the economy evolves.
None: Our objective is reflected in our fiscal 2025 annual same store sales growth target.
None: We are setting a high bar on a key retail metrics over and above two years of exceptional double digit same store sales growth.
None: Our ability to achieve this target will once again be dependent on the continued execution by every member of the dollar Amity.
None: I am very confident that we will once again meet our objectives and deliver on our value and convenience promise to consumers this year.
None: Before I turn the call over I would like to welcome our new CFO Patrick to his first earnings call with Us Patrick.
None: Patrick is a seasoned executive with extensive capital markets expertise and is already making his market dollar Rama.
None: We're glad to have him on board, so with that Patrick over to you.
Patrick Bui: Thank you, Neil. And good morning, everyone.
Patrick: Thank you Neal and good morning, everyone I am pleased to be here. This morning to discuss <unk> results and outlook for next year.
Patrick Bui: I'm pleased to be here this morning to discuss Dollarama's results and outlook for next year. The last three months have given me the opportunity to understand the business and its key drivers, and I am very excited for the future. Dollarama's business model is nothing short of impressive, as are its. I also look forward to continuing to engage and meet with members of the investment community in the coming weeks and months.
Patrick: Last three months have given me the opportunity to understand the business and its key drivers and I'm very excited for the future.
Patrick: <unk> business model is nothing short of impressive as our people.
Patrick: I also look forward to continuing to engage and meet with members of the investment community in the coming weeks and months.
Patrick Bui: Let's start with a review of our fourth quarter and fiscal 2024 results before turning to our guidance for fiscal 2025. For Q4, sales increased by 11.3% over the same period last year to reach more than $1.6 billion. For the year, sales increased 16.1% to nearly $5.9 billion. In Q4, same-source sales grew 8.7% on top of 15.9% for the same period last year. SSS consisted of an 11.2% increase in the number of transactions and a 2.2% decrease in average transaction size. SSS for the quarter came in higher than expected, such that we exceeded our updated SSS full-year guidance, while consumables continue to benefit from stronger than historical demand. The increase reflects strong demand across all our product categories, including seasonal and general merchandise.
Patrick: Let's start with a review of our fourth quarter and fiscal 2024 results before turning to our guidance for fiscal 2025.
Patrick: For Q4 sales increased by 11, 3% over the same period last year to reach more than $1 6 billion for the year sales increased 16, 1% to nearly $5 9 billion.
Patrick: In Q4 same store sales grew eight 7% on top of 15, 9% for the same period last year.
Patrick: This consisted of an 11, 2% increase in the number of transactions and a two 2% decrease in average transaction size.
Patrick: <unk> for the quarter came in higher than expected such that we exceeded our updated sss full year guidance.
Patrick: While consumables continued to benefit from stronger than historical demand. The increase reflects strong demand across all our product categories, including seasonal and general merchandise.
Patrick Bui: SSS for fiscal 2024 came in at 12.8%, consisting of a 12.3% increase in the number of transactions and a 0.4% increase in average transaction size. Annual SSS growth was driven by the same factors as Q4, in addition to the positive impact of ongoing product refresh. This result is all the more impressive when stacked up against the 12 percent SSS generated in fiscal 2014.
Patrick: Sss for fiscal 2024 came in at 12, 8% consisting of a 12, 3% increase in the number of transactions and a 4% increase in average transaction size.
Patrick: Annual Sss growth was driven by the same factors as Q4. In addition to the positive impact of ongoing product refreshes.
Patrick: This result is all the more impressive when stacked up against the 12% Sss generated in fiscal 2023.
Patrick Bui: Margin expansion continued into Q4, resulting in a strong gross margin of 46.3% as we continue to benefit from lower container and logistics costs. For the full year, we generated a gross margin of 44.5%, bringing us to the very top end of our guidance range for Fiscal 2000. SG&A represented 14.5% of sales for Q4 compared to 14.2% for the same period last year, the Barron's primarily reflects higher store labor.
Patrick: Margin expansion continued into Q4, resulting in a strong gross margin of 46, 3% as we continued to benefit from a lower container and logistics costs.
Patrick: For the full year, we generated a gross margin of 44, 5%, bringing us to the very top end of our guidance range for fiscal 2024.
Patrick: SG&A represented 14, 5% of sales for Q4 compared to 14, 2% for the same period last year.
Patrick: The variance primarily reflects higher store labor costs.
Patrick Bui: Looking at the full year, we came in at 14.4% of sales, exceeding our annual SG&E cost containment target for fiscal 2024 by 30 basis points, primarily because of the positive impact of scaling, which offset some of the cost pressure. With respect to our 50.1% share of Dollar City, net earnings for the quarter were $32.8 million, and for the year came in at $75.3 million. This reflects a 66% increase over both comparable periods last year. Based on its strong financial performance, Dollar City's board approved and declared its first dividend in the fourth quarter, which, given our 50.1% share, came in at 40.1 million USD.
Patrick: Looking at the full year, we came in at 14, 4% of sales exceeding our annual SG&A cost containment target for fiscal 2024 by 30 basis points. This is primarily because of the positive impact of scaling which offset some of the cost pressures.
Patrick: With respect to our 51% share of dollar city net earnings for the quarter were $32 8 million and for the year came in at $75 3 million.
Patrick: This reflects a 66% increase over both comparable periods last year.
Patrick: Based on their strong financial performance dollar city's board approved and declared its first dividend in the fourth quarter.
Patrick: Given our 51% share came in at 41 million USD.
Patrick Bui: Returning to Dollarama, Q4 EBITDA grew 19.5% to $558.9 million, representing an EBITDA margin of $34.1 billion. Full year EBITDA increased by 22.2% to over $1.8 billion, or an EBITDA margin of 31.7%. Our Q4 diluted net earnings increased by 26.4% to $1.15 per share, while our fiscal 2024 EPS grew by 29% to $3.00. On the capital allocation front, Dollarama remained active on the NCIB program throughout fiscal 2024 with the repurchase of over 7.1 million common shares for $665.9 million. This quarter, the board also approved a 29.9% increase in the quarterly cash dividend to $0.092. At fiscal year end, our leverage stood at 2.16 times compared to 2.71 times at the end of fiscal 2000.
Patrick: Returning to the dollar Rama Q4, EBITDA grew 19, 5% to $558 9 million, representing an EBITDA margin of 34, 1% full year EBITDA increased by 22, 2% to over $1 8 billion or an EBITDA margin of 31 <unk>.
Patrick: 7%.
Patrick: Yes.
Patrick: Our Q4 diluted net earnings increased by 26, 4% to $1 15 per share while our fiscal 2024 EPS grew by 29% to $3 56.
Patrick: On the capital allocation front all around my remained active on the NCI program throughout fiscal 2024 with the repurchase of over $7 1 million common shares for $665 9 million.
Patrick: This quarter. The board also approved a 29, 9% increase to the quarterly cash dividend to nine <unk> per share.
Patrick: At fiscal year end, our leverage stood at 216 times compared to $2 71 times at the end of fiscal 2023.
Patrick Bui: The variance reflects strong EBITDA growth and cash flow generation. Turning now to our outlook for fiscal 2025, for the full fiscal year, we expect comparable store sales to grow at a pace of between 3.5 and 4.5%. This is on top of the exceptional SSF generated in the last two fiscal years.
Patrick: The variance reflects strong EBITDA growth and cash flow generation.
Patrick: Turning now to our outlook for fiscal 2025.
Patrick: For the full fiscal year, we expect comparable store sales to grow at a pace of between three five and four 5%.
Patrick: This is on top of the exceptional sss generated in the last two fiscal years and in the context of continued economic uncertainty.
Patrick Bui: And in the context of continued economic uncertainty, our confidence that we can generate this level of SSS growth in fiscal 2025 speaks to our conviction in our fundamentals and value proposition. On gross margin, we expect a lower inbound shipping cost tailwind to carry through the first half of the fiscal year, but on the flip side, we expect to face tougher comps in the second half because we experienced lower logistics costs during the second half of fiscal 2020. Like all retailers, we're also seeing an uptick in shrink, but this continues to be actively managed and is included in our full year guidance. For fiscal 2025, we expect to maintain our gross margin at a similar level to last year, with a target range of between 44% and 45% of sales.
Patrick: Our confidence that we can generate this level of sss growth in fiscal 2025 speaks to our conviction in our fundamentals and value proposition.
Patrick: Our gross margin, we expect a lower inbound shipping cost tailwind to carry through the first half of the fiscal year, but on the flip side, we expect to face tougher comps in the second half because we experienced lower logistics costs during the second half of fiscal 2024.
Patrick: Like all retailers, we're also seeing an uptick in shrink but this continues to be actively managed and is included in our full year guidance.
Patrick: For fiscal 2025, we expect to maintain our gross margin at a similar level to last year with a targeted range of between 44% 45% of sales.
Patrick Bui: As GNA as a percentage of sales is expected to continue to decline, pressured by higher store labor and operating costs. We are still facing higher than historical wage inflation, but our goal is to partially offset these cost pressures through ongoing efficiency and labor productivity initiatives. As a result, we anticipate its GNA as a percentage of sales to be in the range of 14.5%. In fiscal 2025, we will maintain our balanced approach to capital allocation, investing in organic growth while also returning capital to shareholders. In addition to maintaining a dividend subject to quarterly approval, we anticipate allocating the majority of excess cash to share repurchases consistent with last year. While the path of the economic recovery and its impact on future consumer behavior remains uncertain, our value proposition clearly continues to rise. As a result, we expect to benefit from a persistent positive consumer response to our convenience and compelling value in fiscal 2020. This concludes our formal remarks. I'll turn the call back to the operator for the Q&A.
Patrick: SG&A as a percentage of sales is expected to continue to be pressured by higher store labor and operating costs.
Patrick: We are still facing higher than historical wage inflation, but our goal is to partially offset these cost pressures through ongoing efficiency and labor productivity initiatives. As a result, we anticipate SG&A as a percentage of sales to be in the range of 14, 5% to 15%.
Patrick: In fiscal 2025, we will maintain our balanced approach to capital allocation investing in organic growth. While also returning capital to shareholders. In addition to maintaining a dividend subject to quarterly approval, we anticipate allocating the majority of excess cash to share repurchases.
Patrick: Consistent with last year.
Patrick: In conclusion, while the path of the economic recovery and its impact on future consumer behavior remains uncertain.
Patrick: Our value proposition clearly continues to resonate.
Patrick: As a result, we expect to benefit from a persistent positive consumer response to our convenience and compelling value in fiscal 2025.
None: This concludes our formal remarks, I will turn the call back to the operator for the Q&A.
Unknown Executive: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from Irene Nattel from RBC Capital Markets.
None: Thank you.
None: A reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.
Operator: Please stand by while we compile the Q&A roster.
Operator: Our first question comes from the line of Irene <unk> from RBC capital markets.
Neil Rossy: Thanks and good morning, everyone. Clearly, thanks to our sales print in Q4, but I was, you know, given that we're seeing a broader pullback in consumer spending, can you talk through what you saw, any shift in cadence as we move through the quarter? And can you provide some commentary on Q1 to date, please?
Irene: And good morning, everyone that clearly strong same store sales trends in Q4, but given that we're seeing a broader pullback in consumer spending can you talk through.
Irene: What you saw any shifts in cadence as we move through the quarter and can you provide some commentary on Q1 to date. Please.
Neil Rossy: Yeah, look, we continue to see strong consumer demand. I mean, that's the most important point.
None: Yes look we continue to see strong consumer demand I mean, that's the most important point.
Neil Rossy: And, you know, speaking of cadence for Q1, look, what we have said is, you know, we finished Q4 at 8.7%. We mentioned that we see a progressive normalization. But all in all, we're still seeing very strong.
None: Speaking of cadence for Q1 look what we have said is we finished Q4 at eight 7%, but we mentioned that we see progressive normalization.
None: All in all we're seeing still very strong consumer demand.
None: So is it safe to assume that we are Q1 to date.
Neil Rossy: So, is it safe to assume that we are, that Q1 so far is above the upper end of guidance at this point in time, understanding that, you know, we're very early in the year?
None: Yes.
The upper end of guidance at this point in time understanding that.
None: We're very early in the year.
Neil Rossy: I mean, to be above the full-year guidance, I mean, I think that's a safe assumption, but we do say that there is progressive normalization throughout the year. So you start from 8.7 in Q4, and then there's normalization towards the year, towards our full-year target of three and a half months.
None: I mean to be above the guidance of full year guidance I mean, I think thats a safe that's a safe assumption.
None: But we do say that there is a progressive normalization throughout the year. So you saw from the $8 70 in Q4, and then there is normalization towards the year towards our full year target of three five to four and a half.
None: That's great. Thank you and then if I could just shift gears for a minute clearly dollar city is making great strides in terms of improving the profitability and cash flow.
Neil Rossy: That's great. Thank you. And then I could just shift gears for a minute.
Neil Rossy: Clearly, Dollar City is making great strides in terms of improving profitability and cash flow. How should we be thinking about sort of the evolution? As you know, you're now at whatever is just over 550 stores. So, you know, the percentage of new stores that are, let's say, not profitable in the early days is becoming smaller and smaller. So how should we be thinking about the evolution there?
None: Or should we be thinking about here.
None: The evolution as you are now or whatever is just over 550 stores. So.
None: Percentage of new stores.
None: Let's say not profitable in the early days is becoming smaller and smaller so how should we be thinking about the evolution there.
None: First of all we're very pleased with the results of $1 30.
None: We think theres still lots of growth potential lots on the storefront it as well in terms of scaling and margin expansion. So.
Neil Rossy: I mean, first of all, we're very pleased with the results of Dollar City. You know, we think there's still lots of growth potential, lots on the storefront, and as well in terms of scaling and margin expansion. So, you know, we do expect the business to continue doing well. But, as you know, we don't provide any specifics or any guidance with respect to Dollar City.
We do expect the business to continue doing well, but as you know we don't provide any specifics or any guidance with respect to dollar city.
None: Understood. Thank you.
None: Thank you one moment for our next question.
None: Our next question comes from the line of Vishal <unk> from N BS.
Vishal: Hi, Thanks for taking my question.
Vishal: Patrick just wondering what your initial observations are as you enter dollar Rama right versus what you thought and what would it actually like and if there was any incremental changes that we should expect in finance function as a result of your higher.
Neil Rossy: understood. Thank you.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Vishal Shreedhar from NBF.
Vishal: Yes.
Patrick: We could talk largely about that but if I try to hit the key notes I mean, if the business grounded in solid solid fundamentals right.
Patrick Bui: Hi, thanks for taking my question. Patrick, I'm just wondering what your initial observations are as you enter Dollarama versus what you thought and what it actually is like, and if there's any incremental changes that we should expect in the finance function as a result of your hire.
None: Break it down into three pieces, it's solid operational model and I think that's very important that it's capable of generating strong cash flows and a strong return on invested capital that translates in a very strong financial model.
None: That we're capable of generating excess capital and returning that to shareholders in the form of a modest dividend, but mostly in terms of share buyback and what I've observed as well that is maybe not perceptible from the outside is the strong culture. We have here at dollar <unk>. This is a culture that is laser focused.
Patrick Bui: Yeah, I mean, I, you know, we could talk longly about that, but if I try to hit the keynotes, I mean, it's a business grounded in solid, solid fundamentals, right? If you break it down into three pieces.
Patrick Bui: It's a solid operational model, and I think it's very important that it's capable of generating strong cash flows and a strong return on invested capital. That translates into a very strong financial model that we're capable of generating capital and then returning that to shareholders in the form of a modest dividend, but mostly in terms of share buyback. And what I've observed as well that is maybe not perceptible from the outside is the strong culture we have here at Dollarama. This is a culture that is laser-focused and focused on delivering on its promises and always focused on efficiency. So again, Vishal, we could talk about it for a long time, but those are the high points.
None: <unk>.
None: And focus on delivering.
None: Its promises and always focus on efficiency so again.
None: We could talk about it long lead but those are the those are the high points.
Okay. Thank you for that and then maybe just talking about the shrink here how is that trending and what can management do to control that line a bit better.
None: I mean, we mentioned that shrink as is.
None: Is increasing.
Patrick Bui: Okay, thank you for that. And maybe just talking about the shrink here: how's that trending? And what can management do to control that line a bit better?
None: But what we have seen is it seems to be plateauing as well.
None: But it is a shrinkage as the retail industry phenomenon so not.
Patrick Bui: I mean, we mentioned that shrink is increasing, but what we have seen is it seems to be plateauing as well. But shrinkage is a retail industry phenomenon, so it's not uncommon in the industry. For sure, managing shrink is a high priority at Dollarama, and we've put in place a host of initiatives to combat shrinkage.
None: Not not uncommon in the industry.
None: For sure managing shrink as a high priority yet at all around them and we've set we've put in place a host of initiatives.
None: To combat to combat shrink.
None: Thank you are you able to expand on what some of those initiatives may be or.
Patrick Bui: Thank you. Are you able to expand on what some of those initiatives may be or not?
None: Not in not in not in detail now.
Patrick Bui: Uh, not in detail, not in detail. Thank you.
None: Thank you.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Chris Lee from Desjardins.
None: Yeah.
Thank you one moment far next question.
None: Our next question comes from the line of Chris Lee from days Jordan.
Neil Rossy: Hi, good morning, everyone. Maybe I'll start off by saying that in the quarter, we had very strong transaction growth and a modest decline in basket size. Is that mainly because consumers are just generally going to Dollarama more often but buying less each time as they try to manage their budgets? Are there any sort of concerns around the modest decline in basket size? Thank you.
Christopher Li: Hi, good morning, everyone.
Christopher Li: Maybe I'll start off with just in the quarter.
Christopher Li: We had very strong transaction growth and modest declines in basket size is that mainly because consumers are just generally going to demand more often but buying less each time as we tried to manage.
Christopher Li: Budgets are there any sort of concerns around around the modest decline in basket size. Thank you.
Neil Rossy: There are always concerns, but the answer to your question is that we believe that your assessment is correct.
None: There is always concerns.
None: But the answer to your question is we believe that your assessment is correct.
Neil Rossy: Gotcha. Okay, that's helpful. And maybe a follow-up on the traffic question is, you know, obviously, consumers are looking for value, no question about that. But Neil, I'm just curious, you know, to get your view on how much of the growth is also driven by the enhanced product assortment from the new price points and also, more likely, improved skill refresh as a supply chain. It's more or less back to normal.
None: Got it Okay. That's helpful and maybe a follow up on the traffic question.
None: Obviously.
None: <unk> are looking for value no question about that but Neil I'm, just curious to get your view on how much of the growth do you think it is also driven by.
None: By the enhanced product assortment, some the new price points and also more likely improve SKU refresh.
None: The supply chain is more or less back to normal.
None: Yeah.
Neil Rossy: That's a tough question.
Neil Rossy: Because.
Neil Rossy: It's very.
Neil Rossy: That's a tough question because it's very subjective in nature, but I think that part of the strength of the consumer response at Dollarama is certainly due to our refresh and the effort we make to bring in new goods. The price points, you know, are starting to be more mature. The buyers have a better handle on, you know, what they're looking for, and what they're buying. The sourcing of all the new price points, because even with the addition of breaking our price points down to 25 cent increments, it has an impact on buying decisions. And so I would say that it's a combination of both of those two elements.
Neil Rossy: Subjective in nature, but.
I think that part of the strength of the consumer response at dollar Ams certainly.
Neil Rossy: The accounting to our refresh and the effort we make to bring in new goods.
Neil Rossy: The price points are starting to be more mature the buyers have a better handle on on.
Neil Rossy: The.
Neil Rossy: The sourcing of all.
Neil Rossy: All of the new price points, because even with the addition of breaking our price points down to 25% increments.
Neil Rossy: It has an impact on buying decisions and so I would say that.
Neil Rossy: It's a combination of both of those two elements.
Neil Rossy: Perfect. Thanks so much. I'll get back to you.
None: Perfect. Thanks, so much okay. Thank you thanks. Thank.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Tamy Chen from BMO Capital Markets.
None: Thank you.
None: Thank you.
None: One moment for next question.
None: Our next question comes from the line of Tami Chen from BMO capital markets.
Neil Rossy: Hi, thanks for the question. On your fiscal 25 same-store sales guidance, I was just wondering how you're thinking about, I guess, the different drivers between, we have had very good population growth recently, the merchandise refresh, just wanted to get a sense of all the different pieces that you saw through, and what, if you could rank in terms of their contribution to it, like what you feel are gonna be the big drivers that is going to continue to generate very good same-store sales off of these last two very strong performances.
Tamy Chen: Hi, Thanks for the question.
Tamy Chen: On your fiscal 'twenty five same store sales guidance I was just wondering how youre thinking about the different drivers between.
Tamy Chen: We have had very good population growth recently, the merchandize refresh.
Tamy Chen: Just wanted to get a sense of all the different pieces that you thought through and what if you could rank in terms of their contribution to it like what you feel are going to be the big drivers that is going to continue to generate very good same store sales off of these last two very strong performances.
Neil Rossy: I mean, we're not going to rank them on this call, but what I can say is, at the end of the day, we're seeing strong consumer demand and response to our value proposition. You know, what we need to do is focus on what we control and every day focus on delivering the best value to consumers, and we do that through product refresh. And, you know, we also see population growth as being a driver in the future.
Tamy Chen: Yes.
None: That's a good question.
None: We're not going to write them.
None: On this on this call, but what I can say is at the end of the day, we're seeing strong consumer is.
Matt: Matt in response.
Matt: To our value proposition, what we need to do is focus on what we control and every day focusing on delivering the best value.
Matt: To consumers.
Matt: And we do that through product refresh.
And we also see population growth as being a driver in the future, but again those are external factors and we focus on what we control. So when you look at FSS, we are lapping a very strong year of 12% and then 12, 8% and based on the strong consumer demand we see.
Neil Rossy: Again, those are external factors, and we focus on what we control. So when you look at SSS, we are lapping a very strong year of 12% and then 12.8%, and based on strong consumer demand, we see continued growth, and so that is really exceptional in the context.
Matt: <unk> growth.
Matt: And so that is really exceptional and in the context.
Patrick Bui: Got it. And my second question is, Capital allocation, so a 30% increase in dividend. I think last fiscal Q4 was also of a similar magnitude. Is that what we should expect going forward? And also, for Dollar City, this first dividend declaration, just is there anything more you can say about that in terms of the board over there thinking on capital allocation there? Thanks.
Matt: Okay.
None: Got it and my second question is.
None: Capital allocation and so 30% increase in dividend I think last fiscal Q4. It's also of a similar magnitude is that what we should expect going forward and also for dollar city. This first dividend declaration.
None: Is there anything more you can say about that in terms of the board over their thinking on capital allocation there. Thanks.
Patrick Bui: Yeah, I mean, on our dividend, you know, we tried to keep it consistent with our growth. So you would have seen our earnings per share increased by close to 30%. And so there is a link between our EPS growth and our dividend growth. So what it will be in the future, we don't know, but certainly this past quarter it was linked to our EPS growth. Then to your second question on Dollar City, look, like I mentioned, we're very pleased with the performance of Dollar City. It's done well in terms of cash flow, and it has a strong balance sheet. And we just saw the opportunity; the board of directors saw an opportunity to pay a dividend without impacting in any way its financial performance and its growth trend.
None: Yes, I mean, our dividend.
We try to keep it consistent with our growth. So you would have seen our earnings per share increased by close to 30%.
None: So there is a link between our EPS growth and our dividend growth.
So what it will be in the future, we don't know, but certainly.
None: This past quarter it was linked to our EPS growth.
None: That's your second question on dollar City look like I mentioned, we're very pleased with the performance of dollar city.
None: It has done well from a cash flow and it has a strong balance sheet and we just saw the opportunity of the board of directors saw an opportunity to pay a dividend without impacting in any way.
Patrick Bui: Got it. Thank you.
None: Financial performance in its growth trajectory.
Unknown Executive: Thank you. Thank you. One moment for our next question. Our next question comes from the line of George Doumet from Scotia Bank.
None: Got it thank you.
None: Thank you one moment for our next question.
None: Our next question comes from the line of George <unk> from Scotiabank.
Neil Rossy: Yeah, good morning, Neil and Patrick. I just want to talk a little bit about what you're seeing in terms of production capacity coming out of Asia, and would you characterize product prices in Asia as expected to be flat or up or slightly down in Fiscal 25?
George: Yes, hi, good morning, Neil Patrick I, just wanted to talk a little bit about what.
George: You are seeing in terms of production capacity coming out of Asia and would you characterize product prices in Asia are expected to be flat or up.
None: We're slightly down in fiscal 'twenty five.
Neil Rossy: So, Production in Asia is business as usual from the perspective of capacities. The pricing is pretty stable at this point in time. The only challenge really is that the amount of creativity and international business that, historically, at different periods, has driven new SKU creation or new design creation in Asia is still quite low, which just means that our buyers and sourcers have to put more time and energy into that piece of the business, into the creativity and creation of new designs and new items, so it's more work for us, but other than that, it's business as usual.
None: So.
None: Production in Asia as business as usual.
None: The perspective of capacities.
None: The pricing is pretty stable at this point in time and.
None: <unk>.
None: The only challenge really is that.
None: The amount of Cree.
None: Creativity and international business.
None: That.
None: Historically at different periods is driven.
None: New SKU creation or new design creation in Asia still quite low, which just means that our buyers and sources have to put more time and energy into that piece of the business into the creativity of new and creation of new designs.
None: And new items.
None: So it's more work for us, but but.
Other than that it's business as usual.
Neil Rossy: On the last call, Neil, you mentioned consumables in North America as a kind of tough backdrop. Just wondering if you can talk a little bit about, presumably that's still the case, but any chance we can see lower North American vendor prices, you think, in fiscal 25?
None: Okay on the last call you mentioned consumables in North America is kind of a.
None: A challenge in a tough backdrop, just wondering if you can talk a little bit about Brazil.
None: Presuming that's still the case, but any chance you can see lower north American vendor prices you think.
Neil Rossy: There's still price pressure from a domestic national brand supply perspective, but I think at the retail end, things have settled, and the market's, you know...
None: Fiscal 'twenty five.
None: There is still price pressure from a supply domestic national brand supply perspective, but I think at the retail and things have settled in the markets.
Neil Rossy: Okay, just a quick clarification to Chris's earlier question. Should we expect, perhaps, a low single-digit, flat to low single-digit decline in the basket as well for Fiscal 25?
None: Early stable.
None: Okay, and just a quick clarification to Chris's earlier question should we expect perhaps like a low single digit.
None: Slot for low single digit decline in the basket.
None: As well for for fiscal 'twenty five.
Neil Rossy: Yeah, we don't, you know, we don't provide guidance on the components of SSS. And so, you know, we take SSS as it comes, George.
Yes, we don't we.
None: We don't provide guidance on the components of Sss.
None: So we we.
None: We take Sss as it comes that George.
Neil Rossy: Okay, that's understood. Good quarter, guys.
George: Okay understood good quarter guys.
Neil Rossy: Thank you. One moment for our next question, which comes from the line of Martin Landry from Stiefel.
None: Thank you.
None: Thank you one moment for our next question.
None: Yeah.
None: Our next question comes from the line of Martin Landry from Stifel.
Patrick Bui: Hi, good morning, guys. My first question is on your EBITDA margins. They've reached 31.7%. It's the highest level ever for you this year.
Martin Landry: Hi, good morning, guys.
Martin Landry:
Martin Landry: First question is on your EBITDA margins.
Martin Landry: <unk> reached 31, 7% its the highest level ever for you this year.
Patrick Bui: The question is, where do we go from here? And more importantly, in the longer term than in the next 12 months? Where is the trade-off between returning value to customers versus growing your EBITDA margins? How do you think about that?
Martin Landry: The question is where do we go from here.
Martin Landry: And more longer term than than in the next 12 months.
Martin Landry: Yes.
Martin Landry: Whereas the tradeoff between returning value to customers versus growing.
Your EBITDA margins, how do you think about that.
Patrick Bui: I mean, it's good that when we think of margin expansion, we think a lot more on the SG&A front, right? And certainly, there's less leverage than there was in the past, right, just because of the sheer scale of our business. But we always think that there's room for improvement; we have some productivity initiatives, but you know, you look at this year; there's a high pressure on wage inflation; we can't compensate for all of that. Hopefully, in the future, that will subside. We don't know. So look, looking to the future, we'll see, but hopefully, we could find other opportunities down the road.
None: I mean, it's a good.
None: When we think of margin expansion, we think a lot more on the SG&A SG&A front right and certainly.
None: There is less leverage than there was in the past right just by this year scaling of our business but.
None: We always think that there's room for improvement and we have some productivity initiatives, but.
None: You look at this year there is a high pressure on wage inflation, we can compensate all of that hopefully in the future that will subside, we don't know.
None: So looking in the future, we'll see but hopefully we can find other opportunities down the road.
Neil Rossy: And I just want to touch on your $5 price point. You know, is the wrap-up complete at this point? And if we were to look back at previous price point increases you've implemented, how successful was this one compared to others?
None: Okay.
None: I just wanted to touch on your $5 price points.
None: Is the ramp up complete at this point and if we were to look back at previous price increases you've implemented how successful was just one versus others.
Neil Rossy: I don't think a price point rollout is ever complete; I mean, it's a continuation in perpetuity, to be honest. Certainly, the original ramp-up is complete, and $5 is part of the assortment in a well integrated way into the offer for the shopper. There is always an evolution of multiple years to get all of your vendors and the market on the supply side to ramp up on the creation of $5 items, particularly domestic vendors and really large international vendors, manufacturers, I should say, to build $5 formats is something that takes time. But, other than that, I think $5 is well integrated into our pricing strategy.
None: I don't think a price point rollout as ever complete I mean, it's the it's a continuation in perpetuity to be honest.
None: Certainly the original ramp up is complete and $5 as part of the assortment.
None: In a well integrated into the offer for the shopper.
None: But.
None: There is.
None: Always an evolution of multiple years to get.
None: All of your vendors and the market on the supply side to ramp up on the creation of $5 items.
None: Particularly.
None: The domestic vendors and really large international vendors.
None: Manufacturers I should say.
None: Two to build five dollar formats is something that takes years, but.
None: Other than that I think $5 is well integrated into our pricing strategy today at store level.
Neil Rossy: And then maybe just lastly for me, you know, inflation has been very high in the last two years. I'm wondering if you've started to think about your next price point introduction?
None: Okay. Okay, and then maybe just lastly for me.
None: <unk> has been very high in the last two years.
None: Wondering if you've started to think about your next price point introduction.
Neil Rossy: We're always thinking about, you know, all of the key drivers of the business. At this point in time, we have no plans to introduce any other price points.
None: We're always thinking about.
None: All of the key drivers of the business at this point in time, we have no plans to introduce any other placements.
Unknown Executive: Congratulations on the results. Thank you. One moment for our next...
None: Okay. Thank you congrats on the results. Thank you.
Unknown Executive: Thank you. One moment for our next question. The next question comes from the line of Mark Petrie from CIBC.
None: Thank you one moment for next question.
None: Our next question comes from the line from Mark Petrie from CIBC.
Neil Rossy: Yeah, good morning. Thanks for all the comments so far. I just have a few follow-ups. I guess just first, could you just clarify with regard to the sales mix? It sounds like it was pretty balanced, but is it fair to say that consumables growth has sort of continued to taper off, or has there been a bit of a resurgence in consumables relative to the rest of the assortment?
Mark Robert Petrie: Hey, good morning.
For all the comments so far I just have a few follow ups I guess, just first could you just clarify with regards to the sales mix.
And the growth drivers there it sounds like it was pretty balanced.
Mark Robert Petrie: But is it fair to say that.
Mark Robert Petrie: Consumables growth has sort of continued to taper off or has there been a bit of resurgence in consumables relative to the rest of the assortment.
Mark Robert Petrie: I think it's been fairly stable for the last year.
Neil Rossy: I think it's been fairly stable for the last year compared to the year prior with regard to mix.
Mark Robert Petrie: To the year prior with regards to mis mix.
Patrick Bui: Is it fair to say that if they could pay another dividend without impacting their ability to grow, then that's what would happen?
None: Yeah, Okay I appreciate that.
None: Patrick just on dollar city following up on your comment with regards to the dividend is it fair to say that if you if they could pay another dividend without impacting their ability to grow and that's what would happen.
Patrick Bui: Yeah, like I mentioned, it's something that we'll assess from time to time, and if we think there's that opportunity, we will do so, but there's no policy or anything like that. We're going to do it on a case-by-case basis.
Patrick: Yes, like I mentioned, it's something that we will assess from from time to time and.
We think there is that opportunity we will do so but.
Patrick: There is no policy or anything like that we were going to do it on a case by case basis, yes.
Neil Rossy: Last question, I know you guys had the pilot with Air Miles on loyalty. It was extended from its original period, and I think it finished last week. I don't know if it was extended again. Could you just comment on that and then any learnings from that test and sort of how that informs your thinking about loyalty or customer data?
None: Understood Okay.
None: And then just the last question I know you guys had the pilot with air miles on.
None: Royalty was extended from its original period.
None: And then I think it finished last week I don't know if it was extended again could you just comment about that and then any learnings from that test and sort of how that informs your thinking about loyalty or customer data.
Neil Rossy: Yeah, look, it was a pilot test, and look, it's too early to provide any conclusions there, unfortunately.
None: Yes look it was a pilot test.
None: Look there is it's too early to provide any conclusions there. Unfortunately.
Neil Rossy: But did you extend it again, or is it over now?
None: Did it did it did you extend it again or is it over now.
Neil Rossy: Sorry, it's not information we're at liberty to disclose at this point. OK.
None: Oh, sorry, it's not information we're at Liberty to disclose at this point in time.
Neil Rossy: Okay. Understood. Okay. Thanks a lot. Appreciate the comments.
None: Okay understood. Okay. Thanks, a lot I appreciate the comments.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Luke Hannan from Canaccord Genuity.
Yes.
None: Thank you one moment for our next question.
None: Our.
None: Question comes from the line of Luke Hannan from Canaccord Genuity.
Neil Rossy: Good morning, everyone. I just wanted to get your thoughts on the overall competitive environment here in Canada, and specifically on pricing, what you're seeing from competitors as it relates to your own assortments. Are folks leaning a little bit more toward price than others in certain categories, or just what you're seeing there?
Luke Hannan: Thanks, Good morning, everyone.
Luke Hannan: Just wanted to get your thoughts on the overall competitive environment here in Canada, and specifically on pricing what you're seeing.
Some competitors as it relates to your own Assortments are our folks leaning a little bit more into price than others in certain categories or just what youre seeing there.
Neil Rossy: I think the market's stabilizing from a retail pricing perspective. It has normalized over the last quarter, and our job, of course, is to keep an eye on the market but to stay laser-focused on our relative value, which is one of the key differentiators of our business from the market.
Luke Hannan: I think the market has stabilized from a retail pricing perspective.
Luke Hannan: It's it's normalized over the last quarter.
Luke Hannan: And our job.
Luke Hannan: Of course is to keep an eye on the market, but to stay laser focused on our relative value, which is one of the key differentiators of our business from the market.
Patrick Bui: Okay, got it. And when it comes to your freight contracts, I believe you're in the process through Q4 and Q1 to date of negotiating those. Are those largely done at this point? And if so, I'm assuming that's all been reflected in the guidance as well. I mean, we're, you know, we're locked into a race until
None: Okay got it and when it comes to your freight contracts I believe you are in the process through Q4 and Q1.
None: To date in negotiating those are those largely done at this point and if so I'm, assuming that's all been reflected in the guidance as well.
Patrick Bui: I mean, we're, you know, locked into a race until the end of this year, so the renewal process is at the tail end. So whatever rates we have are reflected, indeed, in our guidance.
None: I mean, where we're locked into rates until the end of this year, so the renewal processes.
Tail end of this year, so whatever rates, we have are reflected indeed in our guidance.
Patrick Bui: Okay, last one for me, and then I'll pass the line. On the Dollar City founding group, I believe they do have a put right to sell the remaining stake in the business to Dollarama. Can you remind us how the fair market value of those shares is determined? Is that gonna be the five times even that you originally paid, or is there gonna be another mechanism or some other factor to consider there?
None: Okay last one for me and then I'll pass the line on the dollar city founding group I believe they do have.
None: Put rights to sell the remaining stake in the business too.
None: Can you remind us how is the fair market value of those shares determined is that going to be five times EBITDA that you originally paid or is there going to be another mechanism.
Patrick Bui: Yeah, look, it's no, it's not the five times, but it is, it is based on fair market value.
None: Mechanism or some other factor to consider there.
None: Yes.
No it's not the five times, but it is it is based on fair market value.
Patrick Bui: Okay, if I can push a little bit further on that, what constitutes fair market value?
Okay and can I, if I can.
None: Can push a little bit further on that how is what constitutes fair market value.
Patrick Bui: There's a whole host of, there's a whole, you know, mechanism there, which includes third-party evaluators, so, you know, it'll be determined as a fair market value.
None: On the agreement there is a whole host of Theres, a whole mechanism, there and which includes third party evaluators. So it will be determined as a as a fair market value.
Patrick Bui: Got it. Thank you. Thank you.
None: Okay got it thank you.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Bryan Morrison from TD.
None: Thank you one moment far next question.
None: Yes.
None: Our next question comes from the line of Brian Morrison from TD.
Unknown Executive: Good morning, Neil. Good morning, Patrick.
Neil Rossy: I want to follow up on same store sales growth, specifically traffic. I know you stated that it's people coming for the value proposition, but I want to know who you think your incremental customer is going forward. Is it population growth driven by immigration? Is it lower income? Or is it just people coming for your expanded product offering?
Brian Morrison: Hey, good morning, good morning, Patrick.
Brian Morrison: Wanted to follow up on same store sales growth specifically traffic I know you stated that its people are coming for the value proposition, but I want to know who you think your incremental customer is going forward is it population growth driven by immigration is it lower income or is it just people coming for your expanded product offering.
Neil Rossy: Well, we're hoping it's all of the above, and we're relying on it being all of the above.
None: Well, we're hoping it's all of the above and we're relying on it being all of the above.
Neil Rossy: We are our.
Neil Rossy: Market surveys show that we're increasing our traffic from people who are over $100,000 a year in income, and it's also being driven by lower income or newly landed immigrants. It's all of the above.
None: We are our market surveys show that we're increasing our traffic and people.
None: Who were over 100000 a year in income.
None: And it's also being driven by.
None: Lower income more newly landed immigrants.
Neil Rossy: Okay, I guess if I could ask a question on Dollar City, I guess one: are you thinking of providing guidance metrics? It's a bit of a black box, the forecast, and it's becoming a bigger piece of the pie.
None: It's all of the above.
None: Hum.
None: Okay, I guess, if I could ask a question on dollar city I guess, one are you thinking of providing guidance metrics, it's a bit of a black box to forecast.
None: And it's becoming a bigger piece of the pie.
Neil Rossy: And then also with respect to Dollar City, you know, you put out 92 stores this year; your outlook for 850 by 2029 calls for 50 per year. Should we be thinking you're going to take it back down to 50 at this point in time? And then maybe just, you know, the growth rate's been all over the map recently, and it's accelerated up to the mid-60s here in terms of equity pickup year over year. What should we think in terms of the growth rate that you have embedded in your outlook without providing any guidance metrics?
None: And then also with respect to dollar city, you put up 92 stores. This year your outlook for.
None: 850 by 2029 calls for 50 per year.
Should we be thinking youre going to take it back down to 50 at this point in time and then maybe just the growth rate's been all over the map recently and it's accelerated up to mid 60 tier in terms of equity pickup year over year, what should we think in terms of growth rate that you have embedded in your outlook.
Neil Rossy: Well, on the growth of the Dollar City store count, I think the important thing is that what we've said so far is the 850 store target, and that's what we've disclosed so far. So I think the 92 store performance is part and parcel. It happened to be an excellent year of opportunities for the Dollar City real estate team, but if there's an update to be made to the store target, we will disclose that in due time. On the other hand, I'm going to pass the call to Neil.
None: Providing any guidance metrics.
Well on the on the growth.
None: Dollar City store Count Wise I think the important thing is that what we've said so far is 850 store target.
None: And that's what we've disclosed so far so.
None: I think the 92 store performance as part and parcel it happened to be an excellent year of opportunities for the dollar city real estate team, but.
None: If theres an update to be made to the store target.
We will disclose that in due time.
None: On the other fronts I am going to ask.
Neil Rossy: Can I interrupt you before you move there? Is it similar to Canada that you lock in your real estate 12 plus months in advance? Shouldn't we know that number?
None: Pass the call Neil can I can I interrupt you before you move there is it similar to Canada that you've locked in your real estate 12, plus months in advance, but shouldnt that number so I wish we could say that our real estate in Canada was locked in 12 months and events, but that has never been the case.
Neil Rossy: So, I wish we could say that our real estate in Canada was locked in for 12 months in advance, but that has never been the case. We have a goal to lock it in as soon as we can, but the reality of real estate is that there are delays in construction, delays in delivery from landlords, delays in equipment delivery for multiple reasons from an infrastructure perspective at the locations that really force it to be unlocked, three to six months before things are truly locked in before the opening. So while we have been making great strides to know in advance or open our stores earlier in our calendar year or fiscal year, the actual locking in of all of our real estate deals, just like there, is more iterative than normal. We'd all like it to be, but that's just the nature of real estate, and it has been for the last few years.
None: We have a goal to lock it in as soon as we can but the reality of real estate is that there are delays in construction delays in delivery from landlords delays in <unk>.
None: And equipment delivery for multiple reasons.
None: From an infrastructure perspective at the locations that really force it to be at three to six months before things are truly locked in before the opening of the store so well.
None: While we have been making great strides to know in advance or open our stores earlier, and our calendar year or fiscal year.
None: The actual locking in of all of our real estate deals just like there is more iterative than then.
None: We'd all like it to be but thats, just the nature of real estate and it has been for the last 100 years.
Neil Rossy: Thank you.
Patrick Bui: Sorry, Patrick, are you going to elaborate on the growth outlook?
Thank you.
None: Thank you sorry, Patrick are you going to are you going to elaborate on the growth.
Patrick Bui: Well, it was about the first part of your question regarding disclosure. You know, just so you know, we're comfortable with the disclosure we provide today, and it's really a function of, you know, even though it's a growing business. It's a question of relative size versus our business, and from an accounting standpoint, it's an equity investment, so we feel comfortable with the disclosure we provide today.
Patrick: Embedded in your outlook.
Patrick: Well it was about your question your first part of your question regarding disclosure.
Patrick: And.
Patrick: We're comfortable with the disclosure we provide today and it's really a function of even though it's a growing business I mean, it's a question of relative size versus our business and from an accounting standpoint, its an equity investment so.
Patrick: We feel comfortable with the disclosure we provided today.
Unknown Executive: Okay, well, if you reconsider, I think everyone would appreciate it. Thank you. Transcribed by https://otter.ai
Okay, well, if you reconsider I think everyone. Appreciate it thank you.
None: Thank you one moment for next question.
Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Edward Kelly from Wilsonville, Wisconsin.
None: Our next question comes from the line of Edward Kelly from Wells Fargo.
Unknown Executive: Hi, good morning, everyone.
Patrick Bui: Twitter. I wanted to follow up on the gross margin guidance for the year. So, you know, the midpoint, you know, is kind of flat year over year. Obviously, you know, in the first half, you have freight benefits still coming through. I'm just kind of curious; can you help us with any potential offsets? And then, as we think about gross margin in the back half, is there a risk that gross margin in the back half could be down? Because I think that's what you would have to do in order to get to the midpoint.
Edward Joseph Kelly: Hi, good morning, everyone nice quarter.
I wanted to follow up on the gross margin guidance for the year. So the midpoint is kind of flattish year over year, obviously first half you have.
Mentally still coming through I'm, just kind of curious can you help us with any potential offsets in that as we think about gross margin in the back half.
Is there a risk that gross margin in the back half could be down because I think thats. What you would have to do in order to get to the mid <unk>.
Edward Joseph Kelly: England.
Patrick Bui: Yeah, I think what we have to say on gross margin or the guidance is that we don't see any major shift with respect to gross margin next year versus what we've seen in 2024. I mean, there's certainly puts and takes.
None: Yes, I think what we have to say on gross margin or the guidance is we don't see any major shifts with respect to gross margin next year versus what can be seen in 2024, I mean, there are certainly puts and takes.
Patrick Bui: You know, you've mentioned the lower shipping costs will be a tailwind for us, and especially in the first half. If you recall, in the first half of last year, we were still in the process of pushing a lot of volume through our DCN warehouse. So there were incremental costs last year that we shouldn't be expecting this year. But certainly, when you think about the second half, you know, we're up against tougher comps, you know, versus 2024, because if you recall in 24, we didn't have that type of elevated shipping costs and logistics costs. And then the last thing, you know, I'll mention is that we talked about shrinking, so that might partially offset some of the improvements we would see from a shipping method.
None: You've mentioned the lower shipping costs will be a tailwind for us mostly in the first half.
None: If you recall in the first half of last year, we were still in the process. So.
None: Pushing a lot of volume through our DC and warehouse. So there was incremental costs last year that we shouldnt be expecting.
None: This year, but certainly when you think about the second half.
None: We're up against tougher comps.
None: Versus 2024, because if you recall in 'twenty four we didn't have that type of elevated shipping costs and logistics costs and then the last thing ill.
None: Mentioned as we talked about shrink so that might partially offset some of the improvements we would see from a shipping shipping cost perspective.
Patrick Bui: And I was just kind of curious if you could be willing to quantify, you know, where shrink is today versus, I don't know, let's call it normal levels or 2019 levels. You mentioned that it's peaking. I'm curious how often you do inventory counts. So I guess, you know, current counts are telling you that. And then if you think about mitigation, you know, changes to self-checkout in the U.S. have been something that's really been top of mind because, you know, that has been a much bigger problem.
None: Got it and I wanted to follow up one on shrink.
None: I was just kind of curious.
None: <unk> could be willing to quantify where shrink is today versus I don't know, let's call it normal level of 2019 levels.
None: You mentioned that it's peaking I'm curious how often you do inventory counts. So I guess I guess current counter telling you that and then as you think about mitigation changes in self checkout in the U S and Thats something thats really been top of mind, because that has been a much bigger problem I'm kind of curious as to whether you are.
Patrick Bui: Yeah, I mean, with respect to, you know, the actual numbers, unfortunately, we don't we don't provide that type of detail. In terms of the process of inventory counts, we generally do that once per year, one major account per year. And then from time to time, we do some some recounts, but think of it as a one big annual process with some checks. And again, part of your question, you talked about self checkouts. I mean, certainly, you know, when we talked about initiatives to counter shrink, I said, yes, self-checkout could be one of the areas. So we're, it's one area that we're investigating.
None: We're contemplating anything like that.
None: Yes, I mean with respect to.
The actual numbers.
None: Unfortunately, we don't we don't provide that type of.
None: Provide that type of detail.
None: In terms of the process of inventory count, we generally do that once per year, one major account per year and then from time to time, we do some some rig counts, but think of it as a one big annual process with some with some checks.
None: I think you have part of your question also you talked about self checkout I mean, certainly.
None: When we talked about initiatives to two counter shrink I mean, yes, self checkout could be one of the areas, where it's one area that we're investigating for sure.
Patrick Bui: And just one, sorry, one quick follow-up, the actual count. Is it safe to assume that that occurs, you know, in the January, February timeframe, along with when you might be doing your audit, that type of stuff? I'm just kind of curious as to when that happens.
None: And just one sorry, one quick follow up.
None: Well count.
None: Safe to assume that that occur.
None: January February timeframe alone with ranked you might be doing your audit that type stuff just kind of curious as to when that occurs.
Patrick Bui: The annual inventory count
The annual the annual inventory count.
Patrick Bui: Yeah.
Patrick Bui: Yes, that would be at the beginning of the calendar year, so, you know, pretty much the past few months since we redid these counts.
None: Yes, yes that would be.
None: At the beginning of the calendar year so.
None: Pretty much in the past the past few months.
Unknown Executive: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
We did this counts.
None: Thank you.
None: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
None: Okay.
None: [music].
None: Okay.
None: Okay.
None: Yes.