Q2 2025 Dollarama Inc Earnings Call
All participants please standby your meeting is about to begin.
Speaker Change: Good morning, and welcome to dollar on our fiscal 2025 second quarter results Conference call.
Speaker Change: Neil Rossy, President and CEO and Patrick Barry CFO will make a short presentation, followed by a question and answer period open exclusively to financial analysts.
Speaker Change: The press release financial statements and management's discussion and analysis are available at Alabama, Dot Com and the Investor Relations section as well as on SEDAR plus.
Speaker Change: Before we start I've been asked about dollar AMA to read the following message regarding forward looking statements.
Speaker Change: <unk> remarks today may contain forward looking statements about its current and future plans expectations intentions results levels of activity performance Goldberg achievements or any other future events or developments.
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Speaker Change: 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 statements.
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Speaker Change: For additional information on the assumptions of risk. Please consult the cautionary statement regarding forward looking information contained a dollar almost MD&A dated September 11th 'twenty 'twenty four available on SEDAR plus.
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Speaker Change: As may be required by law, the 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 would now like to turn the conference call over to Neil Rossy.
Neil Rossy: Thank you operator, and good morning, everyone.
Speaker Change: This morning, we reported strong second quarter fiscal 2025 results across our key performance indicators translating into an EPS of $1 two.
Speaker Change: Same store sales grew by four 7% in Q2 as they continue to normalize as anticipated.
Speaker Change: This is an impressive result, when stacked up against the $15 five person sss growth in the same period last year and given the cautious consumer spending backdrop.
Speaker Change: In Q2 demand for consumable products, which are primarily comprised of everyday essentials drove the bulk of the increase in same store sales general merchandize sales remained stable while seasonal products.
Speaker Change: After this is consistent with prior quarters customers continue to seek out everyday essentials and deploy their discretionary spending prudently in the current economic environment.
Speaker Change: Our strong results in this context reinforced the fact that Canadian consumers recognize and consistently rely on our convenient and compelling value.
Speaker Change: The breadth of our offering across consumables general merchandise and seasonal is allowing us to meet the current and evolving needs of the Canadian consumer at any given time.
Speaker Change: Our traffic trend quarter after quarter confirmed that our work is hitting the mark.
Speaker Change: Turning to Latam during their second quarter dollar City opened 23, net new stores compared to 10 in the same period last year.
Speaker Change: Bringing their total store count at June 30.
Speaker Change: Two 570 stores with 338 locations in Colombia, 101 in Guatemala, 74 in El Salvador, and 57 in Peru.
Speaker Change: Other cities pace of new store openings and increasing earnings contribution reflects the strong consumer response in these markets and the team's disciplined execution of our long term growth plan and our current countries of operation.
Speaker Change: In parallel the team is also actively working on our plans to enter Mexico by 2026 as announced last quarter, along with our increased ownership stake.
Speaker Change: It is still early days for Mexico. Our work on this front is it progressing well and on plan.
Speaker Change: As we look to the second half of the year. Our team will continue to work diligently to keep delivering convenience and great value to all Canadian consumers.
Speaker Change: We remain focused on our product offering while staying true to our price for all of our philosophy.
Speaker Change: Our aim is to provide customers with a broad selection of compelling everyday and seasonal products at the best relative value in all departments and with a consistent shopping experience.
Speaker Change: With that I'll pass it over to Patrick.
Patrick Barry: Thank you Neal and good morning, everyone, let's start with an overview of our Kpis for Q2 of fiscal 2025.
Patrick Barry: Sales increased by seven 4% after Q2 of fiscal 2024 coming in at nearly $1 6 billion. While same store sales grew four 7% for an impressive two year stack of 22% Sss growth.
Speaker Change: Looking at our sales mix, we continued to experience strong demand for consumable products, while seasonal sales experienced softer demand impacted by unfavorable weather in many parts of the country, particularly during the key spring and early summer season, any color any cautious consumer.
Speaker Change: Same store sales consisted of a 7% increase in the number of transactions and a two 2% decrease in basket size, our strong traffic reflects the underlying strength of our value proposition and all around product offering.
Speaker Change: We continue to be comfortable with our previously disclosed sss guidance range of between three 5% and four 5% for the full fiscal year, which implies a continued normalization in sss growth through the second half.
Speaker Change: This range remains an appropriate target given the strong comps, we will continue to face and the cautious consumer backdrop.
Looking at Q3 also note that too historically key Halloween sales days will fall into Q4, which should skew sss in favor of Q4.
Speaker Change: Gross margin came in at 45, 2% compared to 43, 9% in Q2 of fiscal 2020 for.
Speaker Change: The increase is mainly driven by more favorable contracted shipping rates and lower logistics costs.
Speaker Change: Full year guidance remains between 44 and 45%.
Speaker Change: With higher logistics costs expected in the second half of the year compared to the same period last year.
Speaker Change: SG&A as a percentage of sales remained flat compared to Q2 last year at 13, 6%. Despite an increase in store labor and operating costs.
Speaker Change: We continue to actively work on offsetting these costs through ongoing efficiency and labor productivity initiatives, but expect more pressure in the second half of the year.
Speaker Change: Annual guidance for SG&A remains unchanged at between 14, 5% to 15% of sales.
Speaker Change: With respect to dollar city their net earnings contribution for the quarter almost doubled compared to the same quarter last year to $22 7 million.
Speaker Change: This was a transition quarter for our increasing ownership stake from 51% to 61%.
Speaker Change: Which occurred towards the end of this reporting period.
Speaker Change: Our Q3 contribution will fully reflect our increased ownership stake.
Speaker Change: With a solid kpis performance across the board dollar Ams Q2, EBITDA increased by 14, 7% to $524 3 million.
Speaker Change: And EPS increased by 18, 6% to $1 <unk> per share.
Turning to capital allocation.
Speaker Change: On the <unk> front, we remained active in Q2 with the repurchase of over $2 1 million common shares for cancellation for a total consideration of $263 1 million.
Speaker Change: This excludes the tax on share repurchases enacted during the second quarter.
Speaker Change: The board also approved a quarterly cash dividend of $7 <unk> per share.
Speaker Change: Our second quarter and year to date performance once again proves the resilience of our robust business model and the enduring relevance of our value proposition to consumers both across geographies and through any type of macroeconomic environment.
Speaker Change: Our focus as ever is on continuing to deliver convenience and the best relative value, we can for our customers.
Speaker Change: With that I'll now turn the call back to the operator for Q&A.
Speaker Change: Thank you to ask a question. Please press star one wanting your telephone and wait for your name to be announced towards draw. Your question. Please press star one again.
Irene <unk>: Our first question comes from the line of Irene <unk> with RBC capital markets. Your line is now open.
Irene <unk>: Thanks, and good morning, everyone.
Irene <unk>: I was wondering if you could just please spend a few minutes talking a little bit more detail about what youre seeing in terms of consumer spending.
Speaker Change: Did call out the weather you called out consumables, but what did you see as the quarter evolves and as the weather showed up.
Can you give us any color on for example, early back to school and how we should be thinking about.
Speaker Change: Spending trends in the back half of the year.
Irene butane: So good morning, Irene butane.
Speaker Change: <unk> well.
Speaker Change: The the summer sale started very soft.
Speaker Change: Across the country was terrible which of course negatively impacted all retailers.
Speaker Change: The weather got slightly better towards the end of the summer.
Speaker Change: Our sales certainly increased but not enough to make up for the seasons horrible start.
Speaker Change: As far as back to school sales for us back disclose very very small season.
Speaker Change: And I would say broadly as sales were in line with our expectations.
Speaker Change: Too early to draw any conclusions or trends for Halloween.
Speaker Change: So other than that general emerge.
Speaker Change: Stable.
Speaker Change: As a whole.
Speaker Change: <unk>.
Speaker Change: I think that covers it.
Speaker Change: That's very helpful. Thank you.
Speaker Change: Are you seeing any change whatsoever in the competitive dynamic in terms of perhaps other players trying to sort of drive traffic by playing in your sandbox a little bit more.
Speaker Change: Generally no I think everybody considers.
Speaker Change: All retailers in Canada.
Speaker Change: Our <unk>.
Speaker Change: Our realistic about the fact that everyone is everyone's competition on any given item or category and so we all need to be.
Speaker Change: Aware of our of our relative values and we all have a different story to tell our has been one of relative value or maybe less one.
Speaker Change: The assortment size or.
Speaker Change: Certain categories that we don't play in but I think that generally the market in Canada is fairly stable with regards to.
Speaker Change: Who has come into the market.
Loblaw: Loblaw is of course introduced a new concept in a single store, so far and announced that they will have three stores across the country that they're testing the concept.
Loblaw: And low cost food.
Loblaw: And as we've said many times, we're not in the grocery business is just one small part of our store but.
Speaker Change: But we will keep an eye on all retailers like all retailers keep an eye on us to make sure that we're competitive we understand what's out there.
Speaker Change: That's very helpful. Thank you I'll get back into the queue.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Chris Lee with de Jordan. Your line is now open.
Speaker Change: Good morning, Neil Patrick maybe I'll start with.
Chris Lee: Question on gross margin it was quite strong.
Speaker Change: <unk> estimates I.
Chris Lee: I guess two part question can you elaborate a little bit more on sort of what drove the strong performance was was there any sort of onetime factor and then the second question is on your opening remarks, you did say that you do expect margin to soften up a little bit in the back half.
Speaker Change: I was wondering if you can also elaborate on what you expect in the second half.
Speaker Change: Of softness softer margins. Thank you.
Speaker Change: Absolutely Chris.
So if you look at Q2.
Speaker Change: No we can't point to any one time or anything like that as we said in our remarks, it's a function of.
Speaker Change: Lower shipping cost.
Speaker Change: <unk>.
Speaker Change: That we continue to see this quarter and to be expected in future quarters and also.
Speaker Change: Improved productivity and lower costs on the logistics side. So we're very pleased with the $45.
Speaker Change: 2% margin that being said, we also reiterated our guidance for the full year. So you are right. We do expect some headwinds in the second half.
Speaker Change: And it refers a lot to timing. So we do anticipate for example in Q3, leading to push more volume through the system so that.
Speaker Change: Is one of the reasons why we do see a little bit of pressure on gross margins in the second half.
Speaker Change: Got you Okay. That's helpful and then Patrick maybe just.
Patrick Barry: We're able to provide us with some indication on how Q3 same store sales are trending so far is it still kind of Bellevue, a full year range or has it kind of normalized towards that's been at two 5% range.
Speaker Change: Yeah.
Patrick Barry: Number one obviously too early to say, but what what.
Speaker Change: What we are saying is if you look at our performance year to date for the first half of the year were broadly at 5% and we are reiterating today that the full year is three five to four 5%. So that does imply a normalization for the second half and so that's the color.
Patrick Barry: We're providing there.
Speaker Change: As far as the rest in terms of traffic and consumer demands.
Speaker Change: <unk> continuing what we've seen in Q2.
Speaker Change: Okay, that's great and my last question.
Speaker Change: Neil just because you brought up about sort of loblaw the box pie.
Speaker Change: Pilots I was just wondering can you share with US just so you guys roughly what percentage of your sales would be kind of in that overlap in terms of food.
Speaker Change: What percentage of your total retail sales.
Speaker Change: That's not information that we disclosed but certainly.
Speaker Change: What makes dollar dollar Ana.
Speaker Change: <unk>.
Speaker Change: A very wide assortment of different departments that.
Speaker Change: <unk>.
Speaker Change: Somewhat represent the old five and dime.
Speaker Change: Local convenience store.
Speaker Change: And really we focus on a wide variety of good to attract people in for.
Speaker Change: Far more than just food, that's certainly not our focus.
Speaker Change: Okay. Thanks, I'll get back into the queue all the best.
Speaker Change: Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open.
Oh, Thank you good morning.
Brian Morrison: Question for Neil or Patrick when I look at the exceptional growth at dollar city, continuing the build out of your logistics in Colombia, and El Salvador. It looks complete and then the dividend you paid last year. It leads me to believe Youre content with a $1 to the balance sheet and that barring any major capex outside of store growth that is throwing off substantial free cash flow. So.
Speaker Change: Excluding Mexico would the financial position and cash flow comment be correct. Your Latam and then my follow up question would be can you utilize the Latam infrastructure to service the Mexico startup and can we expect dollar city Latam to evaluate a potential distribution of more capital similar to what we saw last year.
Speaker Change: Okay.
Speaker Change: Try to answer in two parts, one theres a notion of leveraging infrastructure and the second part is our balance sheet and free cash flow. So if I start with infrastructure.
Speaker Change: I mean, yes, you are correct in assuming that we will leverage infrastructure in existing countries.
Speaker Change: Frankly, that's how dollar city has always gone about it so theres nothing different here.
Speaker Change: Certainly when.
Speaker Change: When we enter a country.
Speaker Change: They will also rely on some third party providers as we enter the country and Thats reassess in time as dollar city gains critical mass in that new countries. So that's the first part.
Speaker Change: The second part in terms of free cash flow and balance sheet.
Speaker Change: What I would say is just like dollar Rama in time dull Robyn started generating strong free cash flows and built a strong balance sheet, which led to a very clear and robust capital return.
Speaker Change: Structure in policy and we are starting to see the same thing.
Speaker Change: At dollar city.
Speaker Change: And so that will be assessed in.
Speaker Change: In the future and see how dollar city can as well returning capital to its shareholders.
Speaker Change: That's very detailed thanks, Patrick and the second question I have maybe for Neil is there any reason to think that the Latam new store growth shouldnt be linear.
Speaker Change: And the business model now is working in five countries, Mexico is a massive opportunity, but do you have the bandwidth to evaluate other geographies near term or do resource constraints and getting Mexico, correct push that ambition.
Neil: So we're operating in four countries currently Mexico will be the fifth.
Speaker Change: And.
Speaker Change: We believe that the.
Speaker Change: In Mexico.
Speaker Change: The Mexico.
Operations will be handled.
Speaker Change: In the most part by the dollar city team.
Speaker Change: Obviously.
Speaker Change: The dollar amount team supports dollar city's team and the background on all fronts.
Speaker Change: But for the most part the Mexican expansion will be handled by the dollar city team and with regards to.
Speaker Change: Other expansion in other areas that is the only expansion we plan to do on the dollar city front for the time being and Central and South America, and then with regards to the dollar armor front across the balance of the world. We are always looking at other opportunities and.
Speaker Change: No we do not feel that the Mexico opportunity means that we cannot look at other opportunities depending on where those opportunities are how complex they are and the scale of them but.
Speaker Change: No I don't think one preclude the other.
Speaker Change: Sorry, just.
Speaker Change: In terms of dollar city's new store growth being linear I mean, youre trailing <unk>.
Speaker Change: Pro growth like a 112 stores now I'm just curious on that front.
Speaker Change: Yeah look I mean, we've done when you look at the past three years, we've done 90, plus you look at.
Speaker Change: With the team over there has achieved in the last quarter.
Speaker Change: We should be around that number this year end.
Speaker Change: We do see lots of potential in the four countries operations. That's why we increased our target last quarter. So we do believe that there is still ample opportunity in those countries to grow the business.
Speaker Change: I appreciate the detailed answers.
Speaker Change: Thank you. Our next question comes from the line of Tami Chen with BMO capital markets. Your line is now open.
Tami Chen: Hi, Good morning. Thanks for the question My first one is coming back to Canada. So.
Tami Chen: The composition of your same store sales three quarters of our basket down I believe historically your your algorithm is to grow the basket size can you talk about it.
In Canada right now the current competitive landscape with respect to pricing do you find there is any change or is it a bit more difficult than historically to implement the internal levers that you have for basket growth.
Speaker Change: No. We don't think that the market has changed in Canada, I think the Canadian market has always been sensitive to being.
Speaker Change: Being competitive from one retailer to the other.
Speaker Change: And.
Speaker Change: We've never been solely focused on any given driver.
Speaker Change: Basket or traffic, it's a combination of both that makes us successful and I think as long as we're we're sensitive to the combination of both being in the right mix at any given time, we're happy with the performance.
Speaker Change: Okay.
Speaker Change: My follow up is.
Speaker Change: On dollar city I'm, just wondering I guess, a two part question here is.
Chris Lee: For the last number of quarters I think you said the the trends at the consumer level were very similar to Canada is that still fair to say or are there. Some differences you are noticing now and the dollar city stores on the part of the consumer and Chris. Thank you for your answer.
Speaker Change: Or to the previous question on the cash flow generation is it fair to say, where we are now at a point where <unk>.
Speaker Change: Existing four markets dollar city is that this inflection point, where you're starting to get good operating leverage and margin expansion of the infrastructure that you've built there.
Speaker Change: So on the mix side, yes, we find that the trending in the four countries in central and South America as well as Canada.
Speaker Change: Consumer behavior is surprisingly similar in many many ways.
Speaker Change: And with regards to leveraging our infrastructure, obviously, some countries, which have been around for a longer than others like El Salvador and Guatemala.
Speaker Change: Well to leverage our infrastructure.
Speaker Change: At a greater level.
In Colombia, and Peru in particular, where we're newer to those markets.
Speaker Change: The evolution of our logistics and ability to leverage our infrastructure is still growth.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Mark Petrie with CIBC. Your line is now open.
Mark Petrie: Hey, good morning, just a follow up I guess on the whole sort of.
Assortment sales.
Mark Petrie: Shift between different categories on the sort of performance there.
Speaker Change: I'm curious just with regards to pricing.
Speaker Change: And slower inflation clearly.
Speaker Change: Is that relatively consistent across.
Across the different categories.
Speaker Change: Yes. It is it's very consistent across the category is actually.
Speaker Change: Okay.
Speaker Change: Does this sort of shift in sales mix.
Speaker Change: Does that affect at all how you think about your assortment heading into Halloween and Christmas.
Speaker Change: Seasonal being slower.
Speaker Change: Not really for one you can't change. The fact that you are seasonal but almost a year out anyways. So that's that's all committed way in advance.
Speaker Change: The reality is that this has happened many times over the years, it's a normal cycle when when people feel squeezed they tend to shy away from discretionary focus on the basics and when people are feeling good about their walls.
Speaker Change: But.
Speaker Change: They tend to be more lax about the basics and more willing to spend on discretionary. So there is a cycle that looks at that that way and tells that story many times over my career.
Speaker Change: At this point in time we're.
We're at a point, where people are more focused on basics and less on discretionary.
Speaker Change: Yeah understood Okay.
Speaker Change: And in that context like this is a.
Speaker Change: Particularly strong.
Speaker Change: Gross margin.
Speaker Change: <unk> in this quarter.
Speaker Change: No.
Patrick Barry: Patrick you called out the impact of freight and logistics, but would you would you say that your <unk>.
Speaker Change: Pleased with the balance you're striking with regards to sort of sales momentum and then the pricing and margin realization like is are the Q2 results in line with sort of how you want to prioritize the balance between those two things.
Speaker Change: I mean, that's that's a great question.
I mean, if I look at our Q2 results the improvement in gross margin is mostly a function of.
Speaker Change: Things that we control right. When you think of productivity in terms of logistics. So that part is always something we look to we look to improve and the same way our shipping costs, we always try to enter into favorable contracts. So that part we always tried to increase our margins from that perspective.
Speaker Change: And Thats, what Youre seeing this quarter that being said there is a good balance when you look at the sales level and the margin of the product itself and making sure that we continue delivering the best relative value to consumers.
Speaker Change: That single piece, it's not a function of maximizing that piece. However.
Speaker Change: However on the two other pieces, it's things that we always constantly look to improve.
Speaker Change: Okay understood.
Speaker Change: And one more if I could just could you just remind us when you start to lock in your ocean freight costs.
Speaker Change: For 2025.
Speaker Change: So ocean freight.
Speaker Change: <unk> comes.
Speaker Change: This.
Speaker Change: It's not a consistent thing I can answer because at certain periods ocean freight could be locked in for two years, plus and other times when ocean freight is much more.
Let's say erratic, we tend to not be booking in for as long and.
Speaker Change: Also it's a function of how interested ocean freight companies are and locking in at any given time.
Speaker Change: But for the moment.
Speaker Change: We're looking at about a two year horizon.
Speaker Change: Okay. So you are you are locked in on your freight costs for 2026 on some basis on.
Speaker Change: On some basis.
On an above average basis or typical basis or I mean.
Speaker Change: Saturday Saturday.
Speaker Change: We get out of that.
Speaker Change: Look I mean, I mean, obviously I guess your underlying question is when you look at spot rates, they're higher than usual I mean, like Neil said, we're not subject to spot rates.
Speaker Change: And frankly, whatever the rates are I mean shipping costs are a component in the overall price of our products. So we manage we manage around that.
Mark Petrie: Around that Mark.
Speaker Change: Yeah understood. Okay. Thanks, guys I appreciate it all the best.
Speaker Change: Thank you.
Our next question comes from the line of John <unk> with Scotiabank. Your line is now open.
John <unk>: Thank you good morning, I wanted to ask a bigger picture question, particularly on customer composition and I wonder given the resilience of the traffic numbers that youre generating do you get a sense that youre, gaining new types of customers in this environment, specifically higher income ones and I wonder what internal data you might have on that front that you are willing to share.
Unfortunately, we don't have.
Speaker Change #100: Anything to share on that front.
John <unk>: Yes.
Speaker Change #101: We don't disclose that information, but I would tell you again much like the consumer who spends more on discretionary when when times are good and more on basics, we've done just that.
Speaker Change #101: It's also natural that when the entire economy, feeling slightly squeezed, we get more consumers who might not have to want to shop at a dollar Amit generally or who enjoy shopping at a dollar im about or have the luxury of not.
Speaker Change #101: Having to worry about the price and some other store that they happen to be standing in that has those goods well when times are tougher they will consider the extra five minutes to go through the store next door and so I do think when times are tougher consumers tend to be.
Speaker Change #101: Willing to spend a little more time going to lower cost alternatives that they don't necessarily have to.
Speaker Change #101: When times are better and that's particularly the case for people with higher incomes because people with lower incomes tend to always be more focused on.
Speaker Change #101: Where they can get the best price or whatever they need.
Speaker Change #102: Okay. Okay understood and then I wanted to follow up on the gross margin topic.
Speaker Change #103: If you hold margins, even close to flat in the back half of the year you'd be above the high end of your guide you did call out the higher logistics cost, but can you give a sense of the magnitude of that for the second half and is there anything else to be aware of on mix or some other item to be aware of would love any other comments you're willing to provide on the second half goes to <unk>.
Speaker Change #103: Got it.
Speaker Change #105: Yes, it's hard to provide more color I mean, you frankly have a sense of where we will not a sense you know exactly where we landed after two quarters. We are giving you. The goal post for the full year. So it gives you a sense of what we're thinking about the second half sorry, I can't provide more than that.
Speaker Change #106: Okay understood thanks very much.
Speaker Change #107: Thank you.
Next question comes from the line of Martin Landry with Stifel, Canada. Your line is now open.
Martin Landry: Hi, good morning, guys.
Martin Landry: I was wondering if you could touch a little bit on your in store productivity initiatives.
Martin Landry: Perhaps maybe the kronos scheduling tool that you've put in place.
Speaker Change #109: Wondering did.
Did that allow you to reduce your labor hours per store.
Speaker Change #109: So.
Speaker Change #110: By how much have you been able to reduce your labor <unk>, let's say versus last year or two years ago or any color would be helpful.
Speaker Change #111: Yeah look that's a very detailed question.
Speaker Change #112: All we can say is productivity in our stores is always a big focus right.
Speaker Change #112: In store labor cost as a big line item.
Speaker Change #112: We mentioned that we're always continuously combat inflation.
Speaker Change #112: In wages and what we do is productivity initiatives.
Speaker Change #112: Our wholesale product initiatives to combat that and if you look at our Q2 numbers. It seems that it's been paying off and we see it on our financials.
Speaker Change #113: We can't comment on any specific of these initiatives.
Speaker Change #114: Okay, I thought I tried.
Speaker Change #113: Okay.
Speaker Change #115: Maybe just then just to wrap up the labor discussion.
Speaker Change #116: The government has been tightening immigration policies and I was wondering if that's having an impact on your business.
Speaker Change #117: What is the number of job openings that you have right now.
Speaker Change #117: How does that compare versus historically.
Speaker Change #119: Yes, we don't we don't provide color there either I mean, all I can say is.
Speaker Change #120: From the labor front and from the hiring front I mean, we've talked in the past that it has improved from from periods, where it's been more of an issue and today, we don't see any major issues on that front.
Speaker Change #121: Okay, so no more openings than historically.
Speaker Change #121: No openings are in line with the number of stores, we operate and where.
Speaker Change #121: We're hiring everyday and some part of the country.
Speaker Change #122: But in line with historical is the right way to look.
Speaker Change #123: Okay and then just lastly, your traffic has been.
Very strong it continues to grow at or above historical levels, and you've talked a little bit about the dynamics there, but I'm just wondering if there is a difference.
Speaker Change #126: And traffic patterns between your urban stores and your rural stores.
Speaker Change #124: No not not particularly we could we.
Speaker Change #125: We can read into that I mean honestly when we look at the traffic where we're very pleased with those numbers. It just shows that.
Speaker Change #125: More Canadians are coming into our stores, we are hitting the mark like Neil alluded earlier.
Speaker Change #125: Yeah.
Neil: It's what we looked at it as a combination of the traffic and the basket size and ultimately we look at the Sss and we're very pleased with the results that we're seeing that we're publishing today.
Speaker Change #127: Okay. Thank you congrats on your results.
Speaker Change #128: Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open.
Edward Kelly: Hi, good morning, guys nice quarter.
Edward Kelly: I wanted to ask about the.
Edward Kelly: The back half comp.
Edward Kelly: And just how we should be thinking about a few things I mean, if you look at the calendar.
Edward Kelly: Obviously Q3 Halloween impact I don't know if any color on how much you think that could be as you get into Q4 Black Friday, a week later does that matter.
Edward Kelly: How should we think about that and then obviously you've had some weakness in seasonal and Jan March is a little bit slower in the back half.
Edward Kelly: <unk>.
Speaker Change #130: Bigger events for those for those categories in your comp guidance.
Speaker Change #131: Roughly 2% to 4% range in the back half.
Speaker Change #132: Im curious as to.
Speaker Change #132: How youre thinking about.
Speaker Change #132: All of these dynamics as you look at the back half comp guidance.
Speaker Change #133: Yeah. That's a full question I mean, you are right with your assumption what.
Speaker Change #134: What we're implying for the second half.
Speaker Change #134: We continue.
Speaker Change #134: Continue to believe three five to four five is the right range. So it does imply a normalization in the second half as you've as you pointed out.
Speaker Change #134: Thing that we do also point out is when you look at the retail calendar.
Speaker Change #134: For Q3.
Speaker Change #134: Q3 does lose two key Halloween days.
Speaker Change #134: Leading to October 31, and those two days are shifted to Q4. So we did point out. The fact that if you isolate just that factor will then Q4 will be as skewed more positively.
Speaker Change #135: Versus versus Q3.
Speaker Change #135: The assumption in the range of the back half I mean, frankly is very much function of key seasonal days that are upcoming.
And so it's.
Speaker Change #135: It's really too early to say, how thats going to pan out in the back half I mean, it's still early for anything relating to Halloween and Christmas, but those are very important.
Speaker Change #135: Seasonal sales for us.
Okay.
Speaker Change #136: A follow up I know, we've talked about the gross margin quite a bit but.
It seems like you'd have some decent mix pressure.
Speaker Change #137: Just given the difference in the comps by the categories you haven't really talked about it.
Speaker Change #138: All that much I mean have you seen that pressure and has it just been offset by some of the other benefits and supply chain and freight and does that potentially become more apparent as you get into the back half.
Speaker Change #137: Yes.
Speaker Change #139: You're right to point out that there is.
Speaker Change #139: There is a mix shift.
Speaker Change #139: But it's not something that'll happen overnight either.
Speaker Change #139: In theory, having more consumables in the mix does have a pressure on margins, but again, that's just one factor that goes into our gross margins you layer on top of that the shipping rates all the productivity we're doing.
Speaker Change #139: On the on the logistics side, and so on and so forth. So it's a mix of all of these.
Speaker Change #139: All of these factors.
Speaker Change #141: Thank you.
Speaker Change #142: Thank you and I'm showing no further questions at this time. This does conclude today's conference call. Thank you all for your participation you may now disconnect.
Speaker Change #141: Yes.
Speaker Change #141: Okay.
Speaker Change #141: [music].
Speaker Change #141: Okay.
Speaker Change #141: [music].
Speaker Change #141: Thanks.
Speaker Change #141: Okay.
[music].