Dollarama Inc.

All participants, please stand by. Your meeting is about to begin. Good morning and welcome to the Dollarama first quarter fiscal 2026 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 discussions and analysis are available at dollarama.com and 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 of 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 extra 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 June 11, 2025, available on CDAR+. Forward-looking statements represent management's expectations as at June 11, 2025, 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. We're off to a strong start in fiscal 2026 across our key financial and operating metrics, posting 4.9% same-store sales growth as we pursue our Canadian growth plan. The increase in SSS was supported by sustained demand for consumables, but also positive seasonal performance, notably Easter. Looking at the last few quarters, we are pleased with the performance of our overall mix in the context of generally lower consumer discretionary spending in the current macro context. In what continued to be an unpredictable trade environment, we focused on our value proposition and delivered for our customers. This speaks to our fundamentals and that we are hitting the mark with an offering that is meeting customer expectations. On the real estate front, we opened 22 net new stores in Q1, bringing our total store count across Canada to 1,638 stores at quarter end. As a reminder, we intend to open between 70 and 80 net new stores this year, up from our usual target between 60 and 70. With the work accomplished by our real estate team in the first quarter and our robust pipeline, we remain on track to achieve this year's higher target. The Dollar City team also continued to deliver value to consumers in Latin America and to advance its expansion plans. Dollar City opened 12 new stores in the first three months of the calendar year, bringing their total number of stores in Colombia, Peru, El Salvador, and Guatemala to 644. As confirmed last quarter, we are investing in our Mexico market entry starting this year with the first Dollar City stores in Mexico slated to open imminently. This will mark a big milestone for the Dollar City team with our last new market entries being in Peru in 2021 and Colombia in 2017. The team has a strong track record of success entering new markets and I'd like to recognize their efforts and strong execution as it pertains to our entry into Mexico. We look forward to testing our concepts in this large high potential market. Now for a quick update on our proposed acquisition of Australia's largest discount retailer as we pursue a new international opportunity for Dollarama. We are looking forward to a successful transaction closing in the next month given the excellent progress since we announced in late March. The meeting for TRS shareholders to approve the transaction will be held later this month. Following this important step, and assuming that the subsequent Australian court approvals proceed as currently scheduled, we expect to close towards the back half of July. A dedicated team has been working actively in the background on our integration plans so that we can hit the ground running when the time comes. Onboarding the TRS team will be our first priority. We are all very excited to get started on this new chapter of growth. That being said, management remains focused on our core Canadian business and the continued success of Dollar City. Finally, the current and rapidly evolving trade environment continues to impact many industries, including the retail sector. As discussed last quarter, the direct impacts for Dollarama are the counter tariffs imposed by Canada on a portion of the goods we import from the US. These are primarily national brand consumable products. We have been managing this process with the tools at our disposal, including our flexible and agile business model. Our objective is to hold on price for as long as possible for our customers, and we are working extremely hard on this front. Price adjustments are always a last resort for us. We will continue to maintain our relative value proposition and existing price point range. A quarter of the way into the year, macro uncertainties persist, but we are holding our own and effectively managing the current challenges. We continue to focus on the elements within our control, leveraging our strengths to provide everyday value and convenience to our customers. We will continue advocating on our multiple growth plan strategy with our usual discipline. With that, I'll pass it over to Patrick.

Thank you, Neil, and good morning, everyone. In Q1, sales increased 8.2% compared to the same period last year, coming in at over 1.5 billion. Same store sales grew 4.9%, consisting of 3.7% increase in the number of transactions and a 1.2% increase in average transaction size. That's on top of 5.6% SSS in Q1 last year. Looking at SSS trends through the quarter, There was a fair amount of noise during the months of February and March, with SSS then picking up through April. A lot of uncertainty remains that could continue to impact consumer confidence over the coming months, and with the continued normalization of SSS trend, our full-year guidance remains unchanged at between 3% and 4% SSS. Also note that we are lapping a 53-week year. As a result, we expect a negative impact in Q4 as the prior year's Q4 included Halloween sales. This is similar to fiscal 2020, the last time we lapped a 53-week year. Q1 gross margin was 44.2% of sales compared to 43.2% in Q1 of fiscal 2025. The improvement primarily reflects lower logistics costs. We are also seeing lower inventory shrink notably due to our loss prevention initiatives. Our annual guidance range for gross margin of between 44.2% and 45.2% of sales remains unchanged. We expect further positive momentum in our logistics operations, which may be offset by headwind pressure compared to last year, notably from continuing mix shift effects and shipping rates. SG&A represented 15.3% of sales in Q1 compared to 15.4% of sales for the first quarter of fiscal 2025 with better labor productivity. This was partially offset by higher store expenses, and we absorbed costs related to the TRS transaction. Guidance expectation for SG&A as a percentage of sales of 14.2% to 14.7% for fiscal 2026 remain unchanged. EBITDA was $496.2 million, representing an EBITDA margin of 32.6% for Q1. This is compared to $417.7 million and a margin of 29.7% in Q1 last year. It's important to note that this quarter we recorded a $10.4 million unrealized gain relating to the derivative on our equity-accounted investment in Dollar City. This is purely an accounting impact as a result of the fair value adjustment on the dollar city call option, which is likely to fluctuate over time. Excluding the gain this quarter, EBITDA came in at $485.8 million and the EBITDA margin at 31.9%, which is more reflective of our actual profitability this quarter. Diluted net earnings per share increased by 27.3% to 98 cents in the first quarter of fiscal 2026. The impact of the unrealized gain represents 3 cents of Q1 EPS. Our share of Dollar City's net earnings amounted to $40.3 million compared to $22.1 million. This increase is primarily attributable to strong operational performance in our increased equity stake since June of last year. Now onto capital allocation. There were no buybacks in Q1 due, in part, to our shortest quarterly buyback window, coinciding with heightened market uncertainty and upcoming capital needs. We intend to continue allocating a significant portion of cash towards NCIB through the remainder of the year in line with our balanced capital allocation strategy. We also announced today that the Board approved a quarterly cash dividend of 10.58 cents per share. Our CapEx range for fiscal 2026 has been updated to include estimated spend on the logistics hub in Western Canada this year, based on the anticipated timing of certain expenditures. It is now in the range of $285 to $330 million. Year to date, expenditures related to the project have not been material. As a result of this shift, we expect capital outlay for this project to be more concentrated in fiscal 2027. Timeline to commissioning by the end of calendar 2027 remains unchanged. In conclusion, we are pleased with our Q1 performance in the context of a complex environment and while SSS continues to normalize. We remain attentive to continued tariff-related and broader economic uncertainty and its potential impacts on the future path of consumer sentiment. As always, we will stay focused on delivering compelling value for customers and strong execution across the business to the benefit of our shareholders. With that, I'll now turn the call back to the operator for 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 Attell with RBC Capital Markets. Your line is now open.

Thanks and good morning. Neil, if we could start by talking a little bit about the consumer spending backdrop. It sounds as though maybe this continuation of consumers buying at need, but when the need is there, they're buying. Can you give us any color on category performance timing and that sort of thing? And that helps frame the guide for F26.

There aren't any particular categories that stand out other than the consumable categories. Consumables continue to be strong for us in the context that we're operating in. And of course, Easter was considerably better than last year, which helped. But overall, I would say that the market is fairly stable from the perspective of mix relative to the last quarter.

That's helpful. Thank you. And can you make any commentary about what we're seeing for Q1 to date, recognizing that May was not very good weather-wise?

I mean, it's still early, Irene. I mean, May was tough from a weather perspective. But again, the performance of Q2 will be dictated by the next few weeks. So we're too early to tell.

Pray for sunshine.

Well, it's sunny outside now, Neil. So, yay. And it looks like it's not going to rain on the Grand Prix for once, which is great. And then just a question, if I might, on Mexico. It sounds as though you use the word imminent. Can you talk through sort of what sort of a quote unquote proof of concept will look like in Mexico? how we should be thinking about number of stores and sort of results over the next 12 to 24 months in that region?

The truth is you should be thinking about Mexico like we're thinking about Mexico, which is we haven't got a store open yet. In the next few weeks to month plus, we'll have a store open and we'll have our first true sense of how Mexicans in that area, at the very least, like our offering. The market's a more competitive environment than the last four countries, I would say. But we think we bring an assortment and a value that's differentiated like it is in our other markets. And so truthfully, we're super excited, just like you guys are, to see how the Mexican stores do. And if they do well, the exciting part, of course, is somewhat like Colombia, but even more so, it's a significantly large market and has a much longer runway to its lifespan of store openings. So we're excited about that.

Thank you. And then just one last question on Mexico. Are you planning to make any significant changes to the mix in Mexico relative to the other countries in LATAM?

No. Each of the countries that we operate in has a domestic offering, which generally tends to be in health and beauty, cleaning products, and food for the very limited selection of food that we offer in our stores. And that will be the same case for the domestic offering in Mexico. As always, we try to support the domestic you know, manufacturers as much as we can.

Thank you. Thank you. Our next question comes from the line of Brian Morrison with TD Cowan. Your line is now open.

Oh, thanks very much. So probably for Patrick, dollar city sales are up 13% and net income up 52%. But if we look at store growth, it was up higher than your sales, so 17%. So can you touch on the details to the extent possible, what that means for same-store sales growth and leverage? Like I assume same-store sales was positive. And then is there something to call out on scale or normal increments on – or is this just normal increments on warehousing DNA and SGNA?

So on SSS, obviously SSS was positive, so I'm just confirming that. There's a difference with the unit growth and sales growth simply because you need to take into factor the timing of the store openings, but also there's a wrap-up period to the stores. But SSS was positive. With respect to scaling, it's a business that is growing at a heightened pace. We're fairly new in Colombia and Peru, and we're seeing great progress in those countries. And so as a business is scaling, we see every cost line item scaling, whether you think of gross margins, there's fixed logistics costs in there that can scale, and obviously SG&A. So that explains your high leverage as you go down the P&L.

OK, thank you. And then Neil, you had your major spring buying trip between last quarter and this and curious if you've seen any beneficial pricing from your Chinese vendors based upon your vendor overlap with US dollar stores and the imports they face or the tariffs they face on their imports.

So when we were there in April, the vendors were reticent to pass on any discounts or to sell any of the goods that were being held for their American customers. They were waiting to see what would happen and possibly change with U.S. policies. They were right to do so because U.S. policies changed. And in the end, they shipped their goods and it was pretty much back to business as usual. So at the very beginning when there was some hesitation and orders weren't going out, we were able to negotiate some advantage on some FOBs, but overall, I would tell you it was short-lived and not consequential.

Thank you.

Thank you. Our next question comes from the line of Chris Lee with Day Jardin. Your line is now open.

Hi, good morning, everyone. My first question, maybe going back to the same sort of sales during the quarter, I noticed that the basket size or the average transaction turned positive. during the quarter. Wondering if you can provide some colors in terms of what drove that. Was that a mix of pricing and also high unit volumes?

Thanks for the question, Chris. You know, we don't manage the business, you know, basket versus traffic. I mean, what's important to us is the overall SSS. And as you know, basket and traffic generally have opposing effects. But certainly this quarter with a stronger Easter than last year, It was certainly helpful on the basket size in dollar terms.

Got it. Okay. That's helpful. And then my follow-up question, just maybe going back to the very strong gross margin performance, I know, Patrick, you gave some helpful colors as to what drove it. Yeah, I was wondering, the lower logistics cost, can you maybe deep dive a little bit in terms of what's happening there and how sustainable is that benefit for the rest of the – you mentioned that will continue to be a bit of a tailwind – through the year?

Yeah, I would say it's a host of initiatives that have improved the planning and the balancing of volumes going through our warehouse in DC and it's something that we've been working for the past few quarters. So those gains, we will continue to benefit from that until we actually lap those stronger quarters. So we do expect some benefits as we move forward. in the year. But like I said in my prepared remarks, there's also counterbalancing elements. I talked about continued mix shift and FX and shipping rates that could counterbalance those gains.

Okay, thanks. I'll get back to the queue. All the best.

Thank you. Our next question comes from the line of Tammy Chen with BMO Capital Markets. Your line is now open.

Hi, good morning. Thanks for the question. I wanted to go back to the SSS trend through this quarter. So February sounded a bit softer, March kind of like that too, and you said it really picked up in April. And I'm just curious from what you could at least see, I mean, why do you think that is? Was February, March just a bit of a blip because of the tariff rhetoric escalating? And do you feel now we're kind of through that on how consumer sentiment and behavior is and it's a lot more stable now?

Yeah, we still think the consumer is overall fragile. I mean, when you go back to February and March, we all saw the data on consumer confidence and it was at an all-time low. So that might have had an impact on consumers' willingness to spend. But as we move through the quarter, we did see a resilient consumer in the back half, which led to better performing Easter sales as compared to last year. But we do want to highlight that we do sense the consumer being fragile and with all the uncertainty in the market, very hard to see how that will evolve.

I see. Okay. Got it. And two quick ones on Dollar City. In Mexico, I'm actually curious how you're thinking about that country over the next couple of quarters. I know you're currently not in there yet new stores coming imminently. We're seeing some on the macro backdrop for Mexico a bit soft. So don't know if you agree with that or if in that in any way impacts how you're thinking about cadence of launching the store openings and the offering you're thinking of having there.

No, it doesn't change anything. I mean, we're staying the course and, you know, when we enter a country, we're thinking about, you know, the very long term and therefore, you know, periodic changes doesn't impact how we're thinking about it. So, you're correct in saying that, you know, our first store openings are imminent and, you know, we hope to open a handful of stores in year one, assess how that's going and determine at that point whether we want to ramp up, you know, the store openings in the country.

And my last one is for the existing Dollar City business. So it was about 12 new stores this quarter. It's a little slower than recently. When you think about your full year plans for those existing four countries, should we think that they'll accelerate in the coming quarters and that will be more back half loaded? Thank you.

I mean, we don't provide annual guidance on store openings at Dollar City. As you know, opening real estate can be lumpy from time to time, and therefore I wouldn't read too much into that.

Okay, thank you.

Thank you. Our next question comes from the line of John Zimparo with Scotiabank. Your line is now open.

Thank you very much. Good morning. I wanted to ask about SG&A, and in particular, you mentioned lower labor costs as a favorable driver. I wonder if you can elaborate a bit on this, just because presumably you're seeing some increase in wages. So it seems like that implies a meaningful reduction in labor hours. And I wonder where that's coming from, if you could talk about some of your broader initiatives to reduce labor hours.

Yeah, so we're really referring to the comparison to last year, where last year, you know, we injected additional hours for some specific add-off replenishment projects, which we didn't have to do this year. So that's what we were really referring to, John.

Understood. And then secondly, on the traffic number, this continues to be relatively robust. I wonder what level of insight do you have on are you gaining new customers or are you seeing existing customers frequent more often and just what level of visibility you have on that?

We'd love to know, John, but as you know, we don't have data specifically on the consumer. The data that we have is on our products and the throughput of those products, but we don't have full visibility on our actual consumers.

Okay. Fair enough. If I could sneak in a modeling one, can you share what the transaction costs were from Reject Shop in the quarter?

We don't disclose it, but you could assume that it's standard for an M&A transaction.

Understood. Okay. I'll pass it on. Thank you.

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

Good morning. Thank you. I just wanted to follow up more a bit on the gross margin. And specific to Q1, did sales mix net out to a positive or a negative? Consumables are obviously lower margin and continue to lead the growth, but seasonal was also better than last year. So was sales mix a headwind or a tailwind in Q1?

It was actually neutral in Q1. I mean, we call out consumables performing well, but we also called out seasonal performing better than last year. So actually both essentially neutralized the impact on the gross margin.

Okay, great. Thank you. And then I guess just with regards to the outlook, you highlight sales mix as sort of the first of a few factors. that could potentially present some challenges to gross margin throughout the balance of the year because I think the guidance even at the top end essentially implies flat year over year for the balance of the year. So I'm just trying to understand that a little bit more and is that essentially caution on the performance or how you think seasonal demand could evolve just given consumer uncertainty?

I think it reflects the fact that we see more negatives, headwinds, than positives. There's still a fair amount of uncertainty when it comes to how the mix is going to evolve. Is it going to continue in this direction or not? Even though we're hedged on an FX perspective and we have long-term contracts on the shipping side, you know, heightened spikes and movements over time could have an impact on our overall gross margin. So it's a reflection of a fair amount of unknowns and high volatility in this current context.

Okay, got it. And just following up, I think it was Brian was asking about Dollar City, Seamstress sales trajectory, and actually the sort of pace of ramp up. I'm just curious, Does the pace of ramp-up today look different than the pace of ramp-up, you know, maybe three years ago?

Sorry, you're talking about all the current lifetime business you're not referring to? Yes. Yes, sir. I wouldn't – I don't see any different trends in terms of ramp-up. It's really been the same, you know, steady as we go, frankly. Okay.

Yeah. Okay. And then just sorry, last one. I know this is small, but just curious, the decision to exit the sale of case goods for the website, I'm assuming that's just related to sort of demand, but maybe just confirm that. And then what kind of savings would you expect in terms of your supply chain?

So the costs of the entire infrastructure were minimal, so I expect nothing to be hitting the bottom line in any way that will... that you'll see, but the reason we did what we did was once we started to offer our goods through third parties by the unit, the volume, which was really concentrated as a service to our customers that wanted to buy by the case, went down even further, and with all of the other projects that were focused on And the fact that we have the entire infrastructure now, and if we ever had to put it back up for any reason, like, you know, God forbid another COVID, it could be up within a week. And so, you know, I wanted that functionality. We have that functionality. At the moment, it wasn't a functionality worth, you know, maintaining. So we took it down because our customers are serviced through our third party platforms for online shopping. or e-com shopping and I want the team focused on Mexico and Australia and all the other exciting things, the Calgary warehouse, et cetera. So that's mostly the reason.

Yeah, understood. Makes sense. Thanks and all the best. 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. Can you comment on D&A and what may have drove a lower DNA, at least versus our expectations. Was there an assessment to review the depreciation lives of your assets and how should we think about that going forward?

Yes, so we do highlight that in our MD&A. We did have a modification with respect to the useful life of certain assets. So, on an annual basis, we always reassess accounting policies to ensure that they're still appropriate. As such, we updated, like I said, the estimated useful life of certain classes of assets based on the current use of such assets.

Okay. Thank you for that. Thinking about the Mexico startup and the 10 to 20 million losses, how much of that was in Q1 and how should we think about that through the year?

So there's a ramp up of those costs throughout the year. I would say in Q1 it was fairly minimal, but we do expect it to ramp up in the next few quarters.

Okay. And can you comment on inflation in your basket and at least how that's trending?

Unfortunately, we actually don't comment on the pricing aspect or the inflation within our basket, Vishal, as you would know.

Okay, and maybe squeezing a quick one here. Easter was stronger, I'm going to say better than expected. You can correct me if I'm wrong, but was that due to overall market strength or was that due to your merchandising approach this year?

I would comment on whether it was better than we expected. I think what we're commenting on is, if you recall last year, it was a fairly weaker, even weaker environment. But also, remember last year that because of the calendar, Easter was at the end of March. And this year, Easter was on April 20th. So we did benefit from additional sales days. So I would put more emphasis on that.

I feel the timing benefit. Okay, thank you.

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

Hi, good morning and nice quarter. Starting off question on pricing and how you're thinking about pricing for the year, given some of the puts and takes, including the fragile consumer that you talked about. I'm curious if there's any temptation to sort of play offense from a pricing perspective and maybe look to accelerate some share gain?

No, not at all, actually. As you know, our strategy is always a price follower strategy and we'll go with what the rest of the market does. But there's no direct thought in terms of changing our pricing strategy to gain market share.

Okay. And I want to ask you about traffic. You know, historically, Dollarama's comp has been driven, you know, a bit more by basket than traffic. But the last few years, traffic's been very strong, obviously, including, you know, this quarter where you're lapping a multi-year hard to compare. Do you think anything's changed with, you know, the business? Is this trade down, you know, value seeking consumer behavior? Just curious as to how you're thinking about, you know, the drivers of traffic and the sustainability of what you're seeing there.

Yeah, so we actually were pleased with, you know, more Canadians coming into our stores and buying more units. So we think that's a positive sign. Now, certainly the pandemic and coming out of the pandemic was certainly challenging. helpful in the sense that not only the consumers were looking for best value and we were there for Canadians, but also helping other demographics of Canadian population also discover the Dollarama value proposition. So we've said, and this is many quarters ago, but we've also been able to increase our appeal to higher income Canadians as well.

Just one quick follow-up on the startup costs on Mexico. When do you think those costs sort of peak? And then how quickly do you think you can start to recapture that as we think about the out year?

So we did highlight on the prior call is we're ramping up from scratch. So we need to be patient with the moment that we will start hitting an inflection point. Now certainly we do see losses this year, next year, and it may be losses for a third year before we even think about breaking even. So I'll reiterate that we need to be patient with when and if this business will reverse losses that we're currently recording.

Great. Thank you.

Thank you. Our next question comes from the line of Martin Landry with Stifel. Your line is now open.

Good morning. Congrats on your results. Lots of my questions have been answered. You know, maybe looking back at your large investment coming up in Calgary, is there a – I would assume there's going to be some cost savings on transportation that you're going to realize. Could you help us maybe frame a little bit in terms of savings and efficiencies, what you could expect when the project is going to be fully up and running?

Yeah, so I would go back to some comments we made in prior quarters. You know, we proceeded with this project obviously for some operational considerations, but also from a return of capital perspective. And so when you think about this project as being a $500 million Catholic project, we were able to see a good and acceptable return on this specific project, which mostly stems from savings on the transportation side.

Perfect, thank you. And maybe on a lighter note, Neil, did you stock up on your Canada flags for the upcoming Canada Day birthday?

I think we should be in good shape for Saint-Jean and for Canada Day. I'm excited for both.

Good to hear. Thank you.

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

Thanks. Good morning. I wanted to ask about loss prevention or shrink initiatives. Patrick, you mentioned that that was a tailwind during the quarter, though, I mean, probably lower in magnitude than the lower logistics costs. But can you just frame up for us sort of where shrink is as of now and whether or not you have any more initiatives planned or how well rolled out, rather, those initiatives are at this point and whether we should expect more as far as lower shrink in quarters to come?

Look, we certainly have been seeing a notion of plateauing with respect to the shrink figures, and what we've seen this quarter is a slight decrease in shrink. So we think it's a little early to determine that it's a lasting trend. Now certainly we've been, as a management team, focused on implementing initiatives that go to combat shrink. I mean, we've talked about you know, optimization of self-checkouts in our stores. We've talked about merchandising strategies. But all of this, we think, is bearing fruits. And it's very hard to say, you know, the direction of shrink in the future. We certainly all hope for, you know, lower figures with respect to shrink in the future. But again, hard to say at this point.

Okay, thanks. And then for a follow-up here on capital allocation, I know in the past that there's been this consideration of the earnings yields of your shares versus the after-tax cost of debt when it comes to either buying back shares or paying down debt. And I appreciate the commentary that you have out there that you will resume share buybacks for the rest of the year and you intend to be active there. But, I mean, is it still the thinking of you guys going forward that you'll always keep that in the back of your mind? Or is the point... Or are you at this point now where you're generating plenty of cash between your Canadian operations lot M and then soon to be TRS that you should be able to sort of have your cake and eat it too there?

Yeah, Luke, I mean, you know, I'd say it's a combination of all the above. I mean, certainly that rule of thumb is something we have as a KPI in the back of our minds, but I would say it's one of many that come into the decision of, deploying cash for share buyback.

Okay. Appreciate it. Thanks.

Thank you. Our next question comes from the line of Corey Tarlow with Jefferies. Your line is now open.

Great. Thanks, and good morning. I had a question on new store returns within the context of the fact that you're accelerating your new store openings for the year. Could you provide us a little bit more color on what the returns look like and what you're expecting for this year given the acceleration in trend and perhaps maybe some historical context as well in terms of what these returns used to look like. That would be helpful. Thank you.

Sure. So the guiding light when it comes to store openings is really the payback, the period of payback for the stores. We publicly disclose that we're at approximately a two-year payback on average for all our stores. When we look at and build business cases for new stores, that's the guiding light, really. Certainly, if you look in the history of Dollarama, that figure has come down, and today we are around that two-year average payback.

Understood. Patrick, did you quantify the 53rd week?

Apologies if I missed it. We did not, but from a SSS perspective, it has no impact. I think what I raised in our prepared remarks is please have a look at fiscal 2020. That was the last time we left the 53-week year. It's not so much the additional week that has an impact, but it actually shifts days that are composed in every quarter. So it's a little bit hard to explain over a conference call, but if you have a look at that calendar and what happened back in fiscal 2020, you'll have a better sense of it.

Okay. Thank you very much and best of luck.

Thank you. Our next question comes from the line of Matthew Rothway with UBS. Your line is now open.

Hi, this is Matthew Rothway. I'm from Mark Garden. Thanks for taking our question. I was wondering what component of your gross margin improvement was driven by fixed cost leverage? And if so, you know, is there a certain comp level where you tend to see that leverage?

Yeah, really the component that we saw leverage in our gross margins is really all the costs of bringing the product to the stores. So it's really the logistics cost. So think about warehouse operations, DC operations, and transportation of it. And so there's a lot of fixed costs in there. And as you grow scale, as you have strong SSS, well, those line items scale fairly quickly.

Great. Any comments on what level of comp you tend to see that at?

Not really. I don't have a rule of thumb for that, really.

Fair enough. Moving to your comp performance, any notable differences among the provinces as to strength there?

No, not really. Nothing that stood out, really. It was pretty, still for the moment, pretty uniform across the country.

Great. And then last question. As it relates to same-store sales growth in Dollar City, I know you've mentioned that they were normalizing, much like in Canada. Is that still the case? Any notable gaps between SSS down there and Canada?

No, actually, this quarter was another quarter where the trends were very similar to what we're seeing here in Canada.

Great. Thank you.

Sure.

Thank you. This concludes the Q&A session. Thank you all for your participation on today's call. This does conclude today's conference call. You may now disconnect.