Dollarama Inc.

Good morning and welcome to the Dollarama Fiscal 2022 Second Quarter Results Conference Call. Neil Rossi, President and CEO, and J.P. Towner, CFO, will make a short presentation, which will be 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 CDAR. 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 the assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A, dated September 9, 2021, available on CDAR. Forward-looking statements represent management's expectations as at September 9, 2021, 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.

Thank you, operator, and good morning, everyone. We've been navigating the ups and downs of the pandemic environment for over 18 months now, and no two quarters have been alike. For Dollarama, the second quarter of fiscal 2022 was defined by the ban of non-essential goods in Ontario. It impacted the tail end of our first quarter and remained in place for nearly half of the second quarter. While other restrictions across Canada also affected our sales, the Ontario ban's impact was significant for several reasons. Firstly, it impacted 40% of our network as we have nearly 550 stores in Ontario. It coincided with our peak spring season sales and stretched to almost mid-June. Keep in mind that much of the spring seasonal assortment offered at that time is sold in a short window as it relates to activities completed in the spring, such as planting your garden or decorating your backyard. Third, it specifically targeted in-store shopping at discount and big box retailers. Some of the products we couldn't sell during that extended period were available for purchase in other retail environments, such as exterior garden centers, pharmacies, and grocery stores. All of these factors limited our ability to recoup sales once the ban was lifted. The good news is that it was a temporary measure lifted on June 11th. For the remainder of the second quarter ended August 1st, SSS growth rebounded to mid-single digits. That's both year over year and on a two-year average basis, reflecting the underlying strength of the business. We increased total sales for the quarter year over year, and we delivered positive EPS growth while opening 13 net new stores. This speaks to our solid fundamentals, disciplined execution, and compelling value proposition. Despite the distortion effect on sales of the various restrictions in place during the quarter, we saw a shift in consumer shopping patterns with an uptick in store traffic. On the real estate front, we've opened 25 net new stores to date in fiscal 2022 and remain on track to meet our 60 to 70 net new store target for the year. More stores are expected to be opened in the second half of the year, as has historically been the case for some time now. Turning to Dollar City, we saw a notable increase in our 50.1% equity pickup of their net earnings, from $2.5 million last year to $4.1 million this quarter. We are pleased with the execution of Dollar City's growth plan. New store openings continue in our four LATAM countries of operation, with a focus on Colombia and now Peru. During the second quarter ended June 30, 2021, Dollar City opened 15 net new stores. Looking at the global supply chain environment, container shipping has experienced significant disruption. For fiscal 2022, our teams have worked hard to mitigate supply chain pressures, both from an operational and cost management perspective. Container shipping costs continue to be on the rise, and our rates are mostly contracted through the fiscal year end. Pressure on container shipping costs continue to build, and as a result, will be felt more in fiscal 2023 as we renew contracts and renegotiate rates. Clearly, the pandemic has thrown everyone a lot of curveballs. As a team, we've demonstrated our ability to adapt to changing market conditions, the resilience of our business model, and the essential role we play in the retail ecosystem. We are proud to continue serving Canadians from all walks of life as the economy reopens. I'll now hand it over to JP to discuss our results in more detail.

Thank you, Neil, and good morning, everyone. As we continue to lap pandemic quarters, it's important to look at our underlying performance. This includes looking at our sales performance on a two-year average basis. These metrics provide a more insightful picture of our trends and performance. Year over year, our total sales grew 1.6% on the strength of our new store openings and the contribution of non-com sales from stores that were temporarily closed last year. Same store sales decreased by 5.1%. This drop primarily reflects the impact of the Ontario ban on the sale of non-essential products in place for the first five and a half weeks of the second quarter. The timing and length of the ban resulted in significantly lower seasonal and all-year product sales in Ontario, thereby impacting total sales. And we were already comping against a very strong performance last year in Q2. If we carve out those first five and a half weeks, SSS growth for the remainder of the quarter was a positive 5.1%, and that's over and above 4.3% growth for the same period last year. If we look at the same June 11th to August 1st period, on a two-year basis, SSS growth averages 4.7%. Getting back to SSS for the full quarter, it consisted of an 8.7% decrease in average transaction size and a 3.9% increase in the number of transactions. This is the first quarter in which we're seeing a reversal in these trends and an increase in traffic. These trends are also continuing in the third quarter to date. We generated EBITDA of $293.7 million, representing a 5.7% increase over last year. This reflects positive sales growth and lower year-over-year COVID costs, offset by a slightly lower gross margin and slightly higher SG&A. We generated net earnings of $146.2 million and 4.3% EPS growth in the second quarter. Our gross margin came in at 43.4% of sales compared to 43.9% last year. This decrease is largely due to lower sales of higher margin spring and garden products impacted by the ban on the sale of non-essential items in Ontario. For the first half of fiscal 2022, gross margin is up 20 basis points year over year, and we continue to expect gross margin to be generally flattish year over year for the full fiscal period. As mentioned by Neil earlier, we expect an increase in container shipping costs to be felt more in fiscal 2023. SG&A represented 15.3% of sales compared to 16.7% last year. SG&A includes $11.7 million in direct COVID costs compared to $32.4 million last year. Last year at this time, we had temporary wage increases and we're still incurring some implementation costs related to the rollout of COVID measures. Excluding these costs, SG&A represented 14.1% of sales compared to 13.5% last year. As an essential business, we kept our stores open and staffed throughout the Ontario ban on the sale of non-essential product. But this impacted store productivity, which explains the year-over-year variance in SG&A margin excluding direct COVID costs. For the first half of fiscal 2022, SG&A excluding direct COVID costs is up 40 beeps year-over-year, and we're on track to remain generally flat for the full fiscal year as we see potential for the second half, especially during the fourth quarter. Looking at capital allocation, a total of 2.9 million shares were repurchased in the quarter under our NCIB program for a total of 163.6 million. At quarter end, our leverage ratio stood at 2.8 times adjusted net debt to EBITDA, leaving ample room to remain active on this front in the second half of the fiscal year. Since the beginning of fiscal 2022, under a previous and current NCIB program, we've repurchased 7.8 million shares for a total value of $447 million and representing 2.6% of our shares outstanding. This past July, we renewed our NCIB, allowing us to repurchase up to 7.5% of our public float between July 2021 and July 2022. Yesterday, the board approved a quarterly dividend of 5.03 cents per share. Turning now to the third quarter underway and where we are headed. Here are a few takeaways as we think about the balance of the year. What we know is that the underlying fundamentals of our business are strong. For the first half of fiscal 2022, our sales were up 6.7%. we've maintained an industry-leading gross margin and have generated 15% EPS growth. This is in the context of the pandemic and strict restrictions directly impacting value retailers. Looking at the second half of fiscal 2022 and assuming that non-essential product bands are behind us, we are particularly looking forward to our fourth quarter performance. Historically, Q4 is our highest sales period of the year. and we will be facing favorable year-over-year sales comps. As you will recall, last year we experienced a significant pull forward of Christmas sales, which boosted Q3 but negatively impacted Q4. And then our solid momentum in Q4 was interrupted by new restrictions, including a non-essential product ban in Quebec in late December, where we have about 30% of our network, resulting in a slightly negative SSS for the quarter. If we look at the third quarter underway, to date, we are holding comparable store sales compared to Q3 last year. Keep in mind that we're lapping our best quarter of the past five years. As for the rest of Q3, our performance will be dependent on the Halloween season. We'll also need to think about that on a two-year average basis. In terms of consumer shopping patterns, which we're seeing in Q3 so far, the continued increase in traffic and a readjustment of basket size. The shift in March of 2020 was very sudden, but to date the reversal we're seeing is more gradual. In this context, we're as committed as ever to serving our customers and offering compelling value and unrivaled convenience while creating long-term value for our shareholders. With that, I'll turn it over to the operator for the Q&A.

Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while participants register for questions. Thank you for your patience. And the first question is from Irene Mattel from RBC Capital Markets. Please go ahead.

Irene Mattel Thanks, and good morning, everyone. I think it's safe to say that the topic on everybody's mind is the shipping costs. And as you look forward to F23, can you just talk a little bit about, I mean, obviously we all assume the costs are going to be higher, so that's input cost inflation. So can you talk about the various tools that you might have to help you offset that gross margin pressure and and whether there is something that we should be learning or that you've learned from the experience in 2015 when there was a similar kind of sudden surge in input costs.

Sure. Good morning, Irene. So the levers that we have are the same levers we've had for, as you mentioned, in the past that we've used for FX challenges, raw material challenges, freight challenges, et cetera. And that is the offering. In the end, the offering can be tweaked by our buying group, the count in any given item that's a multi-count item, the weight of any given item, the size of any given item. So I would say that's the greatest tool we have to combat challenges of this nature. We can also change the materials that certain products are made out of, change the plastic types from a more expensive plastic type, for example, an acrylic or a PS, to a plastic that isn't as affected at any given time like PET. And truthfully, the customer can't tell the difference in its usage. But there is a difference in cost. And those things that vary, that are very hard for the consumer to see, are things that the buying group has to use as tools to navigate through difficult situations. So those are some of the tools that they use.

And how would you qualify things like markups or if we think about price points and the possibility of the introduction of new price points?

So markups are a factor that revolves around the market. Our raison d'être is to be a great relative value in the industry and as long as the value at a price point higher is still the best value in the market and if we require markups to help manage margins while staying completely competitive on every item, then we'll use that as a tool as well. With regards to price points, as you know, I've pushed back on introducing 450 and 550 for a very long time, and I'd like to hold off as well for longer, but if price pressures or container and shipping costs are here for a long period of time, which it's too soon to know, then it is certainly another tool that we may use to help us navigate through a longer, more extended period of higher costs.

That's really helpful. Thank you. And then just thinking about just coming back to the offering, as we look in the back half of the year and as you look at sort of what consumer buying patterns have been, Have you made any adjustments to the offering? How do you feel in terms of your current inventory situation? You know, just how do you feel the stores are positioned right now for the balance of the year?

Quite well, I think. We've made many changes to many, many items. And there have been some markups where the markups were appropriate. But I do think that the whole mix should be compelling for the balance of the year.

That's great. And just one final one, if I might, on a different topic. Can you just talk a little bit about how the First Dollar City stores are doing in Peru?

We are excited and happy about the start in Peru.

Okay.

Thanks, Neil.

Thank you. The next question is from Mark Petrie from CIBC. Please go ahead.

Yeah, good morning. I wanted to follow up about the inventory levels. And Neil, I recall from previous conversations how, you know, Dollar M is largely a proprietary assortment, gives it much more control over the supply chain than some competitors. And I recall your comments in the past about challenges thus far not impacting sales. But looking at inventories on a dollar basis, it does seem like They've come under some pressure even versus pre-pandemic. And I understand your supply chain efficiency would justify a lower growth rate versus past rates, but could you just talk about your inventory position both at the warehouse and D.C. and stores and how that's affecting both your supply chain efficiency as well as your in-stock levels in both seasonal and non-seasonal?

So in seasonal it's not affecting it because the seasonal goods come in before the season and therefore have the buffer of timing to compensate. For our everyday goods, like every other retailer on the planet and manufacturer, there is not just the question of cost challenges on the freight side, there's also the question of container availability. And so by being the controller of our own goods, what it means is we've had to prioritize the goods that are most at risk of being out of stock, and those goods take priority as opposed to following normal course flow of containers. So I would tell you that our overall... Inventory is down, but not resulting in a loss of sales, but a lot of work has gone into compensating to make sure that the goods that are required are being prioritized. In the past, it wasn't something that we needed to be quite as focused on, but a lot of focus has been put on that over the last year to ensure that any delays or lack of containers was going towards items that we had enough buffer in our current inventory.

Understood. That makes sense. And when you think about the next quarter or two, is that sort of an escalating concern for you with regards to in-stock positions, or are you pretty confident that that can be navigated and it's really sort of the longer-term cost question that's sort of a bigger factor?

I think you said it perfectly. For the time being, we feel comfortable. The long-term cost issue is a concern for us and everybody else, but certainly it's a concern for everyone. And if it is the case, the only thing that makes me feel more comfortable is the fact that we all will face those same pressures and our cost to the consumer will be relative to our competitors.

Okay, helpful. Thank you. You know, increasingly hearing about challenges in the labor market, what are you seeing in terms of labor availability, your own turnover store or warehouse, and the cost of that labor?

Certainly the labor market is challenging. We've been doing a fantastic job at store level to ensure that it hasn't impacted our store operations. At the distribution center, as you know, we've implemented some seasonal peak season increases that have been reflected in the numbers that you're seeing. And for the time being, we don't see any changes in the near future. It's a continuous study week to week to see how the labor markets are performing with regards to availability of labor.

If I may add, Mark, one thing that we'll be watching is when the federal wage subsidy ends at the end of October, how the labor market reacts and moves in function of that subsidy being out of the labor market.

Yeah. Yeah, definitely. Okay, and then just the last one, sort of a bigger picture one or away from sort of the immediate term. You've spoken in the past about your investments and tools on data analytics, and I guess specifically to give you potentially a more dynamic approach to pricing. Just wondering where you're at in that work.

I would say we're midway through our process. Some... Takeaways have already been put into place, but it's far from finished, and it's incredibly interesting to see what we can use from that, but we haven't completed that particular process. We're midway.

Appreciate all the comments and all the best.

Thank you. The next question is from Karen Short from Barclays. Please go ahead.

Hi, thanks very much. I just wanted to clarify one thing and then I had a bigger picture question. So you said you were holding sales in third quarter to date and that would be up against 7.1 in 3Q last year. Does holding mean flat, just to clarify?

Yeah, that means we're trending flat so far. since the beginning of Q3, keeping in mind that the Halloween season is in front of us, so it's way too early to call the quarter, and it's really on an SSS basis. I mean, our total sales are definitely positive, and SSS so far is flat, and Halloween will be the defining factor in terms of our Q3 SSS performance. What I can tell you so far is although it's not a material season for us, we're seeing strong consumer demand on our back to school season. It's been very strong on all fronts and traffic continues to be back. So we're watching, and it's too early to tell how Halloween will perform, but that's what we're watching for Q3 SSS performance.

Right, and then appreciating the fact that we have to factor in the pull forward of holiday into 3Q as well.

Exactly, yes.

Okay. And then I wanted to just talk a little bit about landed merchandise margins. So I know this is an area where you've been very good at controlling with you know, precision basically based on your freight costs. But as we look into 22, Neil, you commented that it may get a little tougher to predict what freight is looking like. Is there anything to think through in terms of risk to landed merchandise margin as you're kind of in the transition phase contractually with respect to your merchants having conversations on, you know, widget costs versus actual freight costs?

As you know, Karen, for 2021, as you mentioned, we're mostly contracted on freight. For next year, we're in the midst of those renegotiations. The buying group, as you know, when we make our pricing decision, have those variables of freight and FX pretty much locked in. And so... I think, as Neil mentioned, it's all going to be a question of relative value and we'll be dependent on how the market and the competitive set moves over the next few quarters as freight costs continue to increase. And then we'll be a price follower as we've always been. I mean, there's definitely a benefit of having a multi-price point strategy in times like we're seeing now.

Okay, and then this last question for me. When I look at, I mean, I think it's more helpful, and I'm talking more calendar year, to look at first half 19 versus, you know, first half 21, and then your implied guide for second half of the current year. relative to 19, and you're looking at ex-COVID costs for a pretty meaningful increase in the actual margins. So I'm kind of backing into about 120 basis point increase in your second half margins for this year versus calendar 19. Is that directionally, does that seem right to you? Because that does seem like a fairly meaningful expansion relative to what you saw in the first half of this year.

Yeah, so year to date, We're up 20 bps on our gross margin year over year and I think the key comment to keep in mind when we think about gross margin for the second half of the year is that we're still guiding to a generally flat gross margin for the full year of fiscal 22 or call it calendar 21. So that means in the second half of this year, we will, as we mentioned I think back in March, we will start seeing some small headwinds from inflation that will have our gross margin for the full year end up at a generally flat-ish gross margin, keeping in mind that we're up 20 BPC over a year on a year-to-date basis.

Yeah, no, I was referencing more EBIT margins, excluding COVID costs. I mean, I'm just making sure that I'm doing math right because that's certainly an impressive two-year increase in the second half EBIT margins relative.

Yeah, okay. So if you look at the EBIT margin, I mean, from my comment holds for gross margin and then what you have to layer on is the SG&A. SG&A, we had... some productivity headwinds due to the non-essential ban in Q2 will end flat-ish for the full year and it will be flat-ish. I mean it's definitely where we think we'll end up but we did have those productivity headwinds in Q2 and But the flat dish common for SG&A generally remains for the full year. And, yeah, that's where we are. So flat dish on gross margin and flat dish on SG&A, keeping in mind the productivity headwinds that we couldn't forecast at the beginning of the fiscal year.

Okay, great. Thank you.

Thank you. The next question is from Chris Lee from Desjardins. Please go ahead.

Oh, hey, good morning. Sorry if you mentioned this earlier before, but can you give us some guidance in terms of COVID expenses for the current quarter or maybe for the second half of the year?

Yeah. Hi, Chris. It's JP. So for COVID costs for the second half, and I'm assuming no additional restrictions or significant fourth wave You've seen those COVID costs tailing off in Q2. I think we'll see a gradual tail off in the second half. How will that flow between Q3 and Q4 remains to be seen, but you should definitely expect the trend to continue for the second half of fiscal 22.

Okay, that's helpful. And then just in terms of the competitive environment, Have you seen sort of an uptick in competitive environment as businesses start to reopen and consumers are feeling more comfortable going to stores and shopping around again?

I mean, from a competitive set, we're dealing with the same competitors that we've been dealing with for many years. I think the value proposition is strong as demonstrated by our year-to-date sales that are up 6.7% despite the restrictions. Our EPS growth is also strong. We are seeing traffic coming back after our customers have consolidated their basket with us. So overall, both in terms of relative value and value proposition, we think we're at the right place and we haven't seen any material disruption in terms of the competitive set in general in Canada.

Okay, that's helpful. My last question is, what are you seeing in terms of just the industry reaction to the recent cost pressure? Has there been a willingness by your competitors to rate prices so far? Thank you.

Yeah, it's a good question. It's too early to tell. I mean, we're in the We're in, as we said, the renegotiation of those contracts. We don't know where competitors are. We're following the evolution of the market. I think we'll see those trends more clearly as the next six to 12 months evolve, but it's truly to say yes or no in terms of is the market passing on inflation. As you know, our priority will be our value proposition and our relative value, and we'll adjust in function of those market movements.

Thank you, and best of luck.

Thank you.

Thank you. The next question is from Patricia Baker from Scotiabank. Please go ahead. Yeah, good morning. Thank you for taking my questions.

I want a quick follow-up on the supply chain discussions. Can you tell us exactly when in 2022 you'll be renegotiating those contracts? Do they fall across quarters or are they lumped in a specific quarter?

I don't think we typically disclose that information and I don't think we're going to start today. Okay, fair enough. And just with respect to the buyers,

pulling the levers that you discussed, Neil, in the opening remarks. So I understand that they have not yet started to pull those levers. That's something that we'll see as we roll through F-22?

Oh, they're pulling those levers every day of the week, to be honest. Every day of the week they're repeating or looking at an item that needs to be replenished because we replenish our items at an inventory level every month and so literally every day of the week they're going through a list of those items and those items on that day are going to have to reflect the realities of all of the parameters at that point in time what the raw material costs are of that item at that point in time FX at that point in time, transport costs at that time, et cetera. And it's based on all of those parameters that that buyer will decide what the offer will be from the perspective of all the things I explained earlier, you know, counts, weights, et cetera.

Okay, fair enough. And then, you know, the discussion of the third quarter and the importance of Halloween, perhaps if you could remind us what the dynamics were around Halloween last year. and how you're approaching Halloween this year with respect to inventory for the stores?

So I would answer the question in two parts. In terms of store inventory, I mean, we're well-stocked on Halloween goods. Our inventory position is strong. So in terms of assortment and in terms of having the right SKUs in store, Number two, if we compare to last year, I mean, last year we had, if you recall, we had a surprisingly strong Halloween performance in light of some of the restrictions that we're facing at the time. So that's what we are campaigning against. That being said, as I mentioned, we're pleased to see traffic back in our stores and we're We've seen, although it's not material for us, a very strong back-to-school season. So it's too early to call how Halloween is going to perform, but we're pleased with seeing traffic back in our stores and the performance we've seen so far in back-to-school.

Okay, I guess it would be fair to say that you're reasonably optimistic about Halloween, but we'll see where it ends up. And if I could ask, I'll... One final question, and that's about the current quarter. And the seasonal mix that you couldn't recoup after the stores reopened, I'm assuming that the bulk of that is product that you were just able to pack away for next year?

Yes, that's exactly right.

Okay, thank you very much. Thank you. The next question is from Derek DeLay from Canaccord Genuity. Please go ahead.

Yeah, hi. Just one more follow-up on Halloween. I know sometimes with the calendar, the days leading up to Halloween are included in Q3, and sometimes they kind of move to Q4. Can you just remind us where they were last year? I think they were included in the Q3, and will they be again here this year?

Yeah, so this year, the last of the quarter is October 31st, so it's a Sunday. Last year, we had... November 1st in our Q3 results.

Okay, and is November 1st typically a big seasonal selling day or not so much?

I mean, it depends on the year, it depends on the season, it depends on consumer trends, but we did see last year a pull forward of Christmas sales into the third quarter. It remains to be seen how consumer will behave between Q3 and Q4 this year.

Okay, got it. And then just on, you know, again, just back to your inventory, it sounds like you're well positioned for Halloween. Can you just comment on the positioning for the holiday season? And if, you know, if you were forced to, you know, be put in this situation, would you contract on spot rates in terms of shipping and shipping containers to make sure you'd have product on shelf?

For which period of time? I'm so sorry.

We're sorry, for the holiday season.

Oh, the holiday seasons are always purchased way out. We're sitting on those goods months ahead of time. So we'll never be in a position, I don't believe, where spot rates are required to get seasonal goods in time. The only discussion on spot rates would be one that every retailer would be in a position to have to consider most much more than us because we have that buffer of months for any given item but if we ever somehow got to a point where a basic item was low and we wanted to ensure that we had enough of that item at a specific time we might have to pay the spot rate for a container or two for that specific item but that's what all of that focus and work on a daily basis is going into doing, which is to avoid that situation as much as possible.

Great. Thank you very much. Thank you, sir.

Thank you. The next question is from Brian Morrison from TD Securities. Please go ahead.

Yes, thank you very much. Maybe JP, when you say SG&A flat relative to last year, can you just clarify that for me? Does that include or exclude COVID costs? Because when you go through last year, you had some pretty high COVID costs incurred in Q4.

Yeah, it's definitely excluding COVID costs. So it's taking out the $32.4 million we had in Q2 last year and the $11.7 million we had in Q2 this year. and otherwise on a total SG&A basis, we're definitely trending down in a significant way.

Okay, thank you for clarifying that. And then I want to go back to freight for one second if I can. When you see your language in your MD&A, it does say that transportation makes up a significant percentage of cost of sales. I'm hoping you might be able to clarify what the percentage of cost of sales that transportation has comprised on average and maybe also what product merchandise would be.

Yeah, so... As you know, imports are 50 to 60% of our business, so they do represent the material portion of what we have in our stores. In terms of the percentage cost related to freight and transport, it's not something from a competitive standpoint, unfortunately, that we can go into. It would be too sensitive.

Would it be less than 10%? It would be too sensitive.

But it's a portion of our cost, but we can't, unfortunately, go into the exact percentage. Okay.

And then last question, if I can. Neil, you said your willingness or your commentary with respect to bringing on new price points and you'd prefer not to, but it's potential you could. How quickly could that be brought on board? Could that be a fiscal 2022 event? Absolutely. Thank you very much. Thank you.

Thank you. The next question is from Edward Kelly from Wells Fargo. Please go ahead.

Hi, guys. Good morning. Sorry, but back to freight. So we've heard a lot of mixed things actually from some of US companies around their ability to secure containers at their contract rates. I'm just kind of curious how you're managing through this. And then as we think about the impact going forward, I know you don't want to talk about the timing of when you would negotiate. How do overall market spot rates influence what you might end up paying on future contracts? Is there any way to help frame sort of how materially increase could be around all this? Just curious as to whether there's any help there you could provide.

Yeah, I think the best way to look at it is actually to flip it around and look at the levers we have. to manage those cost pressures. We have a multi-price point strategy that has been in place over the past 10, 11 years. And as Neil mentioned, we have several additional tools to manage the cost pressures. Unfortunately, we can't quantify what the cost increases will be next year. Number one, because quite frankly, we're still in some of those negotiations and discussion. But more importantly, I think the focus when we have a multi-price point strategy is really on using the levers that are at our disposal to offset those cost pressures. And that's really how we've thought about it historically and how we're thinking about it now.

Okay, and then I guess, you know, somewhat related to this, Dan, as you, you know, think about sort of $455, you know, it does sound like there's still sort of hesitancy about wanting to go there, and I guess that's because there's still room in the price points underneath of this. But you did mention that, you know, if there was some sustained cost pressure, right, that could change things. What would have to happen from a cost standpoint for you to view what's going on with, you know, with freight right now as more sustained? I...

If the current rate situation lasted 12 to 24 months plus and started to feel almost like the new normal, which I really don't think it will, but if it did, then it's something we would consider it almost as a a tool that every retailer's prices due to inflation and increased costs as a result of that massive change, it'll be reflected in the cost of goods. It simply has to be. And it might be a tool at that point that's required simply to keep our offering what it is currently. As much as that makes me feel horrible you know thinking about the reality is if inflation is affected and those transportation costs are sustained for a very long period and it will simply be something that all retailers will have to pass on because they simply could never absorb it and it will become the new normal and if that's the new normal then we may need those price points for for the ability to continue to offer the selection that we would like to see in our service. But we are nowhere near that point at this time.

Okay, great. Thank you.

Thank you. And the last question is from Graham Kreindler from Eight Capital. Please go ahead.

Hi, good morning, and thank you very much for taking my questions here. Following up on the previous comments, I appreciated the color on the same store sales growth mix. I was wondering if DollarM has seen any changes in its customer mix so far and if there's a potential opportunity to capture greater wallet share from a new demographic of customers as we see prices increase for consumers. How does the company look at that as a potential opportunity for growth moving forward? Thank you very much.

Historically, as we've as we've increased price points, I think it's fair to say that our total addressable market has increased over time and we've captured additional share. Are we seeing any trends currently in terms of a different mix of customers and store? The answer is it's generally in line with what we would have seen in the past. We're not noticing any any major change in terms of wallet share currently I mean when you look at our brand awareness being one of the top 10 brands in Canada in terms of awareness I think we have a solid wallet share in the value retailing space that we play in and the other point I think the results year to date speak for themselves. I mean there's no way that with a pandemic the restrictions that we've been facing in Quebec and in Ontario that we wouldn't have had those kinds of results without a strong relationship and bond I would say with our customers and we've kept delivering our brand promise over the past over the past few years, and it shows in our results here to date. So, no, in general, I think we're at the right place, and customers recognize that, generally speaking.

Okay, understood. Thank you very much. Thank you.

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