Dollarama Inc.

Good morning and welcome to the Dollarama fourth quarter and fiscal year 2024 results conference call. Neil Rossi, President and CEO, and Patrick Bowie, CFO, will make a short presentation followed by a question and answer period upon exclusively to financial analysts. The press release, financial statements, and management discussion and analysis are available at Dollarama.com in the investor relations section as well 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 April 4, 2024, available on CDAR+. Forward-looking statements represent management's expectations as at April 4, 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 Rossi.

Thank you for that exceptional introduction, operator, and good morning, everyone. This morning, Dollarama released impressive fourth quarter and fiscal 2024 results. For the quarter, comparable store sales growth came in higher than expected at 8.7%, and EPS increased by over 26%. For the full fiscal year, SSS came in at 12.8%, and EPS increased 29%. On the back of these results, we met or exceeded our annual guidance targets for all our key performance metrics. Our strong financial and operational performance once again demonstrates the enduring strength of our business model. Our compelling value proposition continues to resonate with consumers, and that keeps us motivated every day to exceed their expectations in what continues to be an uncertain economic context. I would like to recognize and thank every Dollarama employee for their contributions this year. Whether working in our stores, in the field, in our logistics operations, or at head office, your passion, entrepreneurial spirit, and solution-oriented mindsets are key to our continued success. On the real estate front, we opened 65 net new stores in fiscal 2024, bringing our total store count to 1,551 at year end. I'm very proud that we have now hit this annual net new store number for seven consecutive fiscal years, which speaks volumes to our team's execution. We will continue our efforts to front load store openings in this fiscal year while maintaining the same pace of annual net new stores of between 60 and 70. Heading into fiscal 2025, we have a solid pipeline of site opportunities across the country as we work towards our long-term target of 2,000 stores in Canada by 2031. Turning to Latin America, Dollar City continues to generate strong results, demonstrating solid execution on the financial and operational front as they continue to scale up. This is reflected both in their pace of new store openings and in their growing earnings contribution. They opened 92 net new stores in calendar 2023 ending the year with over 530 stores. This puts them in a very strong position to achieve their store target of 850 by 2029 in their four current markets of operation. On the ESG front, I am pleased with our progress for the year, advancing meaningful projects across our priority areas. For example, on climate, we continue to increase our alignment with recognized standards and best practices From a talent perspective, we invested in new technologies and programs to streamline our recruitment efforts, among other priorities. In supply chain, we continue to enroll eligible vendors into our social audit program. We also began pursuing additional engagement work to gain better visibility on indirect vendors. We look forward to providing a comprehensive update on our progress across all our ESG priority areas, with the publication of our FY24 ESG report ahead of our Q1 results in June. Over the last few years, Dollarama has truly solidified its position as an indispensable shopping destination for consumers across Canada. This is thanks to our ability to deliver compelling value and convenience year-round on a broad range of everyday and seasonal products within our low fixed price range. Looking ahead, the path of the economy remains uncertain, both for businesses and consumers. This makes it all the more difficult to predict future consumer behavior. In this context, our objective is to preserve and strengthen our role in the shopping habits of consumers by continuing to focus on our fundamentals and the elements we control. For example, the ongoing refresh of our merchandise and careful execution on our pricing strategy are key to keeping customers coming back as the economy evolves. Our objective is reflected in our fiscal 2025 annual same store sales growth target. We are setting a high bar on a key retail metric over and above two years of exceptional double digit same store sales growth. Our ability to achieve this target will once again be dependent on the continued execution by every member of the Dollarama team. I am very confident that we will once again meet our objectives, and deliver on our value and convenience promise to consumers this year. Before I turn the call over, I would like to welcome our new CFO, Patrick, to his first earnings call with us. Patrick is a seasoned executive with extensive capital markets expertise and is already making his mark at Dollarama. We're glad to have him on board. So with that, Patrick, over to you.

Thank you, Neil, and good morning, everyone. I'm pleased to be here this morning to discuss Dollarama's results and outlook for next year. The last three months have given me the opportunity to understand the business and its key drivers, and I am very excited for the future. Dollarama's business model is nothing short of impressive, as are its people. I also look forward to continuing to engage and meet with members of the investment community in the coming weeks and months. Let's start with a review of our fourth quarter and fiscal 2024 results before turning to our guidance for fiscal 2025. For Q4, sales increased by 11.3% over the same period last year to reach more than $1.6 billion. For the year, sales increased 16.1% to nearly $5.9 billion. In Q4, Same-store sales grew 8.7% on top of 15.9% for the same period last year. SSS consisted of an 11.2% increase in the number of transactions and a 2.2% decrease in average transaction size. SSS for the quarter came in higher than expected, such that we exceeded our updated SSS full-year guidance. While consumables continue to benefit from stronger than historical demand, The increase reflects strong demand across all our product categories, including seasonal and general merchandise. SSS for fiscal 2024 came in at 12.8%, consisting of a 12.3% increase in the number of transactions and a 0.4% increase in average transaction size. Annual SSS growth was driven by the same factors as Q4, in addition to the positive impact of ongoing product refreshes. This result is all the more impressive when stacked up against the 12% SSS generated in fiscal 2023. Margin expansion continued into Q4, resulting in a strong gross margin of 46.3%, as we continue to benefit from lower container and logistics costs. For the full year, we generated a gross margin of 44.5%, bringing us to the very top end of our guidance range for fiscal 2024. SG&A represented 14.5% of sales for Q4 compared to 14.2% for the same period last year. The variance primarily reflects higher store labor costs. Looking at the full year, we came in at 14.4% of sales exceeding our annual SG&E cost containment target for fiscal 2024 by 30 basis points. This is primarily because of the positive impact of scaling, which offset some of the cost pressures. With respect to our 50.1% share of Dollar City, net earnings for the quarter were $32.8 million and for the year came in at $75.3 million. periods last year. Based on their strong financial performance, Dollar City's board approved and declared its first dividend in the fourth quarter, which, given our 50.1% share, came in at $40.1 million USD. Returning to Dollarama, Q4 EBITDA grew 19.5% to $558.9 million, representing an EBITDA margin of 34.1%. Full year EBITDA increased by 22.2% to over $1.8 billion, or an EBITDA margin of 31.7%. Our Q4 diluted net earnings increased by 26.4% to $1.15 per share, while our fiscal 2024 EPS grew by 29% to $3.56. On the capital allocation front, Dollarama remained active on the NCIB program throughout fiscal 2024, with a repurchase of over 7.1 million common shares for $665.9 million. This quarter, the Board also approved a 29.9% increase to the quarterly cash dividend to $0.092 per share. At fiscal year-end, compared to 2.71 times at the end of fiscal 2023. The variance reflects strong EBITDA growth and cash flow generation. Turning now to our outlook for fiscal 2025, for the full fiscal year, we expect comparable store sales to grow at a pace of between 3.5 and 4.5%. This is on top of the exceptional SSS generated in the last two fiscal years and in the context of continued economic uncertainty. Our confidence that we can generate this level of SSS growth in fiscal 2025 speaks to our conviction in our fundamentals and value proposition. On gross margin, we expect a lower inbound shipping cost tailwind to carry through the first half of the fiscal year, but on the flip side, we expect to face tougher comps in the costs during the second half of fiscal 2024. Like all retailers, we're also seeing an uptick in shrink, but this continues to be actively managed and is included in our full-year guidance. For fiscal 2025, we expect to maintain our gross margin at a similar level to last year, with a target range of between 44% and 45% of sales. SG&A as a percentage of sales is expected to continue to be pressured by higher store labor and operating costs. We are still facing higher than historical wage inflation, but our goal is to partially offset these cost pressures through ongoing efficiency and labor productivity initiatives. As a result, we anticipate SG&A as a percentage of sales to be in the range of 14.5% to 15%. In fiscal 2025, we will maintain our balanced approach to capital allocation, investing in organic growth while also returning capital to shareholders. In addition to maintaining a dividend subject to quarterly approval, we anticipate allocating the majority of excess cash to share repurchases, consistent with last year. In conclusion, while the path of the economic recovery and its impact on future consumer behavior remains uncertain, clearly continues to resonate. As a result, we expect to benefit from a persistent positive consumer response to our convenience and compelling value in fiscal 2025. This concludes our formal remarks. I'll turn the call back to the operator for the Q&A.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Irene Nettel from RBC Capital Markets.

Irene Nettel Thanks, and good morning, everyone. A clearly strong same-store sales trend in Q4. But given that we're seeing a broader pullback in consumer spending, can you talk through what you saw, any shift in cadence as we move through the quarter, and can you provide some commentary on Q1 to date, please?

Yeah, look, we continue to see strong consumer demand. I mean, that's the most important point. And speaking of cadence for Q1, Look, what we have said is we finished Q4 at 8.7%. We mentioned that we see a progressive normalization. But all in all, we're seeing still very strong consumer demand.

So is it safe to assume that Q1 to date is above the upper end of guidance at this point in time, understanding that we're very early in the year?

I mean, to be above the full-year guidance, I mean, I think that's a safe assumption. But we do say that there is a progressive normalization throughout the year. So you start from the 8.7 in Q4, and then there's normalization towards the year, towards our full-year target of 3.5 to 4.5. That's great.

Thank you. And then if I could just shift gears for a minute, clearly Dollar City is making great strides in terms of improving the profitability and the cash flow. How should we be thinking about sort of the evolution as, you know, you're now at whatever is just over 550 stores. So, you know, the percentage of new stores that are, let's say, not profitable in the early days is becoming smaller and smaller. So how should we be thinking about the evolution there?

I mean, first of all, we're very pleased with the results of Dollar City. You know, we think there's still lots of growth potential, lots on the storefront, and as well in terms of scaling and margin expansion. So, you know, we do expect the business to continue doing well. But as you know, we don't provide any specifics or any guidance with respect to Dollar City.

Understood. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Vishal Sridhar from NBF.

Hi. Thanks for taking my question. Patrick, just wondering what your initial observations are as you entered Dollarama. versus what you thought and what it actually is like, and if there's any incremental changes that we should expect in the finance function as a result of your hire.

Yeah, I mean, you know, we could talk longingly about that, but if I try to hit the key notes, I mean, it's a business grounded in solid fundamentals, right? If you break it down in three pieces, it's solid operational model, and I think that's very important that it's capable of generating strong cash flows and a strong return on invested capital. That translates in a very strong financial model that we're capable of generating excess capital and returning that to shareholders in the form of a modest dividend, but mostly in terms of share buyback. And what I've observed as well that is maybe not perceptible from the outside is the strong culture we have here at Dollarama. This is a culture that is laser focused. and focus on delivering on its promises and always focus on efficiency. So, again, Michelle, we could talk about it longly, but those are the high points.

Okay, thank you for that. And maybe just talking about the shrink here, how is that trending and what can management do to control that line a bit better?

I mean, we've mentioned that shrink is increasing, but what we have seen is it seems to be plateauing as well. But shrinkage is a retail industry phenomenon, so not uncommon in the industry. I mean, for sure, managing shrink is a high priority at Dollarama, and we've put in place a host of initiatives to combat shrink.

Thank you. Are you able to expand on what some of those initiatives may be?

Not in detail, no.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Chris Lee from Desjardins.

Good morning, everyone. Maybe I'll start off with just in a quarter. We had very strong transaction growth and a modest decline in basket size. Is that mainly because consumers are just generally going to Dollarama more often but buying less each time as they try to manage their budgets? Are there any sort of concerns around the modest decline in basket size? Thank you.

There's always concerns about any declines. But the answer to your question is we believe that your assessment is correct.

Gotcha. Okay, that's helpful. And maybe a follow-up on the traffic question is, you know, obviously, you know, consumers are looking for value. No question about that. But, Neil, I'm just curious, you know, to get your view on, you know, how much of the growth do you think is also driven by the enhanced product assortment from the new price points and also more likely improved skill refresh as the supply chain is more or less back to normal?

That's a tough question because it's very subjective in nature, but I think that part of the strength of the consumer response at Dollarama is certainly accounting to our refresh and the effort we make to bring in new goods. The price points are starting to To be more mature, the buyers have a better handle on the sourcing of all the new price points because even with the addition of breaking our price points down to 25 cent increments, it has an impact on buying decisions. And so I would say that it's a combination of both of those two elements.

Perfect. Thanks so much. I'll get back to you. Thanks.

Thank you. One moment for our next question. Our next question comes from the line of Tammy Chen from BMO Capital Markets.

Hi, thanks for the question. On your fiscal 25 same-store sales guidance, I was just wondering how you're thinking about, I guess, the different drivers between we have had very good population growth recently, the merchandise refresh, just wanted to get a sense of all the different pieces that you thought through and what, if you could rank in terms of their contribution to it, like what you feel are going to be the big drivers that is going to continue to generate very good same-store sales off of these last two very strong performances?

Yeah, that's a good question. I mean, we're not going to rank them on this call, but what I can say is at the end of the day, we're seeing strong consumer demand and response to our value proposition. What we need to do is focus on what we control and every day focusing on delivering the best value to consumers. We do that through product refresh and we also see population growth as being a driver in the future. But again, those are external factors and we focus on what we control. When you look at SSS, we were lapping a very strong year of 12% and then 12.8%. And based on the strong consumer demand, we see continued growth. And so that is really exceptional in the context.

Got it. And my second question is capital allocation. So 30% increase in dividend. I think last fiscal Q4 is also of a similar magnitude. Is that what we should expect going forward? And also for dollar city, um, this first dividend declaration, just, is there anything more you can say about that in terms of the board over there thinking on, on capital allocation there? Thanks.

Yeah. I mean, on our dividends, um, You know, we try to keep it consistent with our growth. So you would have seen our earnings per share increase by close to 30%, and so there is a link between our EPS growth and our dividend growth. So what it will be in the future, we don't know, but certainly this past quarter it was linked to our EPS growth. Then to your second question on Dollar City, look, It's done well from a cash flow and it has a strong balance sheet. And we just saw the opportunity, the board of directors saw an opportunity to pay a dividend without impacting in any way its financial performance and its growth trajectory.

Got it. Thank you. Thank you. One moment for our next question. Our next question comes from the line of George Dume from Scotiabank.

Yeah, good morning, Neil and Patrick. I just want to talk a little bit about what you're seeing in terms of production capacity coming out of Asia. And would you characterize product prices in Asia to be expected to be flat or up or slightly down in fiscal 25? Thanks.

Production in Asia is business as usual from the perspective of capacities. The pricing is pretty stable at this point in time. And the only challenge really is that the amount of creativity and international business that historically at different periods has driven new SKU creation or new design creation in Asia still quite low, which just means that our buyers and sourcers have to put more time and energy into that piece of the business, into the creativity and creation of new designs and new items, so it's more work for us, but other than that, it's business as usual.

Okay, on the last call, Neil, you mentioned consumables in North America as kind of a challenge and a tough backdrop. Just wondering if you can talk a little bit about, presumably that's still the case, but any chance we can see lower North American vendor prices, you think, in fiscal 25?

There's still price pressure from a supply domestic national brand supply perspective, but I think at the retail end, things have settled and the market's fairly stable.

Okay, and just a quick clarification to Chris's earlier question. Should we expect perhaps like a low single-digit, flat to low single-digit decline in the basket as well for fiscal 2025?

Yeah, we don't provide guidance on the components of SSS, and so we take SSS as it comes, George.

Okay, understood. Good quarter, guys.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Martin Landry from Stifel.

Hi, good morning, guys. My first question is on your EBITDA margins. They've reached 31.7%. It's the highest level ever for you this year. The question is, where do we go from here? And more longer term than in the next 12 months. Where is the trade-off between returning value to customers versus growing your EBITDA margins? How do you think about that?

When we think of margin expansion, we think a lot more on the SG&A front. And certainly, there is less leverage than there was in the past, just by the sheer scaling of our business. We always think that there's room for improvement. We have some productivity initiatives. But, you know, you look at this year, there's a high pressure on wage inflation. We can't compensate all of that. Hopefully, in the future, that will subside. We don't know. So, looking in the future, we'll see. But hopefully, we could find other opportunities down the road.

Okay. Okay. And I just want to touch on your $5 price points. Is the wrap-up complete at this point? And if we were to look back at previous price point increases you've implemented, how successful was this one versus others?

I don't think a price point rollout is ever complete. I mean, it's a continuation in perpetuity. perpetuity to be honest. Certainly the original ramp up is complete and $5 is part of the assortment in a well integrated into the offer for the shopper. But there is always an evolution of multiple years to get all of your vendors and the market on the supply side to ramp up on the creation of $5 items. Particularly, the domestic vendors and the really large international vendors, manufacturers, I should say, to build $5 formats is something that takes years. But other than that, I think $5 is well integrated into our pricing strategy today at store level.

Okay. And then maybe just lastly for me, inflation has been very high in the last two years. Wondering if you've started to think about your next price point introduction.

We're always thinking about all of the key drivers of the business. At this point in time, we have no plans to introduce any other price points.

Okay. Thank you. Congrats on the results. Thank you.

Thank you. One moment for our next question. Our next question comes from the line from Mark Petrie from CIBC.

Yeah, good morning. Thanks for all the comments so far. I just have a few follow-ups. I guess just first, could you just clarify with regards to the sales mix and the growth drivers there, it sounds like it was pretty balanced. But is it fair to say that consumables growth has sort of continued to taper off or has there been a bit of resurgence in consumables relative to the rest of the assortment?

I think it's been fairly stable for the last year to the year prior with regards to mix.

Yeah, okay. Appreciate that. Patrick, just on Dollar City, following up on your comment with regards to the dividend, is it fair to say that if they could pay another dividend without impacting their ability to grow, then that's what would happen?

Yeah, like I mentioned, it's something that we'll assess from time to time. And, you know, if we think there's that opportunity, we will do so. But, you know, there's no policy or anything like that. We're going to do it on a case-by-case basis.

Yeah, understood. Okay. And then just last question. I know you guys had the pilot with Air Miles on loyalty. It was extended from its original period. and I think it finished last week. I don't know if it was extended again. Could you just comment about that, and then any learnings from that test and sort of how that informs your thinking about loyalty or customer data?

Yeah, look, it was a pilot test, and look, it's too early to provide any conclusions there, unfortunately.

But did you extend it again, or is it over now? No.

Sorry, it's not information we're at liberty to disclose at this point in time.

Okay, understood. Okay, thanks a lot. Appreciate the comments.

Thank you. One moment for our next question. Our next question goes from the line of Luke Hannon from Canaccord Genuity.

Thanks. Good morning, everyone. I just wanted to get your thoughts on the overall competitive environment here in Canada, and specifically on pricing, what you're seeing from competitors as it relates to your own assortments. Are folks leaning a little bit more into price than others in certain categories, or just what you're seeing there?

I think the market's stabilized from a retail pricing perspective. It's normalized over the last quarter. And our job, of course, is to keep an eye on the market, but to stay laser focused on our relative value, which is one of the key differentiators of our business from the market.

Okay, got it. And when it comes to your freight contracts, I believe you're in the process through Q4 and Q1 to date in negotiating those. Are those largely done at this point? And if so, I'm assuming that's all been reflected in the guidance as well?

I mean, we're locked into rates until the end of this year, so the renewal process is at the tail end of this year. So whatever rates we have are reflected indeed in our guidance.

Okay. Last one for me, and then I'll pass the line. On the DollarCity founding group, I believe they do have a put right to sell the remaining stake in the business to Dollar Emma. Can you remind us, how is the fair market value of those shares determined? Is that going to be the five times even that you originally paid, or is there going to be another mechanism or some other factor to consider there?

Yeah, look, it's – no, it's not the five times, but it is based on fair market value.

Okay. And if I can push a little bit further on that, how is – what constitutes fair market value?

There's – you know, in the agreement, there's a whole host of – there's a whole, you know, mechanism there, which includes third-party evaluators. So, you know, it'll be determined as fair market value. Okay.

Got it. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Brian Morrison from TD.

Good morning, Neil. Good morning, Patrick. I want to follow up on same-store sales growth, specifically traffic. I know you stated that people are coming for the value proposition, but I want to know who you think your incremental customer is going forward. Is it population growth driven by immigration? Is it lower income? Or is it just people coming for your expanded product offering?

Well, we're hoping it's all of the above. And we're relying on it being all of the above. Our market surveys show that we're increasing our traffic in people who are over $100,000 a year in income. And it's also being driven by lower income or newly landed immigrants. It's all of the above.

Okay. I guess if I could ask a question on Dollar City, I guess one, are you thinking of providing guidance metrics? It's a bit of a black box of forecasts and it's becoming a bigger piece of the pie. And then also with respect to Dollar City, you put out 92 stores this year. Your outlook for 850 by 2029 calls for 50 per year. Should we be thinking you're going to take it back down to 50 at this point in time? And then maybe just, you know, the growth rate's been all over the map recently and it's accelerated up to mid-60s here in terms of equity pickup year over year. What should we think in terms of growth rate that you have embedded in your outlook without providing any guidance metrics?

Well, on the growth of Dollar City store count-wise, I think the important thing is that what we've said so far is the 850 store target, and that's what we've disclosed so far. So I think the 92 store performance is part and parcel. It happened to be an excellent year of opportunities for the Dollar City real estate team, but if there's an update to be made to the store target, we will disclose that in due time. uh on the other front i'm gonna pass the call can i can i interrupt you before you move there is it similar to canada that you lock in your real estate 12 plus months in advance like shouldn't we know that number so i i wish we could say that our real estate in canada was locked in 12 months in events but that has never been the case um we have a goal to lock it in as soon as we can But the reality of real estate is that there are delays in construction, delays in delivery from landlords, delays in equipment delivery for multiple reasons from an infrastructure perspective at the locations that really force it to be three to six months before things are truly locked in before the opening of a store. So while we have been making great strides to know in advance or open our stores earlier in our calendar year or fiscal year, the actual locking in of all of our real estate deals just like there is more iterative than we'd all like it to be. But that's just the nature of real estate and it has been for the last 100 years. Thank you.

Thank you.

Sorry, Patrick, are you going to elaborate on the growth outlook embedded in your outlook?

Well, it was about your first part of your question regarding disclosure. I wanted to comment on that. Just to let you know, we're comfortable with the disclosure we provide today, and it's really a function of, even though it's a growing business, it's a question of relative size versus our business, and from an accounting standpoint, it's an equity investment. So we feel comfortable with the disclosure we provide today.

Okay. Well, if you reconsider, I think everyone would appreciate it. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Edward Kelly from Wells Fargo. Hi.

Good morning, everyone. Nice quarter. I wanted to follow up on the gross margin guidance for the year. So, you know, the midpoint, you know, is kind of flat-ish year-over-year. Obviously, you know, first half you have the freight benefits still coming through. I'm just kind of curious, can you help us with any potential offsets? And then as we think about gross margin in the back half, is there a risk that gross margin in the back half could be down? Because I think that's what you would have to do in order to get to the midpoint half.

Yeah, I think what we have to say on gross margin or the guidance is we don't see any major shift with respect to gross margin next year versus what we've seen in 2024. I mean, there's certainly puts and takes. You know, you've mentioned the lower shipping costs will be a tailwind for us and mostly in the first half. If you recall in the first half of last year, We were still in the process of pushing a lot of volume through our DC and warehouse, so there was incremental costs last year that we shouldn't be expecting this year. But certainly when you think about the second half, we're up against tougher comps versus 2024, because if you recall in 2024, we didn't have that type of elevated shipping cost and logistics. And then the last thing I'll mention is we talked about shrink, so that might partially offset some of the improvements we would see from a shipping cost perspective.

Got it. And I wanted to follow up on shrink. And I was just kind of curious if you could be willing to quantify where shrink is today versus, I don't know, let's call it normal levels or 2019 levels. You mentioned that it's peaking. I'm curious how often you do inventory counts. So I guess, you know, current accounts are telling you that. And then as you think about mitigation, you know, changes to self-checkout in the U.S. has been something that's really been top of mind because, you know, that has been a much bigger problem. I'm kind of curious as to whether you're contemplating anything like that.

Yeah, I mean with respect to the actual numbers, unfortunately we don't provide that type of detail. In terms of the process of inventory count, we generally do that once per year, one major count per year, and then from time to time we do some recounts, but think of it as one big annual process with some checks. I think part of your question also, you talked about self-checkouts. I mean, certainly, you know, when we talked about initiatives to counter shrink, I mean, yes, self-checkout could be one of the areas. So it's one area that we're investigating for sure.

And just one, sorry, one quick follow-up. The actual count, is it safe to assume that that occurs, you know, like January, February timeframe along? with when you might be doing your audit, that type of stuff. I'm just kind of curious as to when that occurs.

The annual inventory count?

Yes.

Yes, that would be at the beginning of the calendar year. So, you know, pretty much in the past few months that we redid these counts.

Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.