Dollarama Inc.

All participants, please stand by. Your meeting is about to begin. Good morning, and welcome to the Dollarama Fiscal 2025 Third Quarter Results Conference Call. Neil Rossi, President and CEO, and Patrick Bowie, 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 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 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, 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 December 4th, 2024, available on CDAR+. Forward-looking statements represent management's expectations as at December 4th, 2024, and accept 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. This morning we reported our third quarter fiscal 2025 results with EPS of 98 cents representing a 6.5% increase over the same quarter last year. Comparable store sales increased by 3.3%, reflecting the same trends we have seen since the beginning of the year. Continued SSS normalization and a cautious consumer who continues to appreciate and seek out our value proposition. Our performance in the context of careful discretionary spending by consumers only strengthens our conviction in the relevance of our value model within the Canadian retail landscape, across geographies and demographics, and through the economic cycle. In this vein, we also announced this morning an increase in our long-term growth plans in Canada. We have increased our target to 2,200 stores by 2034. This is up from our previous target of 2,000 stores by 2031. Our updated market analysis confirmed that there is continued opportunity to profitably grow in Canada over the next decade, maintaining our average new store capital payback period of about two years. For the year underway, we've opened 50 net new stores and are well on track to open a total of 60 to 70 net new stores by fiscal year end. Just before we close the corridor, we reached another real estate milestone with the opening of our 1600th store in Canada located in Edmonton, Alberta. In parallel to growing our store network, we are also constantly working on the optimization of our logistics operations to match this growth. Up until now, we have relied on a centralized approach. While our current operations have served us well, given our Western store base and future growth plans across the country, the time is right to put in motion plans to develop a two-node logistics operation. This will enable us to better service our network across Canada over the long term, while bringing more agility and resilience to our logistics operations through redundancy. With such a system in place, we will be even better positioned than we are now to ensure the smooth flow of goods to our stores in all situations. The Calgary region was identified as the optimal location to host our future Western hub. We have found a well-located parcel of land in Balzac, just north of the city, where we can develop exactly what we need. Following the closing of the land acquisition and over a three-year period, we intend to build a distribution centre along with warehousing integrated in the same complex. Once built, this hub will service our stores across Western Canada, which are currently serviced out of Montreal. The plan is for the two-node logistics network to meet the distribution capacity requirements for our updated growth plans in Canada. Having this in place will also allow us to optimize our Montreal logistics operations. Once the Western hub is up and running, the Montreal DC and area warehousing centers will focus on servicing stores in Eastern Canada. The property we purchased in town of Mount Royal in fiscal 2024 located right next to our Montreal DC will provide us with optionality with future optimization of the Montreal Hub. Turning to Latin America, during their calendar third quarter, Dollar City continued on their growth plan with the opening of 18 net new stores. This brings their total store count at September 30th to 588, up from 532 at the end of 2023. This includes 349 stores in Colombia, 103 stores in Guatemala, 75 in El Salvador, and 61 in Peru. As mentioned last quarter, the team is also continuing to progress with its work to open the first Dollar City stores in Mexico in 2026. The Dollarama team is not resting on its laurels, but building on our successes and forging ahead with our multi-pronged growth lens. Earlier this year, we reiterated our confidence in Dollar City by increasing our ownership and their long-term store targets in their current countries of operation. We also announced plans to enter Mexico. Today we are announcing plans for another decade of growth in Canada and an evolution in our logistics network, which speaks to the role we have carved out for Dollarama as a leading value retailer. With our growth platforms and a business model that can deliver for today and tomorrow's value-oriented customer across geographies, we look forward to executing on our plans with our usual focus and discipline. With that, I'll pass it over to Patrick.

Thank you, Neil, and good morning, everyone. Let's start with an overview of our Q3 results. Sales increased by 5.7% over Q3 of fiscal 2024, coming in at over $1.5 billion. We generated same-store sales growth of 3.3% for a two-year stack of 14.4%. Q3 performance was primarily driven by strong demand for everyday essentials. As mentioned last quarter, we also had two Halloween sales days fall in Q4. In this context, SSS is behaving as anticipated and continues to progressively normalize. In terms of our annual guidance of 3.5% to 4.5%, we expect SSS growth to be anchored around the midpoint of this range, with the next few weeks leading to Christmas being important. Growth margin came in at 44.7% compared to 45.4% in Q3 of last year. The decrease is mainly due to stronger sales of consumable products and higher logistics costs. For the full year, We expect gross margin to fall within the top half of our guidance range of between 44 and 45% of sales. SG&A decreased the 14.3% of sales for Q3 compared to 14.5% for Q3 of fiscal 2024 due to the positive impact of scaling. For the full year, we expect SG&A as a percentage of sales to come in towards the bottom end of the 14.5% to 15% annual guidance range. Dollar City's net earnings contribution for the quarter was $27.1 million compared to the $18 million last year. This is the first quarter to fully reflect our 80.1% ownership stake. Back to Dollarama earnings, Q3 EBITDA came in at $509.7 million compared to $478.8 million last year. EPS increased by 6.5% to $0.98 per share. On the NCIB front, we remained active with the repurchase of nearly 1.4 million common shares for cancellation in Q3 for a total consideration of $186.2 million. the Board also approved a quarterly cash dividend of $0.092 per share. Turning now to our new long-term target in Canada. Our update to 2,200 stores by 2034 was based on a thorough revaluation of the market potential for Dollarama stores and corroborated by third-party analysis. Several factors came into play in this exercise, including demographics, now projected, Dollarama's role and relevance in the everyday shopping habits of Canadian consumers, our capabilities as operators, the evolution of the retail landscape, and the environment we expect to operate in over the next 10 years. Taking these factors into consideration, we believe that we can continue to pursue our growth at a healthy pace and by maintaining our two-year new store capital payback period. As it relates to the Western Logistics Hub, operating a two-node system is expected to generate significant annual cost savings that justify the capital investment. But cost savings is not the only driver. This is also about optimizing and putting in place the right infrastructure to support the business, including growth to our new store target in 2034. Excluding land acquisition costs of 46.7 million, the estimated capex for the construction of our future western hub is approximately 450 million. We plan to have distribution and warehousing operations similar in nature to those in Montreal, so primarily unautomated. With the land acquisition anticipated to close by the end of the fiscal year, we should break ground on construction in the spring of next year, aiming for project commissioning by the end of calendar 2027. The capex for this project will be distributed over a three-year period, and we do not expect it to impact our shareholder capital return strategy. We intend to remain active on the share buyback front in addition to maintaining our dividend subject to quarterly approval. Next quarter, when we provide guidance for fiscal 2026, we will be able to provide visibility on the anticipated pace of capital spend, although we already foresee the capital outlay to be more front-loaded. Our updated 10-year growth target and plans to strengthen the backbone of our Canadian business demonstrate our conviction in the continued potential of our core market. At the same time, we are also tapping into more growth in LATAM, both in Dollar City's current countries and eventually in Mexico. Our focus across all teams and markets is on leveraging our strength and agility as buyers, importers, retailers, operators, and as judicious capital allocators. We are confident that delivering on our value and convenience promise to consumers will continue to translate into sustained profitable growth and long-term value creation for our shareholders. With that, I'll now turn the call back to the operator for the Q&A.

Thank you. 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. Our first question comes from the line of Irene Natel with RBC Capital Markets. Your line is now open.

Irene Natel Thanks, and good morning, everyone. My first question is for the CEO of the year. Congratulations, Neil. And as always, I really want to focus for a moment, if possible, on consumer spending trends. We've been hearing a lot from other retailers about sequential deceleration during calendar Q3. Can you walk us through what you saw in terms of seasonal, how is Halloween as a season overall? And I know it's early, but any early read on Christmas demand?

So it's too early for Christmas, but we were generally satisfied with Halloween's performance in the context of last year's very strong Halloween performance, and in the context of consumers being conservative with their discretionary spending. We are seeing what the market is seeing, and that is that conservative approach to discretionary spending. The consumer is focused on everyday essentials, and I guess it's completely to be expected when people worry about the economy in general.

That's helpful. Thank you, Neil. And just sort of to continue to beat this horse, within the essentials, have you seen any kind of shift in demand by category or anything like that, or that's been relatively stable?

No, it's been very stable, actually.

Okay, excellent. And then just one question on the DC warehouse. You mentioned, I think, Patrick, that the automation is going to look fairly similar to Montreal. Can you walk us through what the thought process was, whether there are any concerns about labor availability and things like that?

So I'll take this one, Irene. The thought process was after... doing our diligence on the market. The way we do our distribution and warehousing processes in Montreal today seem to be the most efficient and most flexible way to start with our operations in Calgary. We did not want to start testing new concepts away from Montreal, so the process would look more like Montreal and then over the course of time as we continue to test you know new types of automation that will happen in the Montreal warehouse and then if they're successful the next you know phase would be to start implementing some of those in Calgary at some later point in time that's really helpful thank you thank you our next question comes from the line of Chris Lee with the Jordan your line is open

Hi, good morning, Neil and Patrick. I have two questions. First, on Dollar City, and then the second one will be on gross margin. Just on Dollar City, the pace of earnings growth seemed to have slowed down a little bit compared to recent quarters. I know it tends to fluctuate on a quarterly basis, and there's probably some noise from FX and interest costs and et cetera. So my question is, was the slowing in earnings growth part of the normal growth normalization process? that is also happening in Canada, or are there other factors that you would like to call out? Thanks.

Yeah, thanks, Chris. I mean, you're spot on. I mean, we mentioned in the past that the trends that we're seeing at Dollar City are very similar to those at Dollarama. So, you know, ultimately, I think we're pleased with the growth at Dollar City, but it is also true that we're seeing some normalization in terms of SSS trends. Still very healthy, but there is normalization in LATAM as well. There's one item that I would point out as well is as we ramp up our operations in Mexico, there may be some additional costs that trickle through the equity pickup line as well.

Okay, that's helpful. Maybe just a quick follow-up, Patrick. In the past, I think we've talked about maybe the possibility of the company providing some incremental disclosures around Dollar City in the future. Is that still... on the table to be considered?

Well, just from an accounting standard standpoint, we will likely provide some more color in Q4 with our annual report.

Okay, that's helpful. And my other question, just on the gross margin, as we look out into next year, the industry might be facing higher product costs with potential tariffs and a weaker Canadian dollar. And given that the industry has gone through, obviously, a high cycle of high inflation, do you expect there will be maybe less flexibility for the industry to pass on higher costs, maybe resulting in some margin pressure next year? And maybe on the flip side, what are some of the key margin levers that you can pull to offset some of this potentially higher cost pressure for next year? Thank you.

Our business is really a relative value business, as you know, because we've said it a million times. It's really, really important to always keep that in mind. So whatever challenges we have, whether it's tariffs or surtaxes of various kinds, the point is it's going to affect all Canadian retailers equally who are selling our category of goods. And how we react to it is always what's going to decide whether we are competitive or not competitive in the market. And as we've also said many times, we're a price follower, not a price leader. So we will watch what the market does. And if the market absorbs inflation or weaker exchange rates or tariffs, then that is what Dollarama will do too. Because at the end of the day, we have to work within the context of the challenges that we all face as retailers and as businesses in Canada. And as long as we're doing, you know, a great job of executing and being, let's say, on our game in every piece of our business, then it's our job to ensure that the customer, you know, comes to Dollarama for the best value and the most interesting shop.

Okay, that makes sense. Thanks and happy holidays. Happy holidays.

Thank you. Our next question comes from the line of Brian Morrison. Good morning.

Maybe I can just follow up on that question, Neil, with respect to is there any changes in terms of pricing behavior from your competitors or does it remain pretty much flat right now?

Currently, it's been pretty flat. Certainly, you know, tariffs and other things We'll get everybody very excited and there'll be a lot to keep an eye on. But for the moment, in general, it's pretty flat.

Okay. And then with respect to the expansion for Patrick, I guess, but with respect to the expansion to Western Canada, with respect to your logistics facility, should we expect that all of the costs there will be capitalized or could some of that be expensed?

In terms of building the logistics network?

Exactly.

I mean, you should see it mostly as capital investments.

Okay. And then last question, if I can. I've noticed in prior years that Q4, you typically have a big uplift in dollar city store additions, and I'm wondering if we're going to see that again this year, and what is the reasoning for that?

Sorry, you repeat that? You mean in Q4? Yeah.

In Q4, typically there's been a big uplift with respect to Dollar City new store additions. I'm wondering the reason for that. We should probably, or pardon me, if we can expect to see that again this year.

I mean, honestly, it depends from year to year and depending really on the tactical of it. Some years you get more back and weighted, some a little bit more front weight loaded. There's nothing particular reason for that. You see the pace that we provided with the guidance, the new target about two quarters ago. So that should give you an idea of what the pace, the average pace by year should be.

Okay. Thank you, Patrick. With all due respect, you've been well in excess of that over the past four quarters, though.

Yeah, look, the teams are working hard and trying to do their best, but that pace is a very, very high pace. We hope they meet their targets, but those are very high-paced years.

I appreciate your comments. Happy holidays.

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

Yeah, thanks. Good morning. Just given the consumer context that you described, I'm curious to hear your latest thoughts on how you think about managing your assortment and your merchandising, just given the emphasis on value. And I guess I'm thinking specifically of sort of the balance of SKUs across price points, particularly as you introduce new SKUs, and then also the merchandising in the store.

I wish it was something that, you know, could switch within a month. But the reality is large retailers, let's call it more traditional retailers, plan out their stores for the entire year. Dollarama has a much shorter, more flexible schedule than that for how goods get laid out, etc. But it's still a massive job to start changing the layout of 1,600 stores. And so it's not something that gets done at a whim. Things have to really change drastically to change the overall mix and the overall assortment. And you don't want to be changing it overly drastically, thinking that a trend might only last. You never know how long these consumer trends will last. So as a rule, we stick to our mix. We stick to our layout in general. and if certain departments are selling more goods out of the same square footage than usual, the buyers will get some flexibility in adding extra SKUs, but we won't generally change the entire, you know, zonogramming or planogramming of a store.

Yeah, understood, understood. And I guess specifically, the balance of products across price points, that's all relatively stable, I would assume, as well?

It is relatively stable.

I want to ask just about your self-checkouts and I'm just curious if you could give us an update about the current penetration in the network, your satisfaction with the consumer adoption and your execution with those and then the overall net impact on the business and consumer perception.

Yeah, I mean, the penetration, you know, call it roughly, you know, 20% of our stores. We see tremendous value in the self-checkouts in certain stores, but not all stores. So as we mentioned in the prior quarters, it's making sure that the stores that warrant a self-checkout have them, and the ones that have less of a business case, well, then we might reallocate some of the self-checkouts to other stores. But generally speaking, you know, we think this mix seems fairly appropriate.

Yeah. Okay. And maybe if I could just ask one more, just back to the whole distribution facility or logistics hub in Calgary. You called out a number of different variables that sort of drove the decision now. And I'm just curious if what was the tipping point for the decision was was any sort of shifting in the prioritization of those different variables, you know, the financial, but also, you know, the importance of redundancy, or if it really was, you know, the vast majority of the decision was just ultimately about growth and the need for capacity in another region.

Yeah, I mean, as you would know, you know, our guiding light when it comes to economics of stores is really payback, and so as we see you know, strong paybacks for our stores, it gives us confidence in a longer target and a better target.

Okay. I appreciate the comments, guys, and all the best. Happy holidays.

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 start on the DC as well. I wonder how we should think about the impact to consolidated operating costs once that's up and running. Is there anything you can say to help quantify the cost savings on a net basis or just comment on how you approach your returns requirement on projects like this?

Yeah. All we would say is there's improved efficiency by having a two-node logistics, so you could assume that there are significant savings on transportation costs, and those savings, based on our analysis, fully justifies the capital outlay.

Okay, understood. And is it fair to say that those savings would phase in over time, or would we see a notable amount in 28 once it's up and running?

I mean, there's certainly a ramp-up of the logistics hub's operations, so you would need to assume a ramp-up until full operation and commissioning of that to have the full run rate savings.

Right. Okay. Fair enough. On to leverage, the press release stated that with the new DC, you don't anticipate a change to your capital return plans. Presumably, that means you're willing to take on a bit more leverage. I wonder if there's a new target or range that you have in mind.

No, I mean, no, we don't have a target with respect to leverage. I think what we're alluding to is that the company will continue generating strong free cash flow, and we think we could at the same time maintain a robust NCIB program and at the same time fund the Catholics for this project.

Okay, understood. And then one last one on the new store target. Presumably you're seeing more of your new stores overlap with your existing footprints I wonder if you're seeing a greater impact of these stores when you execute this sort of fortressing strategy, and should we anticipate that there will be more overlap with new stores of existing stores moving forward?

I think we need to go back to the progression of the revenues per store. It's increased quite a bit over time. even if one might consider there is some cannibalization by adding more stores, the growth in sales per store has far outpaced the cannibalization that may happen to other stores.

Okay. I appreciate the call. Thank you.

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 wanted to go back to the distribution center. The capex of $450 million looks high to me at first glance. So I was wondering, can you share what's going to be the size of the complex, both the DC and warehouse? And is there any buckets that you could break down to give us a better sense of what makes up that $450 million?

So the building size will be approximately 1.6 million square feet. And so the $450 million is actually a great deal. But now you have some context relative to our other buildings. That being said, the other questions I'm going to leave with Patrick.

We're not breaking down the cost, but in there, there's obviously the building, but you need to think about what's inside the building as well. In terms of racking, conveyor, material handling equipment, so on and so forth. All of that is included in our 450 number.

Okay. And what's the return on invested capital that you expect to achieve on that investment?

Look, I mean, all we mentioned is that, you know, there's substantial cost savings and it justifies the capex and it easily clears our internal hurdle rates.

Okay. So, Patrick, can you refresh me? What's your internal hurdle rate?

I mean, think of, you know, this is not something that is new to you. I mean, every company has, you know, their own cost of capital, and that would be similar to what we view as, you know, a minimal hurdle rate we need to achieve on projects.

Yeah, because I see your return on invested capital is 20% now. So would that be dilutive to that return?

So a few things. One, you need to view this as a critical infrastructure. So yes, there is a financial aspect to it, but there's a strategic and operational value as well to this project. When you also think about the total cost of the building, a portion of this cost is also warehousing that we need to add in any case as years go by. And so a substantial portion of the savings could be attributed to the part of the building that is the DC. So a little complex what I just mentioned, but you need to look at the returns, not necessarily on the full project, again, because some of the warehousing was needed anyways, but rather what brings the exact cost savings.

Okay.

Okay, that's it for me. Thank you. Thank you. Our next question comes from the line of Vishal Sridhar with National Bank Financial. Your line is now open.

Hi. Thanks for taking my questions. Neil, off the top, you said that you felt comfortable that your business proposition was still resonating with consumers, notwithstanding the slowdown, which was called out in advance. But I'm wondering what metrics that you're looking at suggest to you that the sequential slowing of same-source sales growth is related more so to the consumer versus a view that Dollarama has become less competitive, let's say, versus its peer set?

I think just a comp shop answers that question for us. At the end of the day, if we're still equally competitive within the market, then the only thing that could affect our sales is discretionary spending I mean you know that's the reality we see the performance of our competitors we see the offering of our competitors like they see ours and I think it's those things that allow us to feel that way okay thank you for that and with respect to

your plans to look further into different geographies for Dollarama. Given the larger CapEx spend and the intent to maintain your capital return program, does that suggest that the acquisitions outside of the regions currently indicated would be more of a longer-term consideration?

I think that the answer to that question is always a question of opportunity. It's much like the question of How many stores are we going to open a year? If the opportunity arises like it did, for example, for Dollar City last year, then they'll open more stores than the store target. And if that happened to us, for example, next year, then we would have to give a different range of store target and we would take advantage of those opportunities. And so the question of international expansion is not one of need, but one of opportunity. and one where we think our team and our systems can handle it and flourish because of that opportunity and that new challenge. So really, it involves multiple things, but it's never a question of need.

Okay. With respect to the dividend that Dollar City paid in the past, I understand you flagged that that wasn't a recurring dividend and that was more of a one-time situation, but how should we think about it this year and in the years ahead? Should we anticipate a cash flow back to the Dollarama business?

I mean, that's a decision by the Board of Directors of Dollar City, and it's going to be reviewed from time to time, but there's no policy in place.

I see. Would it be reasonable to assume that given the Mexico expansion that that cash will be preserved for that?

I mean, again, it's going to be a decision that's going to be reviewed from time to time, and certainly Mexico in its beginnings will require some capital. So it will require some capital maintained at the business to fund the opening of Mexico indeed.

Okay, thank you. Thank you. Our next question comes from the line of Emily Fu with BMO Capital Markets. Your line is now open.

Hi, good morning. Thanks for taking my questions. So with your new store target announcements and also the opening of the Western DC, we're just wondering what maybe data or signs that have been giving you confidence that maybe you'll be keeping the incremental traffic that you've been getting from the last two blockbuster years And also, secondarily, with the population growth potentially slowing down, what are your thoughts about keeping the top line momentum?

I mean, Emily, you named a few factors, but, you know, as you would have seen in our press release, it's a host of, there's a lot of factors that come into play. You mentioned, you know, population growth being one. But I think it's also on the positive consumer response. It's on the relevance of Dollarama within the Canadian retail landscape. There's payback. There's a lot of different factors that go into there. So it's not predicated necessarily on us maintaining the traffic that we've gained in the pandemic only. It's on a bunch of factors that we've listed in the press release.

I see. Thank you. And now on the Western DC, presumably this will support the growth to your new store target of 2200. But how do you guys factor in future growth beyond that into the consideration of building out this DC?

When we're building these DCs and warehouses, we're obviously taking in the context of the trends of our items, the cube of our items, the trends in our sales, and the amount of cubic footage we need for warehousing and distribution. We're looking at the costs, of course, of land and construction. We're looking at what the transportation costs are and how they've changed across the country over the years. There's a whole lot of factors that go into the decision to decide to build a second node after holding out on not building that second node for almost 30 years. And we just feel that now's the right time because we've gotten to the point where everything is pointing at it being the right decision.

Okay. Those are my questions. Thank you.

Thank you.

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

Yeah, hey, good morning, guys. This is Anthony Bonadio on for Ed. Thanks for taking our questions. So first I wanted to ask about SG&A. I think you guys talked about some SG&A pressure last quarter in the back half of the year, but it looks like cost leverage in Q3 was actually pretty strong and better than most for modeling. So maybe just talk us through some of the puts and takes there and then how you're thinking about cost growth in Q4 as we model that.

So indeed we flagged that there may have been more hours pushed in the second half and I think you know what the numbers you see today is that there were more hours pushed in Q3 but it'll be a little bit more tilted towards Q4 than originally thought. I mean the rest of the performance is you know like we mentioned relates to scaling impact and overall good cost control.

Got it. Thank you. And then just on the comp guidance, I think you mentioned the midpoint of the full year comp guide. That would imply something around 3% in Q4. So can you just talk about the puts and takes there in the comp expectation and then how you're thinking about the impact from calendar shift as we think about the timing of Halloween and Black Friday this year?

Yeah, so in terms of the calendar, the retail calendar, I mean, we mentioned it last quarter that there's two Halloween days that were shifted to Q4. So if you just isolate the notion of impact of retail calendar, those two days is a positive to Q4. But obviously, there's a host of other factors, such as the progressive normalization that we're seeing impacting the Q4 numbers. Now, certainly, if we have A Halloween season, that is, as per our expectations, we expect to finish somewhere anchored around the middle of that range. If Christmas does better, well, then there's a possibility that we do better than the middle of that range. And if the holiday season is not as good as we expect, we might end up a little bit below that range. But as you can see, the next three weeks leading to the holidays are very, very important days for us.

Thanks so much, guys.

Thank you. Our next question comes from the line of Luke Hannon with Canaccord Genuity. Your line is now open.

Thanks. Good morning, and thanks for all of the commentary thus far. I wanted to go back to the Western Canadian Logistics Hub that you guys are going to be building out. So just from a high level, so we understand obviously there's going to be some transportation cost savings as a result of this, and that's why you're going forward with the project. But can you help us understand from a high level, what does the flow of goods look like for those Western Canadian stores today? And then maybe how that changes going forward? You know, is there going to be some goods brought in from the West Coast ports now that'll make its way directly to this DC and then to the stores? Is there still going to be staging occurring in Eastern Canada, just from a high level? What does it look like today versus, you know, three, four years from now?

So, What will change is that there'll be a gradual shift of warehouse goods and distribution for, stores call it, just to keep things simple, half the country will be warehoused and distributed from the Western D.C., half the country will be warehoused and distributed from the Eastern D.C. And the progression to get to the stage where that's the operating factual case is a question of a few years from now, but that is conceptually the idea. And that's where the word redundancy in the opening remarks is just as an added advantage of that fact and the fact that there are cost savings that will come from that efficiency is there will be a redundancy to having the security of two independently operated facilities that can handle both sides of the country if required.

Okay, that makes sense. Thanks. And then, Neil, I wanted to follow up on a comment that you made earlier regarding the tariff conversation. So you mentioned you're paying attention to what's going on as far as the price of goods in the market right now because of what could happen or may happen from a tariff perspective. But when it comes to, we'll say, the availability of product or the number of vendors that you're speaking to, is there greater flexibility there? when it comes to sourcing inventory because now there's maybe more vendors that are willing to source goods into Canada as opposed to the US since it's relatively less attractive. Are you seeing any of that at all?

No, I have not seen that. All of this is too new and too fresh to really have changed flows of goods or interest by vendors around the world. So it will play out, and everyone will be in the same playing field. But to date, we have not seen that be the case.

Okay. Appreciate it. Thank you.

Thank you so much.

Thank you. That concludes the Q&A session. Thank you, everyone, for your participation. This does conclude today's conference call. You may now disconnect, and everyone have a wonderful day.

You too. Thank you.