Earnings call transcript: Dollarama’s Q1 2025 earnings exceed forecasts, stock surges

Dollarama Inc. (DOL) reported its Q1 2025 earnings, surpassing Wall Street expectations with a notable increase in both earnings per share (EPS) and revenue. The company’s stock responded positively, climbing 9.38% in pre-market trading, adding to its impressive year-to-date return of 21.83%. With a market capitalization of $605.87 million, Dollarama’s EPS reached $0.98, outpacing the forecasted $0.8327, while revenue hit $1.52 billion, slightly above the anticipated $1.5 billion. According to InvestingPro, the stock is currently trading near its 52-week high, reflecting strong investor confidence.

Key Takeaways

• Dollarama’s EPS and revenue exceeded market expectations.
• The stock surged 9.38% in pre-market trading following the earnings release.
• Same-store sales increased by 4.9%, indicating strong consumer demand.
• The company plans to expand its store footprint, including entry into the Mexican market.
• Dollarama maintains its full-year guidance despite economic uncertainties.

Company Performance

Dollarama demonstrated robust performance in Q1 2025, with sales increasing by 8.2% to over $1.5 billion. This growth was driven by a 4.9% rise in same-store sales and a 3.7% increase in transactions. The company’s ability to attract more customers and increase the average transaction size by 1.2% highlights its strong market position amidst a challenging retail environment.

Financial Highlights

• Revenue: $1.52 billion, up 8.2% year-over-year
• Earnings per share: $0.98, a 27.3% increase from the previous year
• EBITDA: $496.2 million, with a margin of 32.6%
• Gross margin improved to 44.2% from 43.2% last year

Earnings vs. Forecast

Dollarama’s actual EPS of $0.98 exceeded the forecast of $0.8327, marking a surprise of approximately 17.7%. Revenue also surpassed expectations, reaching $1.52 billion against the projected $1.5 billion. This positive earnings surprise reflects Dollarama’s effective operational strategies and strong consumer demand.

Market Reaction

Following the earnings announcement, Dollarama’s stock price surged by 9.38%, reflecting investor confidence in the company’s performance and future prospects. The stock’s significant movement contrasts with broader market trends, highlighting Dollarama’s strong position in the retail sector. InvestingPro data shows the company has delivered strong returns, with a 18.16% gain over the past six months. The stock’s last close was $175.76, and it remains within its 52-week range of $119.75 to $196.46. Notably, Dollarama has maintained dividend payments for 15 consecutive years, demonstrating consistent shareholder returns.

Outlook & Guidance

Dollarama’s management reiterated its full-year guidance, expecting same-store sales growth of 3-4% and a gross margin between 44.2% and 45.2%. The company plans to open 70-80 net new stores this year, including its entry into the Mexican market, which is anticipated to incur initial losses over the next 1-2 years.

Executive Commentary

CEO Neil Rossi expressed optimism, stating, "We are off to a strong start in fiscal twenty twenty six." CFO Patrick Bouie acknowledged consumer fragility but noted the positive sign of increased store traffic, saying, "We think that’s a positive sign."

Risks and Challenges

• Economic Uncertainty: Consumer confidence remains fragile, potentially impacting discretionary spending.
• International Expansion: The entry into the Mexican market poses initial financial risks.
• Tariff Challenges: Although minimal impact is expected, tariff changes could affect costs.
• Market Saturation: As Dollarama expands, it must maintain its value proposition to attract customers.
• Supply Chain: Continued focus on operational efficiencies is crucial to mitigate potential disruptions.

Q&A

During the earnings call, analysts questioned Dollarama’s entry into Mexico, viewed as a long-term opportunity. Executives assured there would be no significant changes to pricing strategies and emphasized ongoing efforts to enhance operational efficiencies.

Full transcript - Dollarama Inc (DOL) Q1 2026:

Conference Call Operator: Good morning, and welcome to the Dollarama First Quarter Fiscal twenty twenty six Results Conference Call. Neil Rossi, President and CEO and Patrick Bouie, CFO, will make a short presentation followed by a question and answer period open exclusively to financial analysts. The press release, financial statements and management’s discussions and analysis are available at dollarama.com in the Investor Relations section as well as on SEDAR 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 under circumstances.

However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, levels of activity, performance, achievements, future events or developments to differ materially from those expressed or implied by the forward looking statements. As a result, Dollarama cannot guarantee that any forward looking statement will materialize, 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 and A dated 06/11/2025, available on SEDAR plus. Forward looking statements represent management’s expectations as at 06/11/2025, 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, future events or otherwise.

I would now like to turn the conference call over to Neil Rossi.

Neil Rossi, President and CEO, Dollarama: Thank you, operator, and good morning, everyone. We are off to a strong start in fiscal twenty twenty six across our key financial and operating metrics, posting 4.9% same store sales growth as we pursue our Canadian growth plan. The increase in SSS was supported by sustained demand for consumables, but also positive seasonal performance, notably Easter. Looking at the last few quarters, we are pleased with the performance of our overall mix in the context of generally lower consumer discretionary spending in the current macro context. In what continued to be an unpredictable trade environment, we focused on our value proposition and delivered for our customers.

This speaks to our fundamentals and that we are hitting the mark with an offering that is meeting customer expectations. On the real estate front, we opened 22 net new stores in Q1, bringing our total store count across Canada to sixteen thirty eight stores at quarter end. As a reminder, we intend to open between seventy and eighty net new stores this year, up from our usual target between sixty and seventy. With the work accomplished by our real estate team in the first quarter and our robust pipeline, we remain on track to achieve this year’s higher target. The Dollarcity team also continued to deliver value to consumers in Latin America and to advance its expansion plans.

Dollarcity opened 12 net new stores in the three months of the calendar year, bringing their total number of stores in Colombia, Peru, El Salvador and Guatemala to six forty four. As confirmed last quarter, we are investing in our Mexico market entry starting this year, with the Dollarcity stores in Mexico slated to open imminently. This will mark a big milestone for the Dollarcity team, with our last new market entries being in Peru in 2021 and Colombia in 2017. The team has a strong track record of success entering new markets, and I’d like to recognize their efforts and strong execution as it pertains to our entry into Mexico. We look forward to testing our concept in this large, high potential market.

Now for a quick update on our proposed acquisition of Australia’s largest discount retailer as we pursue a new international opportunity for Dollarama. We are looking forward to a successful transaction closing in the next months given the excellent progress since we announced in late March. The meeting for TRS shareholders to approve the transaction will be held later this month. Following this important step, and assuming that the subsequent Australian court approvals proceed as currently scheduled, we expect to close towards the back July. A dedicated team has been working actively in the background on our integration plans, so that we can hit the ground running when the time comes.

Onboarding the TRS team will be our priority. We are all very excited to get started on this new chapter of growth. That being said, management remains focused on our core Canadian business and the continued success of Dollarcity. Finally, the current and rapidly evolving trade environment continues to impact many industries, including the retail sector. As discussed last quarter, the direct impacts for Dollarama are the counter tariffs imposed by Canada on a portion of the goods we import from The US.

These are primarily national brand consumable products. We have been managing this process with the tools at our disposal, including our flexible and agile business model. Our objective is to hold on price for as long as possible for our customers, and we are working extremely hard on this front. Price adjustments are always a last resort for us. We will continue to maintain our relative value proposition and existing price point range.

A quarter of the way into the year, macro uncertainties persist, but we are holding our own and effectively managing the current challenges. We continue to focus on the elements within our control, leveraging our strengths to provide everyday value and convenience to our customers. We will continue executing on our multiple growth plan strategy with our usual discipline. With that, I’ll pass it over to Patrick.

Patrick Bouie, CFO, Dollarama: Thank you, Neil, and good morning, everyone. In Q1, sales increased 8.2% compared to the same period last year, coming in at over 1,500,000,000.0. Same store sales grew 4.9%, consisting of 3.7 percent increase in the number of transactions and a 1.2% increase in average transaction size. That’s on top of 5.6% SSS in Q1 last year. Looking at SSS trends through the quarter, there was a fair amount of noise during the months of February and March with SSS then picking up through April.

A lot of uncertainty remains that could continue to impact consumer confidence over the coming months and with the continued normalization of SSS trend, our full year guidance remains unchanged at between 34% SSS. Also note that we are lapping a fifty three week year. As a result, we expect a negative impact in Q4 as the prior year’s Q4 included Halloween sales. This is similar to fiscal twenty twenty, the last time we lapped a fifty three week year. Q1 gross margin was 44.2 of sales compared to 43.2% in Q1 of fiscal twenty twenty five.

The improvement primarily reflects lower logistics costs. We are also seeing lower inventory shrink, notably due to our loss prevention initiatives. Our annual guidance range for gross margin of between forty four point two percent and forty five point two percent of sales remains unchanged. We expect further positive momentum in our logistics operations, which may be offset by headwind pressure compared to last year, notably from continuing mix shift FX and shipping rates. SG and A represented 15.3 of sales in Q1 compared to 15.4% of sales for the first quarter of fiscal twenty twenty five with better labor productivity.

This was partially offset by higher store expenses and we absorbed costs related to the TRS transaction. Guidance expectation for SG and A as a percentage of sales of 14.2% to 14.7% for fiscal twenty twenty six remain unchanged. EBITDA was CAD496.2 million, dollars representing an EBITDA margin of 32.6% for Q1. This is compared to $417,700,000 and a margin of 29.7% in Q1 last year. It’s important to note that this quarter, we recorded a $10,400,000 unrealized gain relating to the derivative on our equity accounted investment in Dollarcity.

This is purely an accounting impact as a result of the fair value adjustment on the Dollarcity call option, which is likely to fluctuate over time. Excluding the gain this quarter, EBITDA came in at $485,800,000 and the EBITDA margin at 31.9%, which is more reflective of our actual profitability this quarter. Diluted net earnings per share increased by 27.3% to $0.98 in the first quarter of fiscal twenty twenty six. The impact of the unrealized gain represents $03 of Q1 EPS. Our share of Dollarcity’s net earnings amounted to $40,300,000 compared to $22,100,000 This increase is primarily attributable to strong operational performance in our increased equity stake since June of last year.

Now on to capital allocation. There were no buybacks in Q1 due in part to our shortest quarterly buyback window coinciding with heightened market uncertainty and upcoming capital needs. We intend to continue allocating a significant portion of cash towards NCIB through the remainder of the year in line with our balanced capital allocation strategy. We also announced today that the Board approved a quarterly cash dividend of $0.01 $0.58 per share. Our CapEx range for fiscal twenty twenty six has been updated to include estimated spend on the logistics hub in Western Canada this year, based on the anticipated timing of certain expenditures.

It is now in the range of two eighty five million dollars to $330,000,000 Year to date expenditures related to the project have not been material. As a result of this shift, we expect capital outlay for this project to be more concentrated in fiscal twenty twenty seven. Timeline to commissioning by the end of calendar 2027 remains unchanged. In conclusion, we are pleased with our Q1 performance in the context of a complex environment and while SSS continues to normalize. We remain attentive to continued tariff related and broader economic uncertainty and its potential impacts on the future path of consumer sentiment.

As always, we will stay focused on delivering compelling value for customers and strong execution across the business to the benefit of our shareholders. With that, I will now turn the call back to the operator for Q and A.

Conference Call Operator: Thank Our question comes from the line of Irene Nattel with RBC Capital Markets. Your line is now open.

Irene Nattel, Analyst, RBC Capital Markets: Thanks and good morning. Neil, if we could start by talking a little bit about the consumer spending backdrop. It sounds as though maybe a discontinuation of consumers buying at need but when the need is there, they’re buying. Can you give us any color on category performance timing and that sort of thing? And that helps frame the guide for F twenty six.

Neil Rossi, President and CEO, Dollarama: There aren’t any particular categories that stand out other than the consumable category. Consumables continue to be strong for us in the context that we’re operating in. And of course, Easter was considerably better than last year, which helped. But overall, I would say that the market is fairly stable from the perspective of mix relative to the last quarter.

Irene Nattel, Analyst, RBC Capital Markets: That’s helpful. Thank you. And can you make any commentary about what we’re seeing sort of Q1 to date recognizing that May was not very good weather wise?

Patrick Bouie, CFO, Dollarama: I mean, it’s still early Irene. I mean, May was tough from a weather perspective. But again, the performance of Q2 will be dictated by the next few weeks. Too early to tell. Pray for sunshine.

Irene Nattel, Analyst, RBC Capital Markets: Well, it’s sunny outside now, Neil, so yay. And it looks like it’s not gonna rain on the Grand Prix for once, which is great. And then just a question if I might on Mexico. It sounds as though you you used the word imminent. Can you talk through sort of what sort of the quote unquote proof of concept will look like in Mexico?

How we should be thinking about number of stores and sort of results over the next, twelve to twenty four months in that region?

Neil Rossi, President and CEO, Dollarama: The truth is you should be thinking about Mexico like we’re thinking about Mexico, which is we haven’t got a store open yet. In the next few weeks to month plus, we’ll have a store open, and we’ll have our true sense of how Mexicans in that area, at the very least, like our offering. The market’s a more competitive environment than the last four countries, I would say. But we think we bring an assortment and a value that’s differentiated like it is in our other markets. And so truthfully, we’re super excited, just like you guys are, to see how the Mexican stores do.

And if they do well, the exciting part, of course, is somewhat like Colombia, but even more so, it’s a significantly large market and, you know, has a much longer runway to its lifespan of store openings. So we’re excited about that.

Irene Nattel, Analyst, RBC Capital Markets: Thank you. And then just one last question on Mexico. Are you making any are you planning to make any significant changes to to the mix in Mexico relative to the other countries in LatAm?

Neil Rossi, President and CEO, Dollarama: No, each of the countries that we operate in has a domestic offering, which generally tends to be in health and beauty cleaning products and food for the very limited selection of food that we offer in our stores. And that will be the same case for the domestic offering in Mexico. As always, we try to support the domestic manufacturers as much as we can.

Conference Call Operator: Thank you. Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open.

Brian Morrison, Analyst, TD Cowen: Thanks very much. So probably for Patrick, Dollarcity sales are up 13% and net income up 52%. Looking at but if we look at store growth, it was up higher than your sales, so 17%. So can you touch on the details to the extent possible what that means for same store sales growth and leverage? Like I assume same store sales was positive.

And then is there something to call out on scale or normal increments on or is this just normal increments on warehousing DNA and SG and A?

Patrick Bouie, CFO, Dollarama: So on SSS, obviously SSS was positive. So I’m just confirming that. If there’s a difference with the unit growth and sales growth, simply because you need to take into factor the timing of the store openings, but also there’s a ramp up period to the stores. But SSS was positive. With respect to scaling, I mean, it’s a business that is growing at a heightened pace.

We’re fairly new in Colombia and Peru, and we’re seeing great progress in those countries. And so as a business is scaling, we see every cost line item scaling, whether you think of gross margins, there’s fixed logistics costs in there that could scale, and obviously, SG and A. So that explains your high leverage as you go down the P and L.

Brian Morrison, Analyst, TD Cowen: Okay, thank you. And then Neil, you had your major spring buying trip between last quarter and this and curious if you’ve seen any beneficial pricing from your Chinese vendors based upon your vendor overlap with US dollar stores and the imports they face or the tariffs they face on their imports?

Neil Rossi, President and CEO, Dollarama: So when we were there in April, the vendors were reticent to pass on any discounts or to sell any of the goods that were being held for their American customers. They were waiting to see, what would happen and possibly change with, US policies that they were right to do so because US policies changed. And in the end, they shipped their goods and it was pretty much back to business as usual. So, you know, at the very beginning, when there was some hesitation and orders weren’t going out, we were able to negotiate some advantage on some FOBs. But overall, I would tell you it was short lived and not consequential.

John Zamparo, Analyst, Scotiabank: Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Chris Lee with Desjardins. Your line is now open.

Chris Lee, Analyst, Desjardins: Hi, good morning everyone. My question, maybe going back to same store sales during the quarter. I noticed that the basket size or the average transaction turned positive during the quarter. Wondering if you can provide some colors in terms of what drove that. Was that a mix of pricing and also high unit volumes?

Patrick Bouie, CFO, Dollarama: Thanks for the question, Chris. Know, we don’t manage the business, you know, basket versus traffic. I mean, what’s important to us is the overall SSS. And as you know, basket and traffic generally have opposing effects. But certainly this quarter with a stronger Easter than last year, it was certainly helpful on the basket size in dollar terms.

Chris Lee, Analyst, Desjardins: Got it. Okay, that’s helpful. And then my follow-up question, maybe going back to the very strong gross margin performance. I know Patrick, you gave some helpful colors as to what drove it. Yeah, was wondering, did lower logistics cost, can you maybe deep dive a little bit in terms of what’s happening there and how sustainable is that benefit for the rest of the year?

You mentioned that will continue to be a bit of a tailwind through the year.

Patrick Bouie, CFO, Dollarama: Yeah, I would say it’s a host of initiatives that have improved the planning and the balancing of volumes going through our warehouse in DC. And it’s something that we’ve been working for the past few quarters. So those gains, will continue to benefit from that until actually lap those stronger quarters. So we do expect some benefits as we move forward in the year. But like I said in my prepared remarks, there’s also counterbalancing elements.

I talked about continued mix shift and FX and shipping rates that could counterbalance those gains.

Chris Lee, Analyst, Desjardins: Okay, thanks. I’ll get back to the queue. All the best.

Conference Call Operator: Thank you. Our next question comes from the line of Tami Chen with BMO Capital Markets. Your line is now open.

Tami Chen, Analyst, BMO Capital Markets: Hi, good morning. Thanks for the question. I wanted to go back to the SSS trend through this quarter. So February sounded a bit softer, March kind of like that too, and you said it really picked up in April. And I’m just curious from what you could at least see.

I mean, why do you think that is? Was February, March just a bit of a blip because of the tariff rhetoric escalating? And do you feel now we’re kind of through that on how consumer sentiment and behavior is, and it’s a lot more stable now?

Patrick Bouie, CFO, Dollarama: Yeah, we still think the consumer is overall fragile. I mean, when you go back to February and March, we all saw the data on consumer confidence and it was at an all time low. So that might have had an impact on consumers willingness to spend. But as we move through the quarter, we did see a resilient consumer in the back half, which led to better performing user sales as compared to last year. But we do want to highlight that, we do sense the consumer being fragile and with all the uncertainty in the market, very hard to see how that will evolve.

Tami Chen, Analyst, BMO Capital Markets: I see, okay, got it. And two quick ones on Dollarcity is in Mexico, I’m actually curious how you’re thinking about that country over the next couple of quarters. I know you’re currently not in there yet, new stores coming imminently. We’re seeing some on the macro backdrop for Mexico a bit soft. So don’t know if you agree with that or if that in any way impacts how you’re thinking about cadence of launching the store openings and the offering you’re thinking of having there.

Patrick Bouie, CFO, Dollarama: No, it doesn’t change anything. I mean, we’re staying the course. And when we enter a country, we’re thinking about the very long term and therefore, periodic changes doesn’t impact how we’re thinking about it. So you’re correct in saying that, our store openings are imminent. And we hope to open a handful of stores in year one, assess how that’s going and determine at that point, whether we want to ramp up the store openings in the country.

Tami Chen, Analyst, BMO Capital Markets: And my last one is for the existing Dollarcity business. So it was about 12 new stores this quarter. So little slower than recently. When you think about your full year plans for those existing four countries, should we think that they’ll accelerate in the coming quarters and that will be more back half loaded? Thank you.

Patrick Bouie, CFO, Dollarama: I mean, we don’t provide annual guidance on store openings Dollarcity. As you know, opening real estate can be lumpy from time to time. And therefore, I wouldn’t read too much into that.

Tami Chen, Analyst, BMO Capital Markets: Okay, thank you.

Conference Call Operator: Thank you. Our next question comes from the line of John Zamparo with Scotiabank. Your line is now open.

John Zamparo, Analyst, Scotiabank: Thank you very much. Good morning. I wanted to ask about SG and A. And in particular, you mentioned lower labor costs as a favorable driver. I wonder if you can elaborate a bit on this just because presumably you’re seeing some increase in wages.

So it seems like that implies a meaningful reduction in labor hours, I wonder where that’s coming from, if you could talk about some of your broader initiatives to reduce labor hours.

Patrick Bouie, CFO, Dollarama: Yeah, so we’re really referring to the comparison to last year, where last year, you know, we injected additional hours for some specific add off replenishment projects, which we didn’t have to do this year. So that’s what we were really referring to, John.

John Zamparo, Analyst, Scotiabank: Understood. And then secondly, on the traffic number, this continues to be relatively robust. I wonder what level of insight do you have on are you gaining new customers or are you seeing existing customers frequent more often? Just what level of visibility you have on that?

Patrick Bouie, CFO, Dollarama: We’d love to know, John, but as you know, we don’t have data specifically on the consumer, the data that we have is on our products and the throughput of those products, but we don’t have full visibility on our actual consumers.

John Zamparo, Analyst, Scotiabank: Okay, fair enough. If I could sneak in a modeling one, can you share what the transaction costs were from reject shop in the quarter?

Patrick Bouie, CFO, Dollarama: We don’t disclose it, but you could assume that it’s standard for an M and A transaction.

John Zamparo, Analyst, Scotiabank: Understood. Okay, I’ll pass it on. Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Mark Petrie with CIBC. Your line is now open.

Mark Petrie, Analyst, CIBC: Hey, good morning. Thank you. I just wanted to follow-up more a bit on the gross margin and specific to Q1, did sales mix net out to a positive or a negative? Consumables are obviously lower margin and continue to lead the growth, but seasonal was also better than last year. So was sales mix a headwind or a tailwind in Q1?

Patrick Bouie, CFO, Dollarama: It was actually neutral in Q1. I mean, you know, we call out consumables performing well, but we also called out seasonal performing better than last year. So actually both essentially neutralized the impact on gross margin.

Mark Petrie, Analyst, CIBC: Okay, great. Thank you. And then, I guess just with regards to the outlook, you highlight sales mix as sort of the of a few factors that could potentially present some challenges to gross margin throughout the balance of the year, because I think the guidance, even at the top end, essentially implies flat year over year for the balance of the year. I’m just trying to understand that a little bit more and is that essentially caution on the performance of or how you think seasonal demand could evolve just given consumer uncertainty?

Patrick Bouie, CFO, Dollarama: I think it reflects the fact that we see more negative headwinds than positives. There’s still a fair amount of uncertainty when it comes to how the mix is going to evolve. Is it going to continue in this direction or not? You know, even though we’re hedged on an FX perspective, and we have long term contracts on the shipping side, you know, heightened spikes and movements over time could have an impact on our overall gross margin. So it’s a reflection of a fair amount of unknowns and high volatility in this current context.

Mark Petrie, Analyst, CIBC: Okay, got it. And just following up, think it was Brian was asking about Dollarcity same store sales trajectory, and actually the sort of pace of ramp up. I’m just curious, does the pace of ramp up today look different than the pace of ramp up maybe three years ago?

Patrick Bouie, CFO, Dollarama: Sorry, you’re talking about all the coronavirus you’re not Yeah, yeah, yeah. I wouldn’t, I don’t see any different trends in terms of ramp up, it’s really been the same, you know, as we go, frankly.

Mark Petrie, Analyst, CIBC: Yeah, okay. And then just sort of last one, I know this is small, but just curious, the decision to exit the sale of case goods for the website, I’m assuming that’s just related to sort of demand, but maybe just confirm that. And then what kind of savings would you expect in terms of your supply chain?

Neil Rossi, President and CEO, Dollarama: So the costs of the entire infrastructure were minimal, so I expect nothing to be hitting the bottom line in any way that you’ll see. But the reason we did what we did was once we started to offer our goods through parties by the unit, the volume, which was really concentrated as a service to our customers that wanted to buy by the case, went down even further. And with all of the other projects that we’re focused on, and the fact that we have the entire infrastructure now, and if we ever had to put it back up for any reason, God forbid, another COVID, it could be up within a week. And so, you know, I wanted that functionality, we have that functionality. At the moment, it wasn’t a functionality worth, you know, maintaining.

So we took it down because our customers are serviced through our party platforms for online shopping or e com shopping, and I want the team focused on Mexico and Australia and all the other exciting things, the Calgary warehouse, etcetera.

Mark Petrie, Analyst, CIBC: So that’s mostly the reason. Yep. Understood. Makes sense. Thanks, and all the best.

Neil Rossi, President and CEO, Dollarama: Thank you.

Conference Call Operator: Our next question comes from the line of Vishal Shreedhar with National Bank Financial. Your line is now open.

John Zamparo, Analyst, Scotiabank: Hi, thanks for taking my questions. Can you comment on D and A and what may have drove a lower D and A at least versus our expectations? Was there an assessment to review the depreciation lives of your assets and how should we think about that going forward?

Patrick Bouie, CFO, Dollarama: Yes, so we do highlight that in our MD and A, we did have a modification with respect to the useful life of certain assets. So on an annual basis, we always reassess accounting policies to ensure that they’re still appropriate. As such, we updated the, like I said, the estimated useful life of certain class, certain classes of assets based on the current use of such assets.

John Zamparo, Analyst, Scotiabank: Okay, thank you for that. And thinking about the Mexico startup and the 10,000,000 to $20,000,000 losses, how much of that was in Q1 and how should we think about that through the year?

Patrick Bouie, CFO, Dollarama: So there’s a ramp up of those costs throughout the year, I would say in Q1, was fairly minimal. But we do expect it to ramp up in the next few quarters.

John Zamparo, Analyst, Scotiabank: Okay, and can you comment on inflation in your basket and at least how that’s trending?

Patrick Bouie, CFO, Dollarama: We unfortunately, we actually don’t comment on the pricing aspect or the inflation within our basket that Michelle is as you would know.

John Zamparo, Analyst, Scotiabank: Okay, and maybe squeezing a quick one here. Easter was stronger. I’m going to say better than expected. You can correct me if I’m wrong, but was that due to overall market strength? Or was that due to your merchandising approach this year?

Patrick Bouie, CFO, Dollarama: I wouldn’t comment on whether it was better than we expected. I think what we’re commenting on is, if recall last year, you know, it was a fairly weaker, even weaker environment. But also, remember last year that because of the calendar Easter was at the March, and this year, Easter was on April 20. So we did benefit from additional sales days. So I would put more emphasis on that.

John Zamparo, Analyst, Scotiabank: I feel the timing benefit. Okay, thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open.

Edward Kelly, Analyst, Wells Fargo: Hi, good morning and nice quarter. Starting off question on pricing and how you’re thinking about pricing for the year given some of the puts and takes including, you know, the fragile consumer that you talked about, I’m curious as if there’s any temptation to sort of play offense from a pricing perspective, and maybe look to accelerate some share gain.

Patrick Bouie, CFO, Dollarama: No, not at all, actually, you know, as you know, our strategy is always, you know, a price follower strategy and we’ll, you know, we’ll, you know, go with what the rest of the market does. And but there’s no direct thought in terms of, you know, changing our pricing strategy to, you know, gain market share.

John Zamparo, Analyst, Scotiabank: Okay, I I want to ask

Edward Kelly, Analyst, Wells Fargo: you about traffic. Historically, Dollarama’s comp has been driven a bit more by basket than traffic. But the last few years, traffic’s been very strong, obviously, including this quarter where you’re lapping a multi year hard to compare. Do you think anything’s changed with the business? Is this trade down, value seeking consumer behavior?

Just curious as to how you’re thinking about the drivers of traffic and the sustainability of what you’re seeing there.

Patrick Bouie, CFO, Dollarama: Yeah, so we actually were pleased with, you know, more Canadians coming into our stores and buying more units. So we think that’s a positive sign. Now, the pandemic and coming out of the pandemic was certainly helpful in the sense that not only the consumers were looking for best value and we were there for Canadians, but also helping other demographics of Canadian population also discover the Dollarama value proposition. So we’ve said, and this is many quarters ago, but we’ve also been able to increase our appeal to higher income Canadians as well.

Edward Kelly, Analyst, Wells Fargo: And just one quick follow-up on the startup costs on Mexico. When do you think those costs, you know, sort of peak? And then, you know, how quickly do you think you can start to recapture that, you know, as we think about, you know, the out year?

Patrick Bouie, CFO, Dollarama: So we did highlight on the prior call is, you know, we’re ramping up from scratch. So we need to be patient with the moment that we will start hitting an inflection point. Now, certainly, we do see losses this year, next year, and it may be losses for, you know, a year before we even think about breaking even. So, know, I’ll reiterate that we need to be patient with when and if this business will reverse losses that we’re currently in recording, sorry.

Edward Kelly, Analyst, Wells Fargo: Great, thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Martin Landry with Stifel. Your line is now open.

Neil Rossi, President and CEO, Dollarama0: Hey, good morning. Congrats on your results. Lots of my questions have been answered. Maybe looking back at your large investment coming up in Calgary, is there a I would assume there’s going to be some cost savings on transportations that you’re going to realize. You know, could you help us maybe frame a little bit, you know, in terms of savings and efficiencies, what you could expect when the project is going to be fully up and running?

Patrick Bouie, CFO, Dollarama: Yeah, so I would go back to some comments we made in prior quarters. You know, we proceeded with this project, obviously, for some operational considerations, but also from a return of capital perspective. And so when you think about this project as being a 500,000,000 CapEx project, we were able to see a good and acceptable return on this specific project, which mostly stems from savings on the transportation side.

Neil Rossi, President and CEO, Dollarama0: Perfect. Thank you. And maybe on a lighter note, Neil, did you stuck up on your Canada flags for the upcoming Canada Day birthday?

Neil Rossi, President and CEO, Dollarama: I think we should be in good shape for St. Jean and for Canada Day. I’m excited for both.

Neil Rossi, President and CEO, Dollarama0: Good to hear. Thank you.

John Zamparo, Analyst, Scotiabank: Thank you.

Conference Call Operator: Our next question comes from the line of Luke Hannon with Canaccord Genuity. Your line is now open.

Edward Kelly, Analyst, Wells Fargo: Thanks. Good morning. I wanted to ask about loss prevention or shrink initiatives. Patrick, you mentioned that that was a tailwind during the quarter though, I mean, probably lower in magnitude than the lower logistics costs. But can you just frame up for us sort of where shrink is as of now and whether or not you have any more initiatives planned or how well rolled out rather those initiatives are at this point and whether we should expect more as far as lower shrink in quarters to come?

Patrick Bouie, CFO, Dollarama: Look, we certainly have been seeing a notion of plateauing with respect to the shrink figures. And what we’ve seen this quarter is a slight decrease in shrink. So we think it’s a little early to determine that it’s a lasting trend. Now, certainly, we’ve been as a management team focused on implementing initiatives that go to combat shrink. I mean, we’ve talked about optimization self checkouts in our stores, we’ve talked about merchandising strategies.

But all of this, we think is bearing fruits. And it’s very hard to say, the direction of shrink in the future, we certainly all hope for lower figures with respect to shrink in the future. But again, hard to say at this point.

Edward Kelly, Analyst, Wells Fargo: Okay, thanks. And then for a follow-up here on capital allocation, I know in the past that there’s been this consideration of the earnings yields of your shares versus the after tax cost of debt when it comes to either buying back shares or paying down debt. And I appreciate the commentary that you have out there that you will resume share buybacks for the rest of the year and you intend to be active there. But I mean, is it still the thinking of you guys going forward that you’ll always keep that in the back of your mind? Or is the point or are you at this point now where you’re generating plenty of cash between your Canadian operations lot in and then soon to be TRS that you should be able to sort of have your cake and eat it to there?

Patrick Bouie, CFO, Dollarama: Yeah, Luke, I mean, you know, I’d say it’s a combination of all the above. I mean, certainly, that rule of thumb is something we have as a KPI in the back of our minds, but it’s I would say it’s one of many that come into the decision of deploying cash for share buyback.

Edward Kelly, Analyst, Wells Fargo: Okay, appreciate it. Thanks.

Conference Call Operator: Thank you. Our next question comes from the line of Cory Tarlow with Jefferies. Your line is now open.

John Zamparo, Analyst, Scotiabank: Great. Thanks and good morning. I had a question on new store returns within the context of the fact that you’re accelerating your new store openings for the year. Could you provide us a little bit more color on what the returns look like and what you’re expecting for this year given the acceleration in trend and perhaps maybe some historical context as well in terms of what the these returns used to look like? That’d be helpful.

Thank you.

Patrick Bouie, CFO, Dollarama: Sure, so the guiding light when it comes to store openings is really the payback, the period of payback for the stores. And we publicly disclose that we’re at approximately a two year payback on average for all our stores. And so when we look at and build business cases for new stores, that’s the guiding light, really. Certainly, if you look in the history of Dollarama, that figure has come down and today, are around that two year average payback.

John Zamparo, Analyst, Scotiabank: Understood. And then, Patrick, did you quantify the fifty third week? Apologies if I missed it.

Patrick Bouie, CFO, Dollarama: We did not, but from a SSS perspective, has no impact. Think what I raised in our prepared remarks is, please have a look at fiscal twenty twenty. That was the last time we left a fifty three week year. It’s not so much the additional week that has an impact, but it actually shifts days that are composed in every quarter. So it’s a little bit hard to explain over a conference call, but if you have a look at that calendar and what happened back in fiscal twenty twenty, you’ll have a better sense of it.

John Zamparo, Analyst, Scotiabank: Okay, thank you very much and best of luck.

Conference Call Operator: Thank you. Our next question comes from the line of Matthew Rothway with UBS. Your line is now open.

Neil Rossi, President and CEO, Dollarama1: Hi, this is Matthew Rothway on for Mark Carden. Thanks for taking our question. I was wondering what component of your gross margin improvement was driven by fixed cost leverage. And if so, you know, is there a certain comp level where you tend to see that leverage?

Patrick Bouie, CFO, Dollarama: Really, the component that we saw leverage in our gross margins is really all the cost of bringing the product to the stores. So it’s really the logistics costs. So think about, warehouse operations, DC operations and transportation of it. And so there’s a lot of fixed costs in there. And as you grow scale as you have you know, strong SSS, will those line items scale fairly quickly?

Neil Rossi, President and CEO, Dollarama1: Great, any any comment on kind of what level of comp you tend to see that at?

Patrick Bouie, CFO, Dollarama: Actually, we don’t, not really, we don’t I don’t I don’t have a rule of thumb for that. Really.

Neil Rossi, President and CEO, Dollarama1: Fair enough. Moving to your comp performance, any notable differences among the provinces as to strength there?

Patrick Bouie, CFO, Dollarama: No, not nothing that that stood out really. It was pretty still for the moment pretty uniform across the country.

Neil Rossi, President and CEO, Dollarama1: Great. Then last question. As it relates to same store sales growth in Dollar City, I know you’ve mentioned that they were normalizing much like in Canada. Is that still the case? Any notable gaps between SSS down there and Canada?

Patrick Bouie, CFO, Dollarama: No, actually, this quarter was another quarter where, you know, the trends were very similar to what we’re seeing here in Canada.

Edward Kelly, Analyst, Wells Fargo: Great, thank you.

Patrick Bouie, CFO, Dollarama: Sure.

Conference Call Operator: Thank you. This concludes the Q and A session. Thank you all for your participation on today’s call. This does conclude today’s conference call. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.