Neil Rossy - President and CEO Michael Ross - CFO

Mark Petrie - CIBC World Markets Kenric Tyghe - Raymond James Irene Nattel - RBC Capital Markets Derek Dley - Canaccord Genuity Vishal Shreedhar - National Bank Financial James Durran - Barclays Anthony Bonadio - Wells Fargo Brian Morrison - TD Securities Keith Howlett - Desjardins Securities Peter Sklar - BMO Capital Markets Neil Linsdell - Industrial Alliance

Good morning and welcome to the Dollarama Fourth Quarter and Fiscal 2018 Results Conference Call. Neil Rossy, President and Chief Executive Officer, and Michael Ross, Chief Financial Officer, will make a short presentation, which will be followed by a question-and-answer period open exclusively to financial analysts. The press release, financial statements, and management's discussion and analysis, are available at dollarama.com in the Investor Relations section as well as on SEDAR. 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 statements will materialize and you are cautioned not to place undue reliance on these forward-looking statements. For additional information on these assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A dated March 29, 2018 available on SEDAR. Forward-looking statements represent management's expectations as at March 29, 2018, and except as maybe 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 over to Neil Rossy.

Thank you, operator, and good morning everyone. Let's start with an overview of the key highlights and announcements from this morning. First, we reported solid financial results with an increase in sales, net earnings, and earnings per share, both for the quarter and the full fiscal year 2018. We were particularly pleased with the sales results, given the strong comps over the last two years. Same-store sales in fiscal year 2018 increased by 5.2% over and above SSS of 5.8% in FY 2017 and SSS of 7.3% in FY 2016. Second, we opened 65 net new stores in fiscal 2018, which was right on target. Our store network is now 1,160 stores and growing. Strong SSS and the success of new stores reflect the positive customer response to our offering and our compelling value proposition. They also reflect the strength of our business strategy and our ability to execute. Third, we announced that we will be expanding our existing distribution center in Montreal, Québec to address our growing distribution capacity needs. We will be increasing the size of the distribution center by about 50% to approximately 500,000 square feet. We have made the required property acquisitions to move forward with the project with the purchase of two adjacent properties as well as the purchase by Dollarama of the existing distribution center which was previously leased. As a result, Dollarama will own its distribution operations in their entirety. The expanded distribution center, scheduled for completion by the end of fiscal 2020 or by the end of calendar 2019, will provide the infrastructure to support our store network growth to the previously targeted, stated 1,700 store count by 2027. We expect the existing distribution center to continue normal operations throughout the construction phase. Fourth, the Board approved a 9% dividend increase to C$0.12 per common share, justified by our healthy balance sheet and strong free cash flow. This is the seventh increase since the introduction of a dividend in 2011. Fifth, we are proposing a three-for-one share split, subject to shareholder approval at the AGM in June. A share split can improve liquidity and make our shares more accessible to a broader range of investors, especially retail investors. If approved by shareholders and pre-cleared by the TSX, the share split will be effective on or about June 19, 2018. Finally, we announced the appointment of Steve Gunn as Chairman of the Board, effective following the AGM in June. He will succeed our Founder, Larry Rossy, who will not stand for re-election as a director and will be named Chairman Emeritus. Kristin Mugford was also appointed as an independent director effective today, bringing further depth to our Board. Succession planning has been a priority of the Board over the last several years. The objective has been to ensure a smooth transition and continuity of leadership and key roles held by our founder. With the appointment of our lead director since 2009 as the new Chairman, this transition will be complete and we will be able to continue to count on Larry as a mentor and advisor for the management team and as a source of knowledge and insights for the Board. On behalf of the management team, I would like to congratulate Steve and Kristin on their respective appointments. I would also like to express my sincere thanks and gratitude to Larry, who was an inspiration to all of us. We are pleased to be able to count on his continued support in his capacity as Chairman Emeritus. With that, I will now turn it over to Michael to discuss our financial and operational results in more detail.

Okay. So, thank you, Neil, and good morning everyone. I would also like to extend my congratulations to Steve and Kristin. First, looking at the fourth quarter of fiscal 2018, our strong financial performance was once again driven by continued improvements across all key metrics. Total sales were up 9.8% at C$938.1 million. Same-store sales increased by 5.5% over and above the 5.8% increase reported in Q4 last year. Gross margin was very strong at 41.4% of sales, consistent with last year. G&A improved from 14.9% of sales last year to 14.4% of sales this year. EBITDA was up 12.2% at C$253.8 million, representing 27.1% of sales. Net earnings stood at C$162.8 million, an 11.5% improvement over the prior year. And finally, diluted earnings-per-share was up 17% to C$1.45, also benefiting from the accretive effect of the share buyback program. Q4 2018 CapEx increased to C$51.4 million from C$37.5 million in Q4 last year. This increase is mainly attributable to the purchase of the two properties adjacent to our existing DC for C$23.2 million as part of the distribution capacity expansion plan. We will get to the fiscal 2019 CapEx impact in a moment. Looking now at the full-year results for fiscal 2018, sales increased by 10.2% to nearly C$3.3 billion. Same-store sales was 5.2%, over and above the 5.8% reported last year. We improved gross margin to 39.8% compared to 39.2% last year. G&A represented 14.5% of sales compared to 15.5% last year, reflecting the positive impact of store labor productivity initiatives, the benefits of certain cost reduction initiatives at store level, and the positive scaling impact of higher sales. EBITDA as a percentage of sales improved to 25.3% from 23.7% last year, as a result of cost control initiatives as well as the positive scaling impact of strong top line growth. Finally, net earnings were up to [16.16%] [ph] to C$519.4 million while EPS increased by 22.6% to C$4.55 per share, reflecting improved earnings and the accretive effect of our share buyback program. For the full fiscal year, we repurchased 6.1 million shares for a total consideration of C$112.7 million at a weighted average share price of C$133.12 per share. On February 1, we issued senior unsecured notes in the aggregate principal amount of C$300 million, bearing interest at a floating rate of three-month BAs plus 0.27%. The notes have a three-year term and were given a rating of BBB with stable trend by DBRS. Net proceeds of the offering were used to repay variable rate indebtedness outstanding under dollar credit facility which bears interest at a higher rate and for general corporate purposes. Throughout fiscal 2018, we continued the rollout of technological initiatives to improve store productivity and reduce costs. We enhanced in-store mobile applications for tasks accomplished by store associates with handheld scanners, thereby improving the efficiency of store processes. We rolled out several initiatives to reduce inventory shrink. Examples include installation of smart cameras in several stores and improved data and analytic tools to better help us identify and target risk areas. We are also currently rolling out a new cash management process in stores that will improve the efficiency of cash handling activity. Looking at the consumer-facing side, we have been accepting credit cards nationwide since April 2017. After nearly 12 months, the addition of this new payment method is meeting our expectations with incremental sales and related margins exceeding the incremental impact of credit card fees. We also continue to work on the development of our e-commerce platform for bulk sales. This work is ongoing and our objective remains to launch by the end of current calendar year. Now, turning to the guidance for fiscal 2019, the outlook on four key metrics shared with the market in December 2017 remains unchanged. So our net new stores target remains 60 to 70, consistent with last fiscal year. The gross margin range is 38% to 39%. Range for G&A as a percentage of sales is 15% to 15.5%. And the EBITDA range is 22.5% to 24%. All of these guidance ranges are based on a number of assumptions, including the assumption that same-store sales will be in the range of 4% to 5%. Finally, looking at CapEx for fiscal 2019 and the DC expansion, guidance for fiscal 2019 has been revised to a range of C$150 million to C$160 million, up from C$110 million to C$120 million, to reflect the purchase by Dollarama of its existing distribution center which was previously leased. Capital expenditures will be revised again once construction and related costs for the distribution center expansion are finalized. The Corporation expects the majority of construction and related costs to be incurred in fiscal 2019, with the balance to follow in 2020. With that, I will now turn the call back over to Neil.

Thank you, Michael. As you can see, we are not resting on our laurels. We have a lot of exciting projects underway to the benefit of our customers and our shareholders. Since my appointment as CEO two years ago, I have come to appreciate even more the strength of our team and our ability to execute. It reflects both strong leadership across the ranks and a dedicated workforce. This includes our store employees from coast-to-coast, our head office, field management employees, as well as our warehouse and distribution center staff. We are all working together to achieve our collective business objectives. I want to recognize the dedication and a job well done, the proof of which is in our sustained results. With that, I will now turn it over to the operator to take questions from financial analysts.

[Operator Instructions] The first question is from Mark Petrie from CIBC. Please go ahead.

I guess first, I just wanted to ask about the competitive environment, and specifically, are you seeing anything that makes you a little bit more concerned on the gross margin number than you might've been previously?

No. The actual competitive environment is relatively stable. It's always very competitive. And so from that perspective, whether there are new retailers coming into the market and other retailers leaving the market, we're always attentive to all competition. And so, I would say the first answer is, no. With regards to gross margin, we are pretty stable right now from a relative competitive perspective, but there are a lot of moving pieces at this moment in time between the domestic pressures on costs for certain commodities and import pressures on certain commodities and things happening overseas. And so, as long as that continues to affect all retailers at the same time, which it does of course, the competitive environment from that perspective will remain [valid] [ph].

Okay, thanks. And then also wanted to ask about the impact of minimum wage, specifically in Ontario, and obviously one month of that is in effect for this quarter, was that all sort of as expected and how should we think about or how should investors think about the impact of that on your Q4 SG&A?

This is Michael. So that was totally expected. And so, that's the answer to that, for Q4 absolutely.

Okay, I appreciate it. Thank you.

The next question is from Kenric Tyghe from Raymond James. Please go ahead.

Just a busy quarter in terms of new store adds and net store adds. I wonder in that context though if you could speak to your new store productivity in quarter, and perhaps more broadly, how it trended through 2018?

Okay, so you are right, Q4 we had 25 net new stores. In fact, it was in line with Q4 the year before. And the economics continue to be very strong. So, if you look at our final results, the average sales per store are up first year. If you look at prior cohorts at 2015, 2016, 2017, we continue to see a good first-year ramp-up in sales and second year. And our costs to open up stores have not increased from year to year. So, all to say that the payback, the economics are very strong.

Great. Thank you, Michael. That's it for me.

The next question is from Irene Nattel from RBC Capital Markets. Please go ahead.

Just on the subject of bulk buying/e-commerce, would you be able to share with us your current thinking around how you plan on rolling it out, shipping, whether it's going to be more of a reactive or a proactive approach, any color you can provide there?

Yes, a little color, a little color. It continues to be an iterative process even internally. By no means are we e-commerce experts. So we are taking our time and doing lots of beta testing and we are somewhat introducing a new concept, but for Costco in this concept of selling things by the case and not by the units. So, communicating that message is a challenge for us, and so we are working on all those things. As far as how shipping or shipping costs, et cetera, will be charged – were not charged to the customer. It's mostly hammered down but not enough that I'm willing to say that we've put a final stamp on it. So, that remains to be seen before I give you more details on that, simply because we want to make sure before we say anything, as you understand, that we are convinced that it is the right way to start. We are happy with the progress. I mean, it's up and running internally and we're tweaking and learning from the people, the test groups internally that we've been doing our tests with, and as promised, you'll have it and every customer will have it before the end of the year. I'm considering rolling it out in a province or two before doing it nationally to just get more feedback and make sure that we've produced a product that people are happy with. But it's still a work in progress, and again, how big a business it will be is a complete unknown to us, and I guess to the people in your position who are trying to figure that out too, and so that remains to be seen. I think at the end of the day, the way we look at it is, any additional business it brings is a positive thing and it's really meant as a tool to address a customer base that isn't satisfied or being satisfied in an intelligent, useful way to them that need a higher quantity of our product without having to go store to store. Whether that's a person with a party, or the dog groomer who has got a small business, or whatever it is, we're trying to address the person who isn't being serviced in the correct way by our physical locations. And so, we'll continue to update you as we finalize all the details.

That's very helpful, Neil. Would you be able to disclose anything around, some of your current thinking around which categories will it be across the store or will there be certain categories that you have definitely decided will not be included, or will?

No, I think we're going to start with categories across the store. One of the things you learn when you get into this is that if you want to do it with our existing goods, and our existing goods were built for our retail operation, there are certain items you simply can't ship in an e-commerce platform without it being cost-prohibitive. So, if you are buying wineglass at our store and you are hoping to buy 400 wineglasses on our e-com site, it's highly doubtful that will happen because the wineglasses, the way we bring them in for our retail operation, aren't built to handle drop tests for courier companies. And so, there's a bunch of items that will drop off or be added or removed based on the practicality within our system, and that's why it's still a work in progress.

That's great. Thank you. And just one final question if I may, I guess it was on the last call, you guys indicated that you want to get through Christmas before you gave us some idea of some debit versus credit, sort of the combined penetration of the two, the degree of cannibalization, and that sort of thing. Can you share any more color on that?

It's Michael. Yes, I mentioned that last time. And so what we've noticed clearly, and I mentioned it a bit in the script, was that initially we were satisfied if this operation was cost-neutral, and what we have realized after Q4 is that it's been better than cost-neutral. So, we exceeded on that side. We're not disclosing by how much or what that is, but just happy to tell you that it's definitely been better than cost-neutral.

Thank you very much.

The next question is from Derek Dley from Canaccord Genuity. Please go ahead.

Just moving back for a second to the conversation on the bulk buying initiative, can you just talk about the infrastructure that you have in place to support that initiative, whether it would be any general proportion of your distribution center or potentially the new capacity that's coming online that will be dedicated towards bulk buying? And in terms of the distribution on the e-commerce side, can you just remind us like how often your distribution trucks are touching a store per week, just to get an idea of the infrastructure in place?

Sure. So, on the e-com side, when we built our latest warehouse on [indiscernible] in Montreal to build out further warehouse capacity, we took into account that we would have the luxury of plenty of floor space to test the e-commerce platform in let's say a less elegant and efficient way than when we'd do if this becomes a successful business. So it was very easy. We took some square footage at floor level, laid out as efficient a pattern as we could for the picking and shipping, and made sure that it can handle whatever we are about to test and run. And if the business itself proves to be successful or deserves more attention and sophistication, then we have plans and understand how to take it to the next level from that perspective. With regards to your second point, trucks going to the current stores, of course it depends on where the stores are located. Prince George, BC and Decarie Square was just in Montreal 2 minutes from the distribution center have different times for delivery, but trucks are going out to all of our stores on a daily basis. So, goods are being delivered to all of our stores every day of the week, and the question of whether an item is going, the same item is going to our stores every day of the week is a different question, which is, how often does the same item gets cycled to any given store during the normal course of business, and it really depends on the item. So, on very high-volume items, they have much shorter cycle time with regards to a replenishment and therefore they get delivered to our stores much more frequently. And on lower-volume items or smaller cube items, we have a longer replenishment time, so it could be up to three weeks between picking and replenishment. But all of those factors are considered in the algorithms that we run to decide how much to ship, so that the stores are not out of goods. Whether that's three days apart or four weeks apart, that's all taken into consideration in how many pieces we are sending to ensure that the goods are in the stores at all times.

Okay, terrific. Got you there. Really appreciate the color there. And Michael, maybe this one for you, just on the weather impact during the quarter, I know we saw a lot of snow, more so in January than in December, but was there any discernible weather impact on same-store sales this quarter?

In Q4, January I think we could have shown better traffic if mother nature had been a bit more on our side for sure.

Okay. Thank you very much.

The next question is from Vishal Shreedhar from National Bank Financial. Please go ahead.

Just on the mix there, I think some grocers have indicated that in their perspective Dollarama is focusing more on consumables. I'm wondering if that was the case and what your percentage mix is for consumables.

Vishal, I'm just going to answer the fact part, the mix part, and I'll let Neil answer the rest, but the mix is exactly the same as it was last year. So it hasn't increased in terms of percentage of that.

Okay, that's helpful. In terms of intent to move into fresh and frozen, any desire there?

We have no desire to move into fresh or frozen at the current time.

Okay, that's great. The dividend increase was smaller than at least I anticipated and the dividend payout ratio seems to be tracking down over time. Wondering if there was a target dividend payout ratio that investors should look at or how the Board considers the best ways to return capital to shareholders.

The Board considers the share buyback program as the best way. I mean we have bought back close to almost 30% of the initial float at an average price of C$70. So, today that means that the share buyback program has contributed C$3.5 billion to the value of the Company. And dividend is, like I mentioned in the past, that's not – we do and have for the seventh time now increased the dividend on a yearly basis. There is no payout or yield target. It's simply convenient to add C$0.01 to the quarterly number we had before and that was it.

Okay. In terms of DC expansion, will your initiatives also increase efficiency for that DC or is it just using the same processes but just more up?

The purpose of the expansion is for capacity. If you ask me, when a DC is getting close to saturation, is it at its most efficient? I would say, no. And so, by that notion we should be slightly more efficient. But I would say, that's not the purpose of the project, and if that ends up being the case, it's icing on the cake.

Okay, that's helpful. And just a quick one here for Michael, in terms of the sales performance, I think you quantified or you gave us color that January wasn't as hot as anticipated on traffic because of the weather, and that's understandable. But last quarter you also gave us color that there was a benefit from a calendar shift in this quarter. I'm wondering if those two factors roughly netted out.

Yes, that's a good point. Yes, let's assume yes.

Okay, all right, thanks a lot guys.

The next question is from Jim Durran from Barclays. Please go ahead.

Just wanted to go back to the credit card, so are you telling us that the credit card was accretive to average ticket and can you give us some idea as to how accretive it might've been?

So the first part is yes and the second part of your question is, no, we don't give out more information. But yes, it was. So, we were happily surprised that it did contribute more than what we had anticipated.

And Michael, can you give me some idea like how ex the test market penetration has unfolded relative to your experience in the test market, and is the test market still showing increased penetration of credit card today?

Okay, so obviously the big chunk came during the past year. Now we're levelled off, so now it's going to be more normal increases moving ahead. So that's the color I can give you right now.

So, would you describe the adoption of credit card as a payment vehicle by consumers to be a quick adoption and there's kind of like a straight line up and that you expected it will reach maturation sometime over the next 12 months?

Penetration of debit and credit, so plastic, has accelerated during the period more than it had in prior periods.

Okay, that's helpful. Thank you. I wanted to go back to a question that was asked earlier talking about what we call loosely 'square footage efficiency'. So, if we track how your sales growth is performing each quarter and take away the comp store sales number as a rough proxy for the sales growth contribution of new square footage, it looks like this year was one of the weakest we've seen in a long time. Is there something with respect to cannibalization or other factors that would be reducing the contribution of new store openings in their sort of first 12 months?

In fact, no. So, when I talked to you about payback and ramp-up, we factor cannibalization and that's been improving. In the non-comp, you have to factor those Dollar City numbers there which is approximately 1% of total sales. I don't know if you took that into account. But otherwise, sales of the more recent cohorts, F'2015 being one that gives you the full two-year and then F'2016, we notice increase in first year of those cohorts of sales, and even F'2017 for the stores that have become comp, have been doing very well and outperforming the other cohorts.

Okay, that's helpful. Thank you. Last question just on bulk, will you be including bulk in comp store sales performance or is that going to be a Corporate driven initiative and so excluded from comps?

No, it's going to be excluded from comps.

Great. Thank you.

So, if the stores are cannibalized, the current stores that are cannibalized by it, it will show up in reduced same-store sales, and we'll report separately the bulk sale operation.

Great, thank you.

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

This is actually Anthony Bonadio in for Ed. Congrats on the quarter. So real quick just on traffic, you guys saw a sequential uptick this quarter. Anything to point to there in terms of drivers and to what extent was the credit card addition playing a part?

Credit card was not significant to it. And it was in line with what we had communicated over the past five quarters or even six quarters when we had announced that Q4 of last year would be negative and Q1 and that we should see an ebb and flow of the movement of the traffic, and it's exactly what happened in Q2, traffic starting to kick back in Q3 and Q4. So, again, in line with our expectations, no surprise, and that's how we view it.

Got it, that's helpful, thank you. And if I can just get one more in quick, you mentioned you've completed about 400 store layout optimizations in the last call with 600 to 700 left. Can you just give us some quick color around the changes that were involved and, if you can, a sense of how much comp we typically see from something like that?

Sure. So our optimizations generally include putting wall standards on the walls, new cash counters, adding the queue line, and reconfiguring the store and re-optimizing the layout of the store.

Got it, thanks, that's helpful.

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

If I could just go back to an earlier question on the gross margin, Neil, you say that the competitive environment is consistent and obviously through the buying process you have very good visibility in the gross margin well in advance. So if you could just walk me through some of the key factors in the 100 basis point gross margin decline in your guidance of the investment and the value proposition?

Again, it's all about the margin you decide to put on the items and what price point value you are comfortable with comparing to the market. So, as you know, we refresh 25% to 30% of our items every year, and over and above that we can have in a much lower percentage some mark-ups, but essentially it's through that process that we establish. When the buyer set the price point, they look at the level of competitiveness, and so that's how the margin is reflected. And as we told you, it's already very high at 39%, we finished at 39.8%, and so we need to be aware of that balancing value between what's the compelling value and what you put into your – what you retain as a return for the investor.

Fair, but I mean the consumer has told you by the traffic and the basket size over the past couple of years as you've had pretty big headwinds with FX that the value proposition is there. So I'm not sure I understand if the competitive environment is consistent, why you feel the need to invest [indiscernible] just a degree of conservatism?

Sure. So, I'm going to add some color to what Michael said. Beyond FX challenges, both domestically and on an import side, because as you know, a good percentage of our goods come from Asia and the U.S. dollar question of Canadian to U.S. is one hedge, and the other question of course is the U.S. dollar against the currencies in the markets that we buy in. So there's a question there that might affect costs from anybody importing from those countries. There is also a question of increased costs for multiple reasons, whether it's shortages in supply of raw materials and therefore prices go up, or commodities are harder for any given reason, or production challenges for any given reason and any given area of production. And so, if there is pressure on price for all buyers buying goods, then one of the reasons Dollarama might go from what we consider to be internally very high margins that we have today, and always with our core principle kept at the forefront of all of our decision-making, which is, we are in the business of offering great relative value. And so, if there's pressures on price, forgetting the competitive environment here for a moment, then there's pressures on price for everyone. And when those pressures come, there's always the delay or the lag between the cost to the retailer and what they are going to sell it for, and we never want to be the first to react negatively to a higher cost. So, we need considering the special sauces of our business' relative value, we need to wait and watch what the relative value is in other retailers, and if they move their costs or their retails I should say, then it gives us some flexibility to do what you're saying, which is remain highly competitive and have the right margins. But if there are cost pressures on goods being bought in all categories, because that's what happens in the world at times and the buyers have to deal with it, then we have to be more conservative on where that pricing flexibility will be, and we never want to be the leader to go up, we always want to be the leader by being the last to have to go up if we have to go up.

That's fair, Neil. I appreciate that. That makes sense. I'm just wondering, are you seeing any of those pressures currently as you look forward into fiscal 2019?

For sure there are pressures that all buyers and all companies are facing right now. The cost of raw materials, whether it's carton, whether it's steel, they are all going up. It is a challenging time now to be a buyer for any and all retailers and importers of any kind. And so, because of those challenges, as a company we want to make sure that we can be realistic about what we're able to deliver, and the last thing we'd ever want to do is deliver margin percentage and lose customers. And so, we will always put the customer first and then the margin percentage second.

Thank you for the color.

The next question is from Keith Howlett from Desjardins Securities. Please go ahead.

I was wondering why Larry decided to retire early.

I would love to address that one. Of course my father being let's say a seasoned retailer had simply decided to slow down a little. And to give you a little color on what that means, I guess it's the way he rightly deserves. That being said, just so we keep things in relativity, he was still at the office every day of the week and I can tell you for a fact that he put in six hours last Saturday as well. So, it was a six-day work week instead of a five-day work week. So everything is relative when we say, he is slowing down. He continues to enjoy mentoring the teams in his core areas of buying in real estate and he is simply taking a step back but that in fact brings him closer to normal people. I hope that helps.

I was wondering about the real estate and the buying roles that he is most active in, are there any extra people brought in to the buying group or to real estate?

Thankfully, there's not been a need to bring any extra people, and because part of our responsibility and his responsibility as management of a company of our size is that we have the teams in place that we're not relying on any one person. Although obviously a founder and somebody of Larry's wherewithal and competence is hard to replace, but the people that have been working with him in for example real estate and buying have been working with him for, I can tell you, 10-plus years. And so, we're very comfortable with the position, he's very comfortable with the position of the people in his areas, and so he continues to mentor them, continues to enjoy working with them, and thankfully, there are no hires to put.

And then just a question on the Ontario minimum wage, I'm wondering if you've had an opportunity to take specific measures to try and offset that impact in terms of store hours, which I don't think you're changing, or other measures that specifically would offset that?

So, Keith, if you look at the range, the outlook for next year, if you look at the range, it deteriorates at the better end by 50 bps. And if you look at the impact of the minimum wage increase in Ontario, which was the biggest, but we still had or having one in Quebec that's going to be a good size too, up to C$12, so all of that if you factor that headwind and you look at the range we have, there is obviously some offsetting savings that come from these different initiatives and principally from those that I mentioned in the script. So, there is still labor cost opportunities at store level, cash management will bring some, and there is loss prevention going on in Johanne's team, initiatives that allow some work invest in capital, we talked to you about the cameras in the stores, there are training, follow-ups, and so on. So, all these initiatives will be offsetting some of the headwinds, not all, but some of the headwinds this year in F'2019.

Just a question about some of the malls where Miniso has opened stores, and I'm just wondering whether in specific close adjacency you noticed any impact from the opening of a Miniso store?

No, we haven't, not to date.

And then just I had one last question just with Sears going out of business, and I realize most of their price points are beyond yours, but is there any change to your outlook in terms of the categories in the store, like would you look at more for example commodity socks or that sort of thing or any change due to the exit of Sears?

No. We've been selling socks for 20 years, and so I don't think Sears' products and the products that Sears really specialized in unfortunately are things that fit into our price points. And so, really Sears from a competitive environment perspective just really didn't live in our domain at all. And so, other than there being theoretically more dollars to be spent at other retailers, there's really not been an impact specifically from Sears' domain.

Thank you.

The next question is from Peter Sklar from BMO Capital Markets. Please go ahead.

I just have one question, just curious why you haven't talked about Dollar City today and can you update us what's going on in Colombia in terms of store count and how store economics are unfolding? I mean you have been open there for a period of time. So maybe you could provide us with some insights.

Sure. So, Dollar City continues to progress in the right direction. The results of our entrance into Colombia have been in line with the results of our entrance into the two first countries, which is all good news. The execution at store level has been, continues to be very strong, and our ability or variability in fact to find sites continues to be let's say reasonable and not a challenge that's made the entire concept of testing Colombia and going into Colombia any more difficult than we had hoped it would. And so, I would say, so far so good. It would be from a high level the status of Dollar City continues to be I guess mentored and monitored and guided in a direction that will hopefully will make it an interesting thing one day and we'll keep you posted.

And Neil, how many units do you have at Colombia now?

I think it's 11, but it's somewhere in the 10 to 15 range.

Okay, thank you.

The next question is from Neil Linsdell from Industrial Alliance. Please go ahead.

Just a follow-up on what you said about Dollar City, on a same-store sales purpose, how were the sales to Dollar City considered?

We're not ready to disclose because we are under NDA, so there is certain information where we're definitely not going to disclose, but all to say that it's going very well in the three countries. And so, as Neil said, we like what we see. And in terms of whether same-store sales or margins, but we're – to date they are meeting our expectations.

I wasn't actually looking for their same-store sales. I'm just wondering, do you consider, when you do the same-store sales number, is Dollar City included in that or is that separate, [is that one channel, one store] [ph]?

No, we don't own them, so it's zero. So, there is absolutely – the revenues that we have are in non-comp revenues and the revenues that we recognize are only the ones where the products that are shipped to them go through our logistics system. It excludes any purchases that they make directly from Asia.

Right, okay, that's what I was just looking for clarification on. And I mean there's a decent amount of growth coming out of Dollar City, from what we're seeing. Have you changed the number of people or the amount of time that's being spent in Canada to support them or is it all in Dollar City's camp?

No, I would say it's 99% in Dollar City's camp and that the team we've built from day one here to handle that project remains either exactly the same, give or take 1%.

Okay, good leverage. And then just on the international side as well, on the sourcing side, have you seen anything change over the last 12 months say as far as countries that you might focus on for purchasing or any change in the climate in China?

Well, certainly there's not some new country that's come out of nowhere and amazed us all, us, the buyers, and sources of the world. That being said, because of pressures in China in the last 12 months or so or a year and a half on environmental issues and other issues, there is more competitive production trying to compete and compensate for certain categories of goods. So, where I might have been buying our [indiscernible] bags that we sell from China, I'll just move the order to Vietnam. But as a whole, that's a tiny percent of the time, and if goods were coming from Asia, particularly China, 9 out of 10 times, or more, they are still in China and China still remains the most efficient source of supply. But we're always looking and always studying the question that you just asked. I'm going to take this opportunity to correct myself because I had something else in mind when I answered the question before, and I was wrong. The amount of stores we currently have in Colombia, because of our incredibly efficient friends down south that are working so hard, is actually 37 stores open and operating in Colombia today.

That sounds great. Okay, thank you very much.

Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Please disconnect your lines and we thank you for your participation.