Q4 2025 Dollarama Inc Earnings Call
Okay.
All participants.
Vince Please standby your meeting is about to begin.
Speaker Change: Good morning, and welcome to the dollar on the fourth quarter of fiscal 2025 Adults conference call, Neil Rossy, President and CEO and Patrick Buoy 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 of Managements discussion and analysis are available at dollar from a dot com in the Investor Relations section as well as on SEDAR plus.
Speaker Change: Before we start I've been asked by dollar I'm going to read the following message regarding forward looking statements.
Colorado: Colorado's remarks today may contain forward looking statements about its current and future plans expectations and intentions results levels of activity performance goals or achievements and 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.
Colorado: There can be no assurance that such estimates and assumptions will prove to be correct.
Colorado: Many factors could cause actual results levels of activity performance achievements future events or developments to differ materially from those expressed or implied by forward looking statements.
Colorado: As a result, Colorado cannot guarantee that any forward looking statement will materialize and you're cautioned not to place undue reliance on these forward looking statements for additional information on these assumptions and risks. Please consult the cautionary statement regarding forward looking information contained in dollar almost MD&A dated April three 2025 available on SEDAR plush.
Colorado: Forward looking statements represent management's expectations as at April 32025, and except as may be required by law, Colorado has no attention or undertakes no obligation to update or revise any forward looking statement, whether as a result of new information future events or otherwise I would now like to turn the conference over to Neil Rossy.
Neil Rossy: Thank you operator, and good morning, everyone.
Neil Rossy: Throughout fiscal 2025, all around that were there for Canadians delivering compelling year round value across our broad assortment of everyday goods.
Neil Rossy: And providing convenience through our growing national store network.
Neil Rossy: The strong execution by all of the other M. A teams as reflected in both our fourth quarter and full year financial and operational results.
Neil Rossy: We generated same store sales growth of four 9% in Q4 capping off the year on a high note and bringing full year sss to four 6%.
Neil Rossy: Q4 S SaaS growth reflected a positive seasonal performance on top of the sustained demand for consumables from cautious value seeking customers.
Neil Rossy: On the real estate front, we opened 15 net new stores in Q4, bringing our total to 65 for the year our store networks across Canada fiscal year end stood at 1616 stores.
Neil Rossy: Last quarter, we increased our long term target in Canada to 2200 stores by 2034.
Neil Rossy: As we work towards this goal, we expect to generally maintain our historical annual pace of growth.
Neil Rossy: We will also sees opportunities as they come along for.
Neil Rossy: For fiscal 2026 in addition to a strong store pipeline, we secured opportunities to take over leases from retailers is exiting the market.
Neil Rossy: As a result.
Neil Rossy: New store opening range is between 70 and 80 net new stores.
Neil Rossy: While subject to annual review ahead of setting guidance.
Neil Rossy: Expect to then come back in line with our historical pace of 60 to 70 net new stores.
Neil Rossy: Turning to our capital project, we continue to develop a true no logistics model to bring even more agility and resilience to our logistics operations through redundancy.
Neil Rossy: Since announcing our plans last quarter, we completed the acquisition of the land for a total cash consideration of $46 7 million. The parcel is located north of Calgary, where we will build the logistics center that integrates distribution and warehousing activities.
Neil Rossy: As a reminder, the addition of a western logistics hubs by the end of 2027, well being complementary to our currently centralized Montreal area logistics operations, which continue to run business as usual.
Neil Rossy: The project planning phase is in full swing.
Neil Rossy: With permitting and building design, well underway and with construction is set to begin. This summer we are in the process of finalizing our roadmap through the project commissioning, including the timing of certain expenditures based on design decisions.
Neil Rossy: Construction schedule, which we expect to complete in the coming months.
Neil Rossy: And Latam dollar city had another busy year as the team works towards its recently updated long term store target of 1050 stores by 2031 and the current countries of operation.
Neil Rossy: Dollar City opened an impressive 100 net new stores in calendar 'twenty through 'twenty four bringing their total number of stores in Colombia, Peru, El Salvador, and Guatemala to 632 at year end.
Neil Rossy: We're very pleased with this strong execution.
Neil Rossy: New stores were primarily opened in Colombia, and Peru, a trend, which is expected to be maintained this year.
Neil Rossy: Strong execution continues to translate into strong financial performance.
Neil Rossy: The city is not only able to self fund its growth and its current countries of operation. It is also generating excess cash that can be returned to its shareholders.
Neil Rossy: Since we increased our equity interests and expanded our partnership with dollar city, we have been working diligently to prepare the market for entry into Mexico.
Neil Rossy: As a result of this work I am pleased that we have been able to accelerate our timeline to this year, we expect to open our first locations in Mexico. This summer.
Neil Rossy: Consistent with past practice, we will test our concept first prior to making the call on a full ramp up.
Neil Rossy: Finally last week, we announced that we entered into a definitive agreement to acquire Australia largest discount retailer as we pursue additional opportunities for dollar out.
Neil Rossy: With this acquisition, we have an opportunity to bring our value proposition to a new market through an at scale platform and.
Neil Rossy: In our retail value of retail market with a path for growth.
Neil Rossy: We believe that following the gradual transition of their business to our retail model, which we expect will take upwards of three years, we can unlock their margin and growth potential over the long term to the benefit of all stakeholders.
Neil Rossy: The transaction is subject to customary conditions, including shareholder and regulatory approvals and is expected to close during the second half of calendar 2025.
Neil Rossy: While we are all looking forward to bringing the Trs team onboard later this year we.
Neil Rossy: We must let the protests follow its course.
Neil Rossy: And the last year, we have made excellent progress advancing our growth plans across multiple platforms, reflecting our conviction and the relevance of our business model across demographics and geographies.
Neil Rossy: Our success in extending our reach whether in Canada or internationally is made possible by the incredible team we have at all levels.
Neil Rossy: Want to thank everyone at all around and dollar city, including every employee on the front lines for doing their part in providing everyday value and convenience to our customers.
Neil Rossy: And thanks to all contributions large and small that we are in the position we are in today and that our long term growth prospects are so compelling.
Neil Rossy: Certainly fiscal 2026 is gearing up to bring its fair share of challenges and uncertainty something the last several years seems to have had in common.
Neil Rossy: The particularity of this time around is the unpredictability factor brought on by the current trade environment, coupled with a weakening economic outlook.
Neil Rossy: For our business the direct impacts of the ongoing trade war.
Neil Rossy: The counter tariffs on a portion of goods, we import from the U S.
Neil Rossy: It is not an inconsequential impact, but it is we believe a manageable one and what our peers are facing as well.
Neil Rossy: As agile retailers and importers, we have tools to navigate this whether through product substitution or pricing adjustments where necessary.
Neil Rossy: As a price follower our objective remains the same delivering the best year round in relative value across our broad offering and within our fixed price points.
Neil Rossy: While customer behavior remains difficult to forecast our assumption is that consumers will remain cautious on discretionary spending and continue to seek out value in this context.
Neil Rossy: Our focus will be on the disciplined execution of our long term growth plans and I'm being proactive as our operating environment evolves.
Neil Rossy: Our value and convenience promise resonates with consumers and we will continue leveraging our retail expertise sourcing strengths and operational know how to deliver on that value in fiscal 2026 with that I'll pass it over to Patrick.
Patrick Buoy: Thank you Neal and good morning, everyone, let's drill down on our fourth quarter and fiscal 2025 results.
Patrick Buoy: On the back of a strong quarterly and annual performance, we have either met or exceeded our guidance across all metrics Q4 sales, which included an extra week compared to last year increased by 14, 8% year over year to nearly $1 9 billion.
Patrick Buoy: For fiscal 2025 sales increased by nine 3% to more than $6 4 billion.
Patrick Buoy: <unk> came in at four 9% for Q4, representing a two year stack of $13 six.
Patrick Buoy: While consumables continued to be an important sales driver holiday and winter seasonal sales gave us an extra lift in Q4.
Patrick Buoy: Looking at trends throughout the quarter sales picked up by early mid December after a slower November and those positive trends continued through January.
Patrick Buoy: This was further supported by two extra Halloween sales days, which fell in Q3 in the prior year.
Patrick Buoy: Looking at our performance throughout fiscal 2025, we saw as anticipated a progressive normalization in sss trends.
Patrick Buoy: Full year Sss came in at four 6%, resulting in a slight guidance outperformance and a two year stack of 917, 4% growth.
Q4 gross margin was 46, 8% of sales compared to 46, 3% in Q4 of fiscal 2020 for.
Patrick Buoy: The improvement primarily reflects lower logistics cost.
Patrick Buoy: Full year gross margin came in at 45, 1% of sales compared to 44, 5% in fiscal 2024.
Patrick Buoy: The improvement was due to lower inbound shipping and logistics costs, resulting in a slight guidance beat here as well.
Patrick Buoy: SG&A was 14, 7% of sales for Q4 compared to 14, 5% in the prior year Q4.
Patrick Buoy: Selecting higher store operating costs, partially offset by the positive impact of scaling SG&A for fiscal 2025 was 14, 5% of sales compared to 14, 4% for fiscal 2024 impacted by the same factors as the quarter and coming.
Patrick Buoy: In at the low end of our guidance range.
Patrick Buoy: Q4, EBITDA was $670 million compared to $559 million last year.
Patrick Buoy: For the year EBITDA came in at $2 1 billion compared to $1 9 billion for fiscal 2020 for.
Patrick Buoy: Diluted EPS increased by 21, 7% to $1 40 for the quarter and grew 16, 9% to $4 16 for the year.
Patrick Buoy: Our share of dollar city's net earnings for Q4 amounted to $58 million compared to $32 8 million last year. The contribution for the full year was $129 9 million compared to $75 3 million for the same period last year.
Patrick Buoy: The 76, 8% and 72, 5%.
Patrick Buoy: <unk> over period increases respectively are primarily attributable to strong operational performance and our increased ownership stake.
Patrick Buoy: Dollar city's results in calendar 2024 were mainly driven by an increase in sales supported by the growth in total number of stores and continued scaling of the business. This was also supported by a higher gross margin as a percentage of sales from our lower inbound shipping and logistics costs.
Patrick Buoy: It was partially offset by slightly higher SG&A costs stemming from increased labor costs.
Patrick Buoy: We have also announced this morning, the dollar city's board of directors approved a cash dividend totaling $62 $5 million U S. Our share corresponded to $37 6 million U S or $54 6 million Canadian.
Patrick Buoy: And it was received in the first quarter of fiscal 2026.
Patrick Buoy: Forward dividends are expected to be declared and paid by dollar city twice a year.
Patrick Buoy: We will be using our dividend proceeds to fund our share of the Mexico expansion costs over the near term required investments, which have also been pulled forward with the acceleration of market entry as a result about half of our share of this dividend will be allocated toward.
Patrick Buoy: Mexico investments.
Patrick Buoy: On Capex for the year, we came in just below the top end of our guidance range at $195 3 million. This number excludes the final land acquisition costs of $46 7 million and an additional $4 9 million that went towards land development costs in the quarter.
Patrick Buoy: As we prepare the groundwork for our future Western logistics hub.
Patrick Buoy: On the <unk> front, we remained active with the repurchase of more than eight 1 million common shares for cancellation through fiscal 2025 for a total cash consideration of nearly $1 1 billion, marking dollars Ram is largest annual buyback on record.
Patrick Buoy: We also announced today that the board has approved a 15% increase to our quarterly cash dividend of $10 58 per share.
Patrick Buoy: Looking now at our financial guidance and outlook for fiscal 2026.
Patrick Buoy: We expect to continue generating consistent annual same store sales growth given the enduring relevance of our business model and our unique role within the Canadian retail ecosystem.
Patrick Buoy: This is despite coming from several years of outsized annual Sss growth, followed by progressive normalization and now having to contend with an unpredictable trade environment and a weak economic context.
Patrick Buoy: Factoring that in we anticipate generating between 3% and 4% Sss growth for fiscal 2026.
Patrick Buoy: To achieve this we will leverage our product sourcing and merchandising expertise supported by regular product refreshes in our multi price point strategy to deliver value to our customers.
Patrick Buoy: On gross margin as a percentage of sales, we do expect that headwinds will pressure margins compared to last year. As a result, our annual guidance range is between 40 to 44, 2% and 45, 2%.
On SG&A, we expect higher labor costs to continue as well as increased store operating costs, including higher curbside recycling costs are ongoing efficiency and labor productivity initiatives should help offset those pressures, resulting in an improved guidance range for <unk>.
Patrick Buoy: <unk> as a percentage of sales of 14, 2% to 14, 7% for fiscal 2026.
Patrick Buoy: Looking at the all of the city one item of note is the new timeline for Mexico with market entry happening. This year, we will be required to make investments and will incur ramp up costs. We should expect a loss in the range of roughly $10 million to $20 million U S.
Patrick Buoy: For fiscal 2026 in Mexico.
Patrick Buoy: Turning to Capex, our fiscal 2026 guidance range of between 185 and $210 million will go towards new store openings and other transformational capital requirements. The year over year increase is primarily a result of a higher number of planned store.
Our openings.
Patrick Buoy: For the time being guidance excludes the portion of the $450 million budget estimate for our western logistics hub development that we intend to deploy this fiscal year.
Patrick Buoy: We are still in the process of finalizing the plan specifically the timing of certain significant expenditures, we still expect it to be frontloaded.
Patrick Buoy: The question of completing that work.
Patrick Buoy: We expect to be able to provide more color on logistics capex for fiscal 2026, when we release our Q1 results.
Patrick Buoy: In terms of returning capital to shareholders our approach remains unchanged.
Patrick Buoy: <unk> logistics hub project, nor our proposed acquisition of Trs is expected to impact our overall strategy.
Patrick Buoy: We have sufficient financial flexibility to fund the strategic investments.
Patrick Buoy: Supported by our strong cash flow generation, we intend to continue being active on our CIB program allocating a portion of cash towards share buybacks subject to market conditions and to maintain a dividend subject to quarterly approval.
Patrick Buoy: While the trade environment remains unpredictable and the economic outlook uncertain.
Patrick Buoy: What we do know is that Canadian consumers appreciate it and rely on our value and convenience of promise.
Patrick Buoy: We also have growth plans for each of our platforms. We will continue to execute on these in fiscal 2026 to further strengthen our long term growth path to the benefit of all stakeholders.
Patrick Buoy: With that I'll now turn the call back to the operator for the Q&A.
Patrick Buoy: Thank you to ask a question. Please press star one of your telephone and wait for your name to be announced.
Patrick Buoy: To withdraw your question. Please press star one again.
Patrick Buoy: Our first question comes.
Irina Chow: From the line of Irina Chow with RBC capital markets. Your line is now open.
Speaker Change: Good morning, everyone. We may is I'll start with the topic of the day Paris.
Speaker Change: You said it well.
Speaker Change: Seem Italian jewelry tariffs on a selection of goods can you give us an idea of which categories or which type of goods, specifically and what you see is the magnitude of the headwind.
Speaker Change: Hey.
Speaker Change: Thank you good morning Irene.
Speaker Change: So the majority of the goods.
Speaker Change: In the consumable area of the business.
Speaker Change: But as I mentioned, we have tools to navigate that and whether thats through product substitution or pricing adjustments, where it's necessary.
Speaker Change: We think that consumer confidence will be a major challenge with these tariff discussions while they continue.
Speaker Change: And while our concept maybe more resilient than most.
Speaker Change: When consumers spend less they tend to spend less everywhere. So.
Tariff wars are not good for anyone.
Speaker Change: Gary metric for you to get that last one. Thank you and then I guess the corollary question and maybe this is for you Patrick.
Speaker Change: When we look at your guide for F. 'twenty six can you walk through the factors that.
Speaker Change: Would influence you coming in at the low end versus the high end and also just a housekeeping question the $10 million to $20 million loss in Mexico is that Europe, Europe portion or 100%.
Speaker Change: Yes. Thank you Irene so if you break it down to the components of the guidance when we look at Sss, 3% to 4%.
Speaker Change: In particular this year the level of uncertainty is very high and the picture could change very rapidly.
As it stands today.
Speaker Change: Consumer confidence is low and we believe as Neil just pointed out it will have an impact on consumer spending.
Speaker Change: So thats an sss.
Speaker Change: <unk> margin I mean, we see more headwinds than <unk>, we think about a weaker Canadian dollar, we think have higher shipping rates.
Speaker Change: The the risk of continued mixed shift and all of this in the context of lower scaling as our Sss is weaker so we definitely see some headwinds on the gross margin piece.
Speaker Change: On SG&A.
Speaker Change: It's a mixed bag on the positive side, we're looking for improved store productivity.
Speaker Change: On the plus and minus side, let's see where minimum wage lines in all the provinces.
Speaker Change: And certainly there are certain cost items that are continuously increasing.
Speaker Change: At a very high pace.
<unk> that is funding of recycling program for example.
Speaker Change: And then the last bit is Capex I mean, it's really in line with last year.
Speaker Change: We are guiding towards more net new stores. So it's just a consequence of that.
Speaker Change: To your second question.
Speaker Change: Thanks for asking for the clarification that $10 million to $20 million.
Speaker Change: U S is for 100% of the operations.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Chris Lee with Chardan. Your line is now open.
Speaker Change: Chris Lee Your line is open Oh, sorry, sorry about that sorry.
Speaker Change: Sorry about that.
Speaker Change: Yes, maybe I'll just start off with.
Speaker Change: Another question on tariffs I know there are lots of moving parts, but I think in the past you mentioned a potential benefit that goes on around that is that some of your overseas vendors might increase and look for opportunities outside of the U S.
Speaker Change: Have you seen that yet just trying to get a sense of what the potential opportunity or benefit could be from a diagram might be pat trends. Thanks.
Speaker Change: Thanks.
Speaker Change: At.
Speaker Change: This discussion is somewhat different because.
Speaker Change: U S tariffs.
Speaker Change: Well affect.
Speaker Change: Mostly consumable products.
Speaker Change: And those consumer products tend to mostly be national brand products.
Speaker Change: And those national brand products.
Speaker Change: That arent necessarily easily replaceable, but private label products from other countries or from Canada and so.
Speaker Change: It's not the same.
Speaker Change: Scenario as the other discussion that was had in the past.
Speaker Change: Okay, how about just maybe.
Speaker Change: But how about from products that you source from China, which are I guess more general merchandise so seasonal.
Speaker Change: Those products will now be more expensive I guess into the U S for those suppliers.
Speaker Change: He'd been opportunities to supply to you guys certainly up with it.
Speaker Change: The <unk>.
Speaker Change: Vendors in the world are very sensitive to challenges that there.
Speaker Change: Strong retail partners.
Speaker Change: And so if the Canadian dollar weaker if there's higher shipping rates.
Speaker Change: If the factories are less busy to your point those things are always.
Speaker Change: Places, where the factories will try to offset it.
Speaker Change: Some of those higher cost with better <unk>, but theres only so much somebody can do and at a certain point when you get to a certain scale. Most of your vendors are working fairly tight to start with it's not it's not going to be impactful.
Speaker Change: Okay. That's helpful. Thanks for that and then maybe a question just on <unk> I noticed there's a bit of incremental disclosures with the Q4 results. You guys noted that the sales were up 14, 4% Im just curious to see what we can tease it out for us like how much of that was from new store openings versus the same store sales growth.
Speaker Change: <unk>.
Speaker Change: Yes, I would just say generally what we're seeing in solar city as we've mentioned.
Speaker Change: And many times that the trends are very similar to Canada.
Speaker Change: We've seen continued normalization.
Speaker Change: We are in the uncertain macro environment.
Speaker Change: That impacts consumer behavior.
Speaker Change: But when you look at what we were able to deliver in Q4, I mean, certainly you would have seen the net new stores that being 100. This year, which is an exceptional result.
Speaker Change: So a portion of that is obviously impacting.
Speaker Change: Impacting the growth Sss like I said.
Speaker Change: To be strong, but trending in line with Canada continued normalization in <unk>.
Speaker Change: Certain macro environment that will we think impact consumer behavior.
Speaker Change: Okay, that's great I'll get back into the queue. Thanks a lot.
Speaker Change: Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open.
Thanks, very much good morning.
Speaker Change: Maybe for Neil.
Speaker Change: I guess, what will transpire transpired for you to bring Mexico forward, how many stores as a test concept what does the first region, you're charging and how do you plan to seed the market and advance.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: I always wonder, which answers I'm allowed to say and not allowed to say per for forward looking statements.
Patrick Buoy: But patrick will accompany freely.
Speaker Change: Thank you so much thank you.
Patrick Buoy: So.
Patrick Buoy: When when we make decisions to move things forward, it's really just a question of.
Patrick Buoy: The speed and efficiency that any given new market allows us to move that and so in the case of Mexico. The dollar city team and its leadership.
Patrick Buoy: We're able to organize.
Patrick Buoy: What we see as our future logistics hub.
Patrick Buoy: The first phase of logistics for Mexico.
Patrick Buoy: Decided on which area of the country.
Patrick Buoy: Would start in the region, we would start in.
Patrick Buoy: And then of course once we decide on a region of Mexico is a huge country. It's just think come into Canada, where youre going to start which province et cetera.
Patrick Buoy: To keep some context and then once you've picked which province you wanted to start in sort of speak you start looking at all the real estate and then the real estate, sometimes can be a challenge and so it takes longer than other times some.
Patrick Buoy: Some opportunities present themselves rather quickly and so in this case.
Patrick Buoy: Play the province, so to speak was chosen the logistics hub is being worked on and was found relatively quickly with it.
Patrick Buoy: So our Senate setup and processes that are being worked on as we speak and.
Patrick Buoy: The opportunity in a small number of stores was found that debt we're comfortable for the for the management team that's responsible for that project and so that's how it ended up moving forward no no more or less complicated than that it's just a question of how it rolled out and so it could just as easily.
Patrick Buoy: We have taken longer but in this case it world out nicely and so we moved it we moved it forward because we're never setting these dates and stone. These dates are set as a as a sort of benchmark for what we think typically things taken if they go faster.
Patrick Buoy: Our opportunity with dollar amid this year to have.
Patrick Buoy: Higher number of store openings this year.
Patrick Buoy: We don't think that will continue but if it presents itself.
Patrick Buoy: We're going to do what we're supposed to do which is to do the best we can for our shareholders and open.
Patrick Buoy: The number of stores that we can if we think we can open stores that are additive and not just cannibalized.
Speaker Change: Okay I appreciate the high level it sounds like you wont get into the details there, but maybe on Australia, then I know, it's a process last week I took away the message that it's going to take three plus years to transform our store base to the dollar in our model and the EPS contribution following that closed is going to be neutral.
Speaker Change: I think forward to that transformation period is there any reason, we shouldnt believe that shared best practices over this transformation could lead to margins such as dollar city at an equivalent store based upon completion and what kind of capex will be required per store and will there be DC and warehousing investment required.
Patrick Buoy: So I will let Pat answer some of those questions. This is all a little premature because.
Speaker Change: The thing is waiting on regulatory decisions.
Speaker Change: We're just hoping the whole thing continues to move in the right direction, but conceptually I will answer the first part of your question which is.
Speaker Change: It's not the same as the dollar city stores, where because this dollar city stores were essentially starting greenfield and in this case, you have 392 existing stores with the existing merchandise the existing racking the existing processes et cetera, and so it's going to be a lot more work to.
Speaker Change: To convert all of those things.
Speaker Change: Even if the employee base.
Speaker Change: As capable even if theyre excited even if they they want.
Speaker Change: To do the very best they can as quickly as they can there's just a lot more to work through and so it will just take longer simply.
Speaker Change: Practically speaking there's only so many conversions we can do a year.
Speaker Change: While we are doing everything Allison as you know, we would prefer to go slow and steady and do things properly.
Speaker Change: And everything we do then rushed through anything just to tick a box. So it will take the time it takes and it's our best guess that that will be somewhere.
Speaker Change: In the three to four year range more likely four by the time the whole things completed.
Speaker Change: Okay.
Brian Morrison: And Brian for the other your other questions in the question.
When you when you think about capital outlay, we talked about converting the 390 plus stores. So theres definitely capex to be invested there and then you.
Brian Morrison: We set out a target.
Brian Morrison: 2034, so there will be capex for new stores, you could assume it's something in line with what we see here in Canada, There's certainly investments in it.
To bring it to.
Brian Morrison: That all around the standards.
Brian Morrison: With respect to logistics and so on and so forth again, it's a little premature where we just announced the transaction has not closed but.
Brian Morrison: But what we see is that they have a developed logistics.
Brian Morrison: Logistics network.
Should we need more capacity that would be leased.
Brian Morrison: <unk> just like a dollar city decisions to invest capital are only made much later in time.
Brian Morrison: Once we feel comfortable investing that capital and that the business case stands on its on its own.
Speaker Change: Okay. Thank you Tommy.
Speaker Change: Thank you. Our next question comes from the line of.
John: John <unk> <unk> with Scotiabank. Your line is now open.
Speaker Change: Thank you and good morning.
Speaker Change: I was wondering if you could talk about behavior of Canadian consumers, particularly recently.
Speaker Change: Have you noticed any shift in.
Speaker Change: Buying behavior preferences since tariff talk really ramped up in February and can you share your view on the theme of buying Canadian is that providing our best dollar ammo versus peers.
Speaker Change: I think that.
Speaker Change: The theme is notional to be honest.
Speaker Change: I can't tell you that in our case.
Speaker Change: That would.
Speaker Change: <unk> be something that we've seen.
Speaker Change: For certain.
Speaker Change: There there is a sentiment to want to do that and.
Speaker Change: As a Canadian company founded in Quebec, and whose business is run entirely.
Speaker Change: Our Canadian business out of Canada, and with the management team, that's all Canadian and.
Speaker Change: I think that Canadians should be proud of the fact that dollar Amazon all Canadian business.
Speaker Change: Founded and run by Canadians, but.
Speaker Change: We're not trying to somebody told me a new thing.
Speaker Change: <unk> glaze the dollar ramp up brand.
Speaker Change: Too much the reality is.
Speaker Change: We try to provide great value every day of the year with or without tariff wars and I would think that Canadians are proud of the fact that dollars Amazon Canadian business.
Speaker Change: To start with.
Speaker Change: Right, Okay fair enough and then a modeling question you talked about lower logistics costs in FQ4 but also said that inbound shipping costs were.
Speaker Change: Were negatively impacting the up 26 guide can you add a bit more color on what youre seeing on those factors both in the quarter and subsequent to it.
Speaker Change: Yeah. So in Q4 logistics costs were lower I mean, it's just a function of everything working running really smoothly. So we didn't enter into any friction.
Speaker Change: Friction costs, I mean, certainly as well scaling with the Sss at four 9% is helpful. In Q4, and we've benefited from.
Speaker Change: Contract level, which were low.
Speaker Change: As we move into FY 'twenty six we're onto.
Speaker Change: Another another contract.
Speaker Change: Recently.
Speaker Change: Prices spot rates have been increased.
Speaker Change: The spot market is higher than it was and so the new rates as we look into FY 'twenty six.
Speaker Change: Our higher than the rates, we locked in in <unk>.
Speaker Change: Why.
Speaker Change: FY 'twenty five.
Speaker Change: And so certainly when you think overall for gross margins.
Speaker Change: I mentioned, a few elements that are headwinds, we talked about weaker Canadian dollar I talked about this higher shipping rate.
Speaker Change: You need to factor in a continued mix shift potentially.
Speaker Change: Even though Q4, we saw a benefit from higher sss and scaling the gross margins.
Speaker Change: As you look into FY 2006, our guide on Sss is 3% to 4%. So there would be less benefit from scaling on the gross margin.
Speaker Change: Because of that.
Speaker Change: Okay.
Speaker Change: Okay. That's helpful. Thank you very much I'll pass it on.
Speaker Change: Thank you. Our next question comes from the line of Vishal <unk> with National Bank. Your line is now open Sir.
Vishal: Hi, Thanks for taking my question wanted to get your thoughts on.
Speaker Change: On further acquisition opportunities and what is management.
Vishal: Impetus right now.
Vishal: Obviously, a lot going on but should we should we be thinking that management is continuing to explore future opportunities. There is a pause for now.
Vishal: For the time being I think you should think that management feels like it has the right number of projects on its plate with regards to.
International expansion.
Vishal: And that we want to make sure that the ones that we've engaged in.
Vishal: As.
Vishal: Sort of.
Vishal: Get their routes planted and we see how those countries start performing.
Vishal: And in the future if everything goes well.
Vishal: It will be management's responsibility to continue to look for other adventures.
Vishal: Adventures, so to speak but for the moment, you should think of us as being satisfied with the number of projects we have on airplanes.
Speaker Change: Okay and with respect to the outlook on the same store sales guidance I just wanted to get a little bit more color on that so so Q4 was strong but there was some transient.
Vishal: <unk> or call it.
Vishal: Events that which may have lifted the comp, including the tax holiday and the Halloween shift and the indication was January is continuing along at a similar pattern, but notwithstanding the.
Vishal: The comp expectation is.
Vishal: Within the three to four which is below kind of dollar on a historical level. So it was like square those altogether should I think that management statement comps to kind of stay towards the back ended the year associate with economic weakness does that is that the thinking.
Speaker Change: Vishal like I mentioned the picture can change very rapidly, even though December and January were on a good pace.
Vishal: Consumer confidence plummeted with all the trade rhetorical so things did.
Vishal: Did turn very quickly.
Vishal: Okay, Alright, thank you for that.
Speaker Change: Thank you. Our next question comes from the line of Mark Petrie with CIBC. Your line is now open.
Mark Petrie: Yes. Thanks, Good morning, I just wanted to follow up on a couple of the topics.
Mark Petrie: First on on sales mix it sounds like Theres, some different moving parts here and in Q4, specifically you got better growth from the seasonal categories than you had been previously I think so can you just clarify for Q4 with sales mix, a positive or a negative effect.
Mark Petrie: I mean generally.
Mark Petrie: As you would know generally speaking.
Mark Petrie: The mix improves as positive in Q4.
Mark Petrie: Consumables were still strong it's the same thesis as the prior quarters and the only thing that we're adding to that is whereas seasonal was.
Mark Petrie: Somewhat of a drag on our sss.
Mark Petrie: Q4, when you take seasonal as a whole.
Mark Petrie: It was it was positive.
Mark Petrie: Okay, and then so your expectation what's embedded in the outlook is that consumables continue to outperform and sales mix as our <unk>.
Mark Petrie: <unk> gross margin for fiscal 'twenty six.
Mark Petrie: Yes, that's an assumption that's our assumption.
Mark Petrie: Okay. Okay understood. Thank you and then.
Speaker Change: I appreciate the additional disclosure for dollar city I'm wondering if you can just give us a sense of a couple of things maybe.
Speaker Change: What sort of how the sales growth kind of played out through fiscal 'twenty five.
Speaker Change: Q on Q3, not necessarily specific numbers, if you don't want to share them, but but what that sort of cadence was and then also just related to that how do you store, what's the store ramp up for dollar city stores looks like I assume it's a little slower than dollar armour just given.
Speaker Change: The stage in maturity of the brand, but curious if you can share anything on that.
Speaker Change: Yes, so on the first part sales cadence.
Speaker Change: I mean.
Speaker Change: <unk>.
Speaker Change: The trend is quite similar to Canada in many respects, we started off from a quite high base same as Canada and as we advance through the year.
Speaker Change: We saw this notion of normalization, both in Canada, and frankly in all of our countries of operations in Latin America Q3 by buy in many respects was soft or in.
Speaker Change: In Canada was the same case in Latin America in Q4, we saw a rebound in <unk>.
Speaker Change: Our case in Latin America as well so.
Speaker Change: We're happy to see that these trends are quite consistent.
Speaker Change: Cros.
Speaker Change: Different countries.
Speaker Change: Okay.
Speaker Change: Second question on the ramp up of the stores I mean once again.
Speaker Change: The operating model and the recipe that you know that is applied to dollar city is the same here in Canada, and so generally speaking, we see a ramp up quite similar too.
Speaker Change: To here in Canada.
Yeah, Okay I appreciate that thank you all the best.
Speaker Change: Thank you. Our next question comes from the line of Luke Hannan with Canaccord Genuity. Your line is now open.
Luke Hannan: Thanks, Good morning, everyone.
Luke Hannan: I want to follow up you mentioned, the new store openings that you have for the year slightly above.
Speaker Change: It's not a function of taking over some some leases from folks who have exited the market. So I mean going forward is it still going to be your your ammo to be I guess flexible in that regard to in other words, let's say later this year the backdrop gets less favorable for other retailers in the market. They decided to leave could we expect some flexibility.
Luke Hannan: <unk>.
Luke Hannan: And your store openings for the year.
Luke Hannan: The answer is yes, you can expect flexibility, but I would also tell you that the answers than you asked for the last six or seven years and for the last six or seven years, we've opened 65 stores. So.
Luke Hannan: It doesn't come around very often but we are always.
Luke Hannan: Open to that flexibility.
Speaker Change: Okay understood. Thanks, and then my second question is just on the stores in store concepts rather to be rolled out in Mexico, I mean overall, what relative maybe to the rest of your Latin American footprint, what should we be thinking about as far as the major points are concepts that you're going to be testing in the stores that that could be difference.
Speaker Change: I imagine assortment, obviously is going to be a key one but I mean, what else are going to be sort of a thing sort of the milestones that you're looking for to ensure everything is rolling as planned.
Speaker Change: I think you'd be surprised by how similar they are in fact to Canada.
Speaker Change: The notion of Tropicalize the assortment and.
Speaker Change: Local product is certainly something we're sensitive to but the reality is it still represents a very small percentage of the net difference between the stores and central and South America, and Canada and the vast majority of the goods are simply consumer goods that people everywhere on the planet.
Speaker Change: Consumer and so.
Speaker Change: You won't see any Canada, or Quebec, souvenir T shirts, and those shops, but youll certainly see the vast majority of our assortment and you may see a tortilla breath. There that you won't see in the vast majority of our stores in Canada, but I mean really it is a very small percentage you should think that.
Speaker Change: Those stores as as the current dollar city stores do.
Speaker Change: Highly reflective of the field, the look and the shop of a $1.
Speaker Change: Okay I appreciate it thank you.
Edward Kelly: Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open.
Edward Kelly: Yes, hi, good morning, everyone.
Edward Kelly: Your gross margin over the last year.
Edward Kelly: Has been a bit lumpier, I guess thinking about the year over year change each quarter.
Edward Kelly: Any help on the cadence of the gross margin and.
Edward Kelly: 25, and how we should be thinking about that.
Edward Kelly: <unk> here.
Edward Kelly: Yes.
Edward Kelly: Sympathetic to that I mean, it's not it's not very easy to anticipate the cadence. There is a lot of timing shift that is impossible to predict I think at the base of the canvas.
Edward Kelly: You know the sales mix.
Edward Kelly: Certain quarters are higher seasonal in nature.
Edward Kelly: But we can't predict the lumpiness in the timing of merchandise flowing through the network.
Edward Kelly: It's something that we are.
Edward Kelly: We also see.
Not a year certainly not a year in advance.
Edward Kelly: Okay.
Edward Kelly: As it pertains to the tariffs what's in guidance in terms of mitigation. I mean are you assuming like full mitigation full pass through of pricing.
Edward Kelly: Related to the.
Edward Kelly: The headwind.
Edward Kelly: We're factoring in some impact.
Edward Kelly: Like Neil mentioned, it's not an inconsequential number.
Edward Kelly: In there we do assume that we will mitigate a portion of it.
Edward Kelly: Another portion of it will may be a negative impact on our gross margins, which also explains the lower guide that you are seeing as compared to what we've achieved in FY 'twenty five.
Edward Kelly: Okay and then just last question for you on dollar City I mean, it's the best way to model dollar city sort of like what we think.
Edward Kelly: A more normalized growth would be in the contribution and then.
Edward Kelly: Subtract.
Edward Kelly: <unk> share of the $10 million to $20 million.
Edward Kelly: From that and is that more back half weighted.
Edward Kelly: That's.
Edward Kelly: If I were to model it that would be exactly the way I would look at the base business and there is a notion of normalization.
Edward Kelly: And then we provided clarity on what the Mexico part will have us as a negative impact.
Edward Kelly: This this year.
Edward Kelly: Given the fact that we.
Edward Kelly: We are opening stores.
Edward Kelly: In the second half of the year.
Edward Kelly: Some costs may be heavier in the second half although.
Edward Kelly: As we speak we're already incurring some costs.
Edward Kelly: So yes back half but.
Edward Kelly: We are already incurring costs as we speak.
Edward Kelly: Okay. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Tami Chen with BMO capital markets. Your line is now open.
Speaker Change: Hi, Thank you most of my questions have been answered I just have one quick.
Speaker Change: Clarification, just Patrick going back to the ramp up costs in Mexico for dollar city. So sorry, your fiscal 'twenty six.
Speaker Change: 10 to 20 million USD again, I just want to confirm when you say, 100% on the ops. You mean this is all on dollar city.
Speaker Change: And so whatever we're modeling for dollar city's base business. We we should assume an increase I guess in the operating expenses by this amount is that the right way to think about it.
Speaker Change: The answer is no so that $10 million to $20 million U S.
Speaker Change: The loss.
Speaker Change: 100% of Mexico, and so considering we own 80% of this venture we would take 80% of these losses. So obviously, that's the U S take 80% of that converted the Canadian and that would be included in our equity pickup line does that clear timing.
Speaker Change: Right. Okay. That's clear thanks for that that was it for me. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Mark Carden with UBS. Your line is now open.
Mark Carden: Good morning, Thanks, so much for taking the questions. So to start you talked about some of the macro challenges impacting your outlook. How are you thinking about the impacts of lower immigration in the year ahead and are you expecting for that to be much of a material headwind.
Speaker Change: No. We don't think that will be much of a material headwind to be honest.
Speaker Change: Okay, Great and then as a follow up just how are you thinking about the potential impacts from Walmart accelerating store growth in the region and just faster growth in that retailer have much of an impact at all on how you're approaching real estate selection.
Speaker Change: We always are focused on dollars Anna <unk> opportunities to grow our store network and be as competitive.
Speaker Change: With a relative value that benefits our customers as much as possible.
Speaker Change: Our.
Competitors and the rest of the retailers and the Canadian market will always have that same responsibility to their shareholders and we understand that that's the way it's going to work.
Speaker Change: While we feel that every retailer is our competition.
Speaker Change: And we're very sensitive to everyone relative value.
Speaker Change: When other retailers in our market.
Speaker Change: Expand more quickly or not it does not change our strategy.
Speaker Change: Great. Thanks, so much good luck.
Speaker Change: Thank you.
Speaker Change: Thank you and I'm currently showing no further questions at this time. Thank you all for your participation. This does conclude today's conference call you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
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