Good morning, and welcome to Dollarama Fiscal 2025 Q2 Results Conference Call. Neil Rossy, President and CEO, and Patrick Bui, 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 discussion and analysis are available at dollarama.com in the Investor Relations section, as well as on SEDAR+. Before we start, I have been asked by Dollarama to read the following message regarding forward-looking statements. Dollarama's remarks today may contain forward-looking statements about its current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. 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 any assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A, dated September eleventh, 2024, available on SEDAR+. Forward-looking statements represent management's expectations as at September 11th, 2024, and except as may be required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. I would now like to turn the conference call over to Neil Rossy. Thank you, operator, and good morning, everyone. This morning, we reported strong Q2 fiscal 2025 results across our key performance indicators, translating into an EPS of CAD 1.2. Same-store sales grew by 4.7% in Q2 as they continued to normalize as anticipated. This is an impressive result when stacked up against the 15.5% SSS growth in the same period last year and given the cautious consumer spending backdrop. In Q2, demand for consumable products, which are primarily comprised of everyday essentials, drove the bulk of the increase in same-store sales. General merchandise sales remained stable, while seasonal products were softer. This is consistent with prior quarters. Customers continue to seek out everyday essentials and deploy their discretionary spending prudently in the current economic environment. Our strong results in this context reinforce the fact that Canadian consumers recognize and consistently rely on our convenience and compelling value. The breadth of our offering across consumables, general merchandise, and seasonal is allowing us to meet the current and evolving needs of the Canadian consumer at any given time. Our traffic trends, quarter after quarter, confirm that our work is hitting the mark. Turning to LATAM. During their Q2, Dollarcity opened 23 net new stores, compared to 10 in the same period last year. This brings their total store count as at June thirtieth to 570 stores, with 338 locations in Colombia, 101 in Guatemala, 74 in El Salvador, and 57 in Peru. Dollarcity's pace of new store openings and increasing earnings contribution reflects the strong consumer response in these markets and the team's disciplined execution of our long-term growth plans in our current countries of operation. In parallel, the team is also actively working on our plans to enter Mexico by 2026, as announced last quarter, along with our increased ownership stake. While it is still early days for Mexico, our work on this front is progressing well and on plan. As we look to the H2 of the year, our team will continue to work diligently to keep delivering convenience and great value to all Canadian consumers. We remain focused on our product offering while staying true to our price follower philosophy. Our aim is to provide customers with a broad selection of compelling everyday and seasonal products at the best relative value in all departments and with a consistent shopping experience. With that, I'll pass it over to Patrick. Thank you, Neil, and good morning, everyone. Let's start with an overview of our KPIs for Q2 of fiscal 2025. Sales increased by 7.4% after Q2 of fiscal 2024, coming in at nearly CAD 1.6 billion, while same-store sales grew 4.7% for an impressive two-year stack of 20.2% SSS growth. Looking at our sales mix, we continued to experience strong demand for consumable products, while seasonal sales experienced softer demand, impacted by unfavorable weather in many parts of the country, particularly during the key spring and early summer season, and a cautious consumer. Same-store sales consisted of a 7% increase in the number of transactions and a 2.2% decrease in basket size. Our strong traffic reflects the underlying strength of our value proposition and all around product offering. We continue to be comfortable with our previously disclosed SSS guidance range of between 3.5% and 4.5% for the full fiscal year, which implies a continued normalization in SSS growth through the H2. This range remains an appropriate target, given the strong comps we will continue to face and the cautious consumer backdrop. Looking at Q3, also note that two historically key Halloween sales days will fall to Q4, which should skew SSS in favor of Q4. Gross margin came in at 45.2%, compared to 43.9% in Q2 of fiscal 2024. The increase is mainly driven by more favorable contracted shipping rates and lower logistics costs. Full year guidance remains between 44% and 45%, with higher logistics costs expected in the H2 of the year compared to the same period last year. SG&A, as a percentage of sales, remained flat compared to Q2 last year at 13.6%, despite an increase in store labor and operating costs. We continue to actively work on offsetting these costs through ongoing efficiency and labor productivity initiatives, but expect more pressure in the H2 of the year. Annual guidance for SG&A remains unchanged at between 14.5% to 15% of sales. With respect to Dollarcity, their net earnings contribution for the quarter almost doubled compared to the same quarter last year to CAD 22.7 million. This was a transition quarter for our increase in ownership stake from 50.1% to 60.1%, which occurred towards the end of this reporting period. Their Q3 contribution will fully reflect our increased ownership stake. With a solid KPI performance across the board, Dollarama's Q2 EBITDA increased by 14.7% to CAD 524.3 million, and EPS increased by 18.6% to CAD 1.02 per share. Turning to capital allocation, on the NCIB front, we remained active in Q2 with the repurchase of over 2.1 million common shares for cancellation for a total consideration of CAD 263.1 million. This excludes the tax on share repurchases enacted during the Q2. The board also approved a quarterly cash dividend of CAD 0.072 per share. Our Q2 and year-to-date performance once again proves the resilience of our robust business model and the enduring relevance of our value proposition to consumers, both across geographies and through any type of macroeconomic environment. Our focus, as ever, is on continuing to deliver convenience and the best relative value we can for our customers. With that, I'll now turn the call back to the operator for Q&A. Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Irene Nattel with RBC Capital Markets. Your line is now open. Thanks, and good morning, everyone. I was wondering if you could just please spend a few minutes talking in a little bit more detail about what you're seeing in terms of consumer spending. You did call out the weather, you called out consumables, but you know, what did you see as the quarter evolved and as the weather showed up? Can you give us any color on, for example, early back to school, and how we should be thinking about spending trends in the back half of the year? So, good morning, Irene. I hope you're doing well. The summer sales started very soft. Weather across the country was terrible, which of course negatively impacted all retailers. The weather got slightly better towards the end of the summer, and our sales certainly increased, but not enough to make up for the season's horrible start. As far as back-to-school sales, for us, back to school is a very, very small season. And I would say broadly, sales were in line with our expectations. It's too early to draw any conclusions or trends for Halloween. So, you know, other than that, general merch stable as a whole, and I think that covers it. That's very helpful. Thank you. And are you seeing any change whatsoever in the competitive dynamic in terms of perhaps other players trying to sort of drive traffic by playing in your sandbox a little bit more? Generally, no. I think everybody considers each. All retailers in Canada, you know, are realistic about the fact that everyone is everyone's competition on any given item or category. And so we all need to be aware of our relative values, and we all have, you know, a different story to tell. Ours being, you know, one of relative value, and maybe less one of assortment, size, or you know, certain categories that we don't play in. But, I think that, generally, the market in Canada is fairly stable with regards to, who's come into the market. Loblaws, of course, introduced a new concept in a single store so far and announced that they'll have three stores across the country, that they're testing the concept out in low-cost food. And as we've said many times, you know, we're not in the grocery business, it's just one small part of our store. But we will keep an eye on all retailers, like all retailers keep an eye on us, to make sure that, you know, we're competitive, we understand what's out there. That's very helpful. Thank you. I'll get back into the queue. Thank you. Our next question comes from the line of Chris Li with Desjardins. Your line is open. Good morning, Neil and Patrick. Maybe I'll start with a question on gross margin. It was quite strong compared to our estimates. I guess two-part question. Can you elaborate a little bit more on sort of what drove the strong performance? Was there any sort of one-time factor? And then the second question is, on your opening remarks, you did say that you do expect margin to soften up a little bit in the back half, and just wondering if you can also elaborate on what you expect in the H2 in terms of softer margins. Thank you. Yeah, absolutely, Chris. So if you look at Q2, no, we can't point to any one time or anything like that. It, it, you know, as we said in our remarks, it's a function of, lower shipping costs, that, that we continue to see, this quarter and to be expected in future quarters, and also, improved productivity and lower costs on the logistics side. So we're very pleased with the 45.2% margin. That being said, you know, we also reiterated our guidance for the full year, so you're right. We do expect some headwinds in the H2, and it refers a lot to, timing. So, we do anticipate, for example, in Q3, needing to push more volume, through the system. So that is one of the reasons why we do see a little bit of pressure on gross margins in the H2. Gotcha. Okay. Well, that, that's helpful, and then, Patrick, maybe just if you are able to provide us with some indication on how Q3 same-store sales is trending so far. Is it still kind of above your full year range, or has it kind of now normalized towards that 3.5%-4.5% range? You know, you know, number one, obviously, you know, too early to say, but, you know what, what we are saying is, if you look at our performance year to date, so the first half of the year, you know, we're broadly at 5%, and we are reiterating today that the full year is 3.5%-4.5%. So that does imply a normalization for the H2, and so that's the color we're providing there. I mean, as far as the rest, in terms of traffic and consumer demand, I mean, it's continuing what we've seen in Q2. Okay, that's great. And my last question, just Neil, just because you brought up about sort of Loblaws, the box pilots. I was just wondering, can you share with us, just for you guys, roughly what percentage of your sales would be kind of in that overlap in terms of food? What percentage of your total retail sales? That's not information that we disclose, but certainly what makes Dollarama, Dollarama is a very wide assortment of different departments that somewhat represent the old five and dime, you know, local convenience store, and really, we focus on a wide variety of goods to attract people in for, you know, far more than just food. That's certainly not our focus. Okay. Thanks. I'll get back into the queue. All the best. Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open. Oh, thank you. Good morning. Question for Neil or Patrick. When I look at the exceptional growth at Dollarcity continuing, the build-out of your logistics in Colombia and El Salvador, it looks complete, and then the dividend you paid last year, it leads me to believe you're content with the Dollarcity balance sheet, and that barring any major CapEx outside of store growth, that it's throwing off substantial free cash flow. Excluding Mexico, would the financial position and cash flow comment be correct for LATAM? And then my follow-up question would be: Can you utilize the LATAM infrastructure to service the Mexico startup? And can we expect Dollarcity LATAM to evaluate a potential distribution of more capital similar to what we saw last year? Okay. I'll, I'll try to answer in two parts. One, there's a notion of leveraging infrastructure, and the second part is, balance sheet, and free cash flow. So, if I start with infrastructure, I mean, yes, you're correct in assuming that we will leverage infrastructure in existing countries. Frankly, that's how Dollarcity has always gone about it, so there's nothing different here. Certainly, when we enter a country, they will also rely on some third-party providers as we enter the country, and that's reassessed in time as Dollarcity gains critical mass in that new country. So that's on the first part. The second part, in terms of, you know, free cash flow and balance sheet, what I would say is, you know, just like Dollarama-... In time, you know, Dollarama started generating strong free cash flows and built a strong balance sheet, which led to a very clear and robust capital return structure and policy. And we are starting to see the same thing at Dollarcity, and so that will be assessed in the future, and see how Dollarcity can as well return capital to its shareholders. That, that's very detailed. Thanks, Patrick. And the second question I have, maybe for Neil, is there any reason to think that the LatAm new store growth shouldn't be linear? And the business model now is working in five countries. Mexico is a massive opportunity, but do you have the bandwidth to evaluate other geographies near term, or do resource constraints and getting Mexico correct push that ambition out? We're operating in four countries currently. Mexico will be the fifth. And we believe that the Mexico operations will be handled in the most part by the Dollarcity team. Obviously, the Dollarama team supports Dollarcity's team in the background on all fronts. But for the most part, the Mexican expansion will be handled by the Dollarcity team. And with regards to, you know, other expansion in other areas, that is the only expansion we plan to do on the Dollarcity front for the time being in Central and South America. And then with regards to the Dollarama front, across the balance of the world, we are always looking at other opportunities. No, we do not feel that the Mexico opportunity means that we cannot look at other opportunities, depending on where those opportunities are, how complex they are, and the scale of them. No, I don't think one precludes the other. Sorry, in terms of Dollarcity's new store growth being linear, I mean, you're trailing new store growth, like 112 stores now. I'm just curious on that front. Yeah, look, I mean, we've done. You look at the past two years, we've done 90+. You look at you know what the team over there has achieved in the last quarter, you know we should be around that number this year, and you know we do see lots of potential in the four countries' operations. That's why we increased our target last quarter, so we do believe that there's still ample opportunity in those countries to grow the business. I appreciate the detailed answers. Thank you. Our next question comes from the line of Tamy Chen with BMO Capital Markets. Your line is now open. Hi, good morning. Thanks for the question. My first one is coming back to Canada. So, the composition of your same-store sales, you know, three quarters of the basket is down. I believe historically, your algorithm is to grow the basket size. Can you talk about, in Canada right now, the current competitive landscape with respect to pricing? Do you find there's any change, or is it a bit more difficult than historically to implement the internal levers that you have for basket growth? No, we don't think that the market has changed in Canada. I think the Canadian market's always been sensitive to being competitive from one retailer to the other. And we've never been solely focused on any given driver of basket or traffic. It's a combination of both that makes us successful, and I think as long as we're sensitive to the combination of both being the right mix at any given time, we're happy with the performance. Okay. And my follow-up is on Dollarcity. I'm just wondering, I guess a two-part question here, is for the last number of quarters, I think you said the trends at the consumer level were very similar to Canada. Is that still fair to say, or are there some differences you're noticing now in the Dollarcity stores on the part of the consumer? And just thinking to your answer to the previous question on the cash flow generation, is it fair to say we're now at a point where in the existing four markets, Dollarcity is at this inflection point, where you're starting to get good operating leverage and margin expansion off the infrastructure that you've built there? Thanks. On the mix side, yes, we find that the trending in the four countries in Central and South America, as well as Canada, the consumer behavior is surprisingly similar in many, many ways. With regards to leveraging our infrastructure, obviously, some countries which have been around for longer than others, like El Salvador and Guatemala, we're able to leverage our infrastructure more at a greater level. In Colombia and in Peru, in particular, where we're newer to those markets, the evolution of our logistics and ability to leverage our infrastructure is still growing. Thank you. Thank you. Our next question comes from the line of Mark Petrie with CIBC. Your line is now open. ... Yeah, good morning. Just to follow up, I guess, on the whole sort of assortment sales shift, you know, between different categories and the sort of performance there. I'm curious just with regards to pricing, and, you know, slower inflation, clearly, is that relatively consistent across across the different categories? Yes, it is. It's very consistent across the categories, actually. Okay. And does this sort of shift in sales mix, does that affect at all how you think about your assortment heading into Halloween and Christmas? You know, seasonal being slower. Not really. For one, you can't change the fact that your seasonal is bought almost a year out anyways. So that's, you know, that's all committed way in advance. The reality is that, you know, this has happened many times over the years. It's a normal cycle. When people feel squeezed, they tend to shy away from discretionary, focus on the basics, and when people are feeling, you know, good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary. So, you know, there's a cycle that looks that way and tells that story many times over my career, and at this point in time, we're at a point where people are more focused on basics and less on discretionary. Yeah, understood. Okay. And you know, in that context, like, you know, this is a particularly strong gross margin performance in this quarter. And I know, Patrick, you called out the impact of freight and logistics, but would you say that you're pleased with the balance you're striking with regards to sort of sales momentum and then the pricing and margin realization? Are the Q2 results in line with sort of how you wanna prioritize the balance between those two things? I mean, that's a great question. I mean, if I look at our Q2 results, the improvement in gross margin is mostly a function of things that we control, right? When you think of productivity in terms of logistics. So that part is always something we look to improve. In the same way, our shipping costs, you know, we always try to enter into favorable contracts. So that part, we always try to increase our margins from that perspective, and that's what you're seeing this quarter. That being said, there is a good balance when you look at the sales level and the margin of the product itself, and making sure that we continue delivering the best relative value to consumers. So on that single piece, it's not a function of maximizing that piece. However, on the two other pieces, it's things that we always constantly look to improve. Okay. Yeah, understood. And one more, if I could. Just... Can you just remind us when you start to lock in your ocean freight costs for 2025? Ocean freight. It's not a consistent thing I can answer, because at certain periods, ocean freight could be locked in for two years plus. At other times, when ocean freight is much more, let's say, erratic, we tend to not be booking in for as long. Also, it's a function of how interested ocean freight companies are in locking in at any given time, but for the moment, we're looking at about a two-year horizon. Okay, so you are locked in on your freight costs for 2026 on some basis? On some basis. On an above average basis or typical basis, or, I mean, something, Neil, something? We can't answer that. Look, I mean, obviously, I guess your underlying question is when you look at spot rates, they're, you know, higher than usual. I mean, like Neil said, we're not subject to spot rates. And frankly, whatever the, you know, the rates are, I mean, shipping costs are a component in the overall price of our product. So, you know, we manage, we manage around that, around that mark. Yeah, understood. Okay, thanks, guys, appreciate it. All the best. Thank you. Thank you. Our next question comes from the line of John Zamparo with Scotiabank. Your line is now open. Thank you, good morning. I wanted to ask a bigger picture question, particularly on customer composition, and I wonder, given the resilience of the traffic numbers that you're generating, do you get a sense that you're gaining new types of customers in this environment, specifically higher income ones, and I wonder what internal data you might have on that front that you're willing to share. Unfortunately, we don't have anything to share on that front. We don't disclose that information, but I would tell you again, much like the consumer who spends more on discretionary when times are good and more on basics when times are bad, it's also natural that when the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally, or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods. Well, you know, when times are tougher, they'll consider the extra, you know, five minutes to go to the store next door. And so I do think, when times are tougher, consumers tend to be willing to spend a little more time going to lower cost alternatives that they don't necessarily have to, when times are better. And that's particularly the case for people with higher income, because people with lower incomes tend to always be more focused on, you know, where they can get the best price for whatever they need. Okay. Okay, understood, and then I wanted to follow up on the gross margin topic, and if you hold margins even close to flat in the back half of the year, you'd be above the high end of your guide. You did call out the higher logistics cost, but can you give a sense of the magnitude of that for the H2? And is there anything else to be aware of on mix or some other item to be aware of? Would love any other comments you're willing to provide on the H2 gross margin guide. Yeah, it's hard to provide more color. I mean, you know, you frankly have a sense of where we, well, not a sense, you know exactly where we landed after, you know, two quarters. We've given you the goalpost for the full year. So it gives you a sense of what we're thinking about the H2. Sorry, I can't provide more than that. Okay, understood. Thanks very much. Thank you. Our next question comes from the line of Martin Landry with Stifel Canada. Your line is now open. Hi, good morning, guys. I was wondering if you could touch a little bit on your in-store productivity initiatives, perhaps maybe the Kronos scheduling tool that you've put in place. Wondering, you know, did that allow you to reduce your labor hours per store? And if so, you know, by how much have you been able to reduce your labor hour per store, let's say, versus last year or two years ago? Any color would be helpful. Yeah, look, that's a very detailed question. I mean, all we could say is, you know, productivity in our stores is always a big focus, right? Like, you know, in-store labor cost is a big line item. We mentioned that we're always continuously combating inflation in wages. And what we do is productivity initiatives, a host of productivity initiatives to combat that. And if you look at our Q2 numbers, it seems that it's been paying off, and we see it on our financials, but we can't comment on any specific of these initiatives. Okay. I thought I tried. Maybe just then, just to wrap up the labor discussion, you know, the government has been tightening immigration policies, and I was wondering if that's having an impact on your business, you know, what is the number of job openings you have right now, and how does that compare versus historically? Yeah, we don't, we don't provide color there, either. I mean, all I could say is, you know, you know, from the labor front and from the hiring front, I mean, you know, we've talked in the past that it has improved from periods where it's been more of an issue. And today, you know, we don't see any major issues on that front. Okay, so no more openings than historically? No, openings are in line with the number of stores we operate, and, you know, we're hiring every day in some part of the country. But in line with historical is the right way to look at it. Okay. And then just lastly, your traffic has been very strong. It continues to grow above historical levels, and you've talked a little bit about the dynamics there, but I'm just wondering if there's a difference in traffic patterns between your urban stores and your rural stores? No, not particularly. We could read into that. I mean, honestly, when we look at the traffic, we're very pleased with those numbers. It just shows that, you know, more Canadians are coming into our stores. We're hitting the mark. But like Neil alluded earlier, I mean, you know, it's what we look at is the combination of the traffic and the basket size, and ultimately, you know, we look at the SSS, and, you know, we're very pleased with the results that we're seeing that we're publishing today. Okay. Thank you. Congrats on your results. Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open. Hi, good morning, guys. Nice quarter. I wanted to ask about the back half comp, and just how we should be thinking about a few things. I mean, if you look at the calendar, obviously Q3, you know, Halloween impact. I don't have any color on how much you think that could be. As you get into Q4, you know, Black Friday is a week later. Does that matter? You know, how should we think about that? And then obviously, you know, you've had some weakness in seasonal, and gen merch is a little bit slower, and the back half, you know, is bigger events for those categories. And your comp guidance, you know, implies roughly 2%-4% range in the back half. I'm curious as to, you know, how you're thinking about you know, all of these dynamics as you look at the back half comp guidance? Yeah, that's a, that's a full question. I mean, you're right with your assumption, you know, what we're implying for the H2. You know, we continue to believe three and a half to four and a half is the right range. So it does imply a normalization in the H2, as you pointed out. The thing that we do also point out is when you look at the retail calendar for Q3, Q3 does lose two key Halloween days leading to October thirty-first, and those two days are shifted to Q4. So we did point out the fact that if you isolate just that factor, well, then Q4 will be skewed more positively versus Q3. The assumption in the range of the back half, I mean, frankly, is very much function of key seasonal days that are upcoming, and so, you know, it's really too early to say how that's gonna pan out in the back half. I mean, it's still early for anything relating to Halloween and Christmas, but those are very important seasonal sales for us. Okay. And just a follow-up. I know we've talked about the gross margin quite a bit, but, you know, it seems like you'd have some decent mixed pressure, you know, just given the difference in, you know, the comps by the categories. You haven't really talked about it, all that much. I mean, have you seen that pressure, and is it just been offset by some of the other, you know, benefits in supply chain and freight? And does that potentially become more apparent, you know, as you get into the back half? Yeah, I mean, you know, you're right to point out that there is a mix shift, but it's not something that happened overnight, either. You know, in theory, having more consumables in the mix does have a pressure on margins, but again, that's just one factor in that goes into our gross margins. You layer on top of that, the shipping rates, all the productivity we're doing, on the logistics side, and so on and so forth. So it's a mix of all of these factors. Great. Thank you. Thank you. As I'm showing no further questions at this time, this does conclude today's conference call. Thank you all for your participation. You may now disconnect.