Dollarama Inc.

Good morning, and welcome to the Dollarama Fiscal 2024 Third Quarter Results Conference Call. Neil Rossi, President and CEO, and Joanne Calroun, Vice President, Corporate Finance and Treasurer, 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 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 cut actual results, levels of activity, performance, achievements, future events, or developments to differ materially from those expressed or implied by the four looking statements. As a result, Dollarama cannot guarantee that any four looking statement will materialize, and you are cautioned not to place undue reliance on these four 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 December 13, 2023, available on CDAR+. Forward-looking statements represent management's expectations as at December 13, 2023, and acceptance 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. Our financial and operational performance in the third quarter of fiscal 2024 and year to date reflects sustained consumer demand for our broad range of affordable products and the overall convenience we strive to provide every day. For Q3, We generated a sixth consecutive quarter of double-digit SSS growth. Compared to the same quarter last year, EBITDA grew 24% and EPS over 31%. We also delivered an industry-leading gross margin, which now reflects the normalization in the supply chain and lower inbound shipping costs. On the operational front, we opened 16 net new stores, bringing the total number of net new stores open fiscal year to date to 55, and our total store count to 1,541. Having successfully taken some of the historical pressure off the busy last quarter of the year, we are on track to achieve our annual target of 60 to 70 net new stores. Importantly, we entered the fourth quarter, our highest sales quarter historically, with well-stocked, well-merchandised holiday-ready stores. This speaks to the strong and disciplined execution of the team from head office to logistics to field management and store associates. The Dollar City team in LATAM is also executing right on plan from both the financial and operational perspective. They just celebrated the opening of their 500th store subsequent to their last quarter end. For some perspective on their progress, When we first partnered with Dollar City in early 2013, they had 15 stores in two Central American countries. By the time we acquired our 50.1% equity interest in 2019, they had over 190 stores delivering a localized version of Dollarama value proposition and shopping experience in three markets. Here we are today capping off 2023 with 500 stores and counting in four countries. Huge kudos to the entire Dollar City team on reaching this impressive milestone in such a short period of time. Ultimately, Dollarama's performance across the board continues to reflect the relevance and strength of our compelling value proposition and simple growth-oriented business model. The last few years have truly reinforced the fact that Dollarama is a key shopping destination for all Canadian consumers. Our model resonates with those looking for value for their hard-earned money and for convenience in a time-pressed world. But we aren't taking any of this for granted. To keep both our long-standing customers and new customers coming back, we must stay true to the fundamentals of our business, our convenience and value promise. This is anchored in our proximity to our customers, in our procurement, logistics, and merchandising expertise, and in our unwavering commitment to being a price follower. These remain relevant regardless of the macroeconomic context, but more important than ever and a challenging one. As we head into the crucial fourth quarter and gear up for next year, our focus is on preserving and strengthening our role in the shopping habits of consumers. We will do so by focusing on the elements within our control. By continuing to offer the best relative and year-round value across our product offering, and in each of the categories in which we compete. Regardless of how consumer behavior will evolve and what remains an uncertain context, what is certain is our commitment to be there for all Canadians as they adapt to the economic environment. Joliane, over to you for a closer review of our financial results.

Thank you, Neil. Let's drill down on our future results and expectations for fiscal 2024. SSS grew 11.1% in Q3, over and above 10.8% growth for the same period last year, primarily driven by sustained customer traffic. While consumer product sales continue to be stronger than they have been historically, we are seeing higher sales across all categories. For example, we had a great Halloween this year, which is a good indicator of the relevance of the value proposition across all departments. Based on SSS to date, we are increasing our full-year SSS guidance from a range of 10 to 11% to a range of 11 to 12%. Anticipated growth margin expansion through the second half of the year is now materializing. For Q3, we delivered an exceptional margin of 45.4% of sales. This fully reflects lower container costs and was also boosted by lower logistic costs. Looking at the full year, we expect to be in line with but towards the IRN of our annual gross margin guidance range of 43.5% to 44.5% of sales. SG&E was 14.5% of sales for Q3 compared to 14.1% in the same quarter last year. SG&E as a percentage of sales crept up a bit year over year due to higher store labor costs and the timing of certain store expenses, namely maintenance. Higher labor costs reflect more hours distributed in preparation for the busy holiday season, as well as wage increases taking effect. Looking at the full year, we expect to be in line with our annual SG&E guidance range of 14.7% to 15.2%, but likely the lower end as previously indicated. Our 50.1% shares of the city's net earnings was 18 million compared to 9 million for the same period last year. continuing to reflect their strong execution. Back to Dollarama, EBITDA grew 24% to $478.8 million or 32.4% of sales and dividend net earnings per share increased by 31.4% to $0.92 from $0.70. On capital allocation, we remain active on the NCIB in the quarter with the repurchase of over 1.7 million shares for $166 million. The board also approved a quarterly cash dividend of 7.08 cents per share. As part of the active management of our capital structure, we completed a bond offering during the quarter for proceeds of 500 million. Proceeds were then used subsequent to the quarter end to pay off the notes that came due this past November. Following the offering and repayment, the effective blended interest rates on our outstanding senior unsecured notes remained substantially unchanged. Turning now to our outlook for fiscal 2025, the path of the economy and its impact on future consumer behavior remains hard to predict. We will be looking closely at how the key holiday season and early 2024 play out, as well as how the economic environment evolves as we set our expectation for fiscal 2025. As a result, we will provide guidance for next year in conjunction with the release of our Q4 results in March. Based on what we see so far, our sentiment is that normalization in SSS trends will continue as we last two years of double-digit SSS. The next few months will be a determining factor as we develop our fiscal 2025 outlook on this key metric. Importantly, we have strong conviction in our fundamentals and in the relevance of the value and convenience we offer consumers in any economic environment. Our performance to date reflects that and we will keep our focus on delivering on our value promise to Canadian consumers from coast to coast. That concludes our formal remarks. I'll turn it over to the operator for the Q&A.