Good morning and welcome to the Dollarama Fiscal 2021 First Quarter Results Conference Call. Neil Rossy, President and CEO; and Michael Ross, CFO, will make a short presentation, which will be followed by a question-and-answer period, opened exclusively to financial analysts. The press release, financial statements, and management’s discussions 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 the assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama’s MD&A dated June 10, 2020, available on SEDAR. Forward-looking statements represents managements' expectations as at June 10, 2020, and except as maybe required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. I would now like to turn the conference call over to Neil Rossy.

Thank you, operator, and good morning, everyone. I hope you're all keeping safe and enjoying some nice summer weather wherever you may be joining us from today. Throughout the first quarter of fiscal 2021, we adapted quickly to an unprecedented situation in order to safely and effectively serve Canadians from coast-to-coast in difficult circumstances. Our focus from the beginning of the crisis has been on keeping our employees and customers safe and delivering on the promise of the Dollarama brand. Recognized as an essential business early on in the crisis, we have operated our stores without interruption except for a limited number of store closures and have done so in full compliance with public health guidelines. The resiliency of our business model was proven by our ability to keep our stores from British Columbia to Atlantic Canada open and well-stocked. I am proud of our 20,000 employees and what we have accomplished together in such a short period of time. With many new work processes and wide-ranging safety measures firmly in place, we are well-prepared to do our part to keep everyone safe as communities across the country proceed with a careful and gradual restart of economic activity. We remain steadfast in our commitment to providing Canadians with affordable everyday products and a safe and efficient in-store shopping experience. With that, let's take a look at some of the key themes of the quarter before I pass it over to Michael to discuss our financial and operating results in more detail. Our first quarter results reflected the direct and indirect effects of COVID-19. The pandemic itself and the measures taken to curb its spread had a significant impact on the shopping patterns of our customers. Sales for the quarter were up 2% compared to the same period last year and comparable store sales growth excluding temporarily closed stores was a positive 0.7%. After a solid start to the quarter through February, we experienced a surge in traffic in early March as customers stocked up amid growing fears, surrounding the spread of COVID-19. We saw a significant uptick in sales of product categories like household and cleaning products, health and hygiene essentials and food products. It comes as no surprise that demand for Easter and early summer seasonal goods, party supplies and greeting cards was lower in these exceptional circumstances. This was followed by sharp decline in-store traffic by late March as a result of increasingly strict measures imposed across Canada. Mall stores that remained open were by far the most impacted, seeing a much more significant drop in traffic than our street-level stores and mall stores with an outside entrance with customers keeping shopping trips in malls to a minimum. Enclosed mall stores represent about 25% of the chain. As mentioned on the last call, we nonetheless, kept as many locations open as possible, so that customers had access to everyday essentials. This was especially important in communities with limited options or where we didn't have a nearby location to redirect them to. Overall, customers were making fewer trips to our stores but spending more on each visit. This is well illustrated in our SSS results for the quarter comprised of a 22.6% increase in average ticket and a 17.9% decrease in the number of transactions. By the end of April, the situation began to stabilize with some provinces announcing and/or authorizing, the gradual restart of economic activity and with customers venturing out of their homes a bit more. However, store traffic continued to be adversely impacted by physical distancing measures in place. These measures remain in place to present day and likely for the foreseeable future. Looking at online sales, we saw a sharp increase, in line with the overall trend experienced in the market due to the pandemic. Keep in mind, that Dollarama online sales which are by the case only, remain non-material to our overall sales. But we are pleased with this uptick and continue to develop our capabilities in this regard, while maintaining our focus on our brick and mortar stores. Looking at the second quarter now underway, we anticipate a very careful and gradual resumption of activities across the country, as public health authorities closely monitor the effects of reopening businesses, services and public spaces. In this context, it is important that, the protocols we have designed and the measures, we have invested in, and implemented over the last three months remain in place. Turning to our store network, we did manage to open 10 net new stores in the quarter, bringing our total store count to 1,301 locations. Please keep in mind, that new store openings are planned well in advance. And that most of these new stores were either ready for opening or close to completion, before the start of the confinement and that construction where it was still allowed, proceeded in such a way that all COVID-19 measures in place were respected. Of our 1,301 stores, 104 were temporarily closed at quarter end. These stores were almost all in enclosed shopping malls and primarily in Quebec. The majority of these stores have since been reopened with the lifting of this measure in Quebec outside of the Greater Montreal area, on June 1st. As of today, only 32 stores remain temporarily closed. At quarter end, most of our stores were operating with at least 10% reduced hours to allow more time for restocking. And due to mandatory Sunday closures, in the province of Quebec. As of today, only 246, of our stores are operating with 10% reduced hours, a measured improvement. As previously noted, supporting our employees and ensuring everyone's health and safety was our priority from the outset of the pandemic. We invested significantly -- significant capital and resources on wide-ranging measures, which remain in place to this day. Those include but are not limited to, the implementation of a temporary 10% wage increase, robust in-store health and safety measures to prevent the spread of COVID-19. Including distribution of personal protective equipment, such as masks, gloves and face shields, installation of plexiglass shield at cash counters, distancing markers in queue lines and directional arrows in aisles as well as the implementation of comprehensive store cleaning and sanitization protocols among other measures. The addition of approximately 450,000 employee hours in stores to ensure the execution of all new COVID-19 protocols. Financial support for employees directly or indirectly impacted by a positive COVID-19 case, with a total of only 20 confirmed store employee cases to-date, since the beginning of the pandemic. New operating procedures, in our distribution center and warehouses such as, health checks, increased sanitization, reduced capacity in shift sizes and distribution of personal protective equipment among other measures. Incremental direct costs associated with these measures and incurred during the second half of the quarter are estimated at approximately $15 million, about $14 million of which is SG&A and the balanced cost of goods. This does not reflect any indirect costs related to lost sales or the impact of a different sales mix. Our performance in Q1 demonstrates the strength of our business model and our strong execution abilities, in a difficult context. It also reflects the continued appeal of our value proposition to Canadians, across the country. Every action we are taking today is intended to protect and sustain the Dollarama brand for the long-term. Michael, over to you.

Thank you, Neil and hello everyone. So looking at the first quarter of fiscal 2021, financial results in more detail, sales increased by 2% to $845 million driven by a higher overall store count and a 0.7% same-store sales growth, excluding temporarily closed stores. Same-store sales consisted of a 22.6% increase in average transaction size and a 17.9% decrease in the number of transactions, as customers reduce the frequency of store visits but purchased larger quantities of goods, at one-time. If we include temporarily closed stores, same-store sales decreased by 2.4% year-over-year. Gross margin was 41.3% of sales, down from 42.1% last year, due to negative scaling effects of lower sales per store, higher sales of lower-margin consumable products and incremental direct cost related to COVID-19 measures implemented, which had a 10 basis points impact. SG&A for the first quarter represented 16.3% of sales compared to 14.7% of sales for the first quarter of fiscal 2020. This variance mainly reflects costs related to additional health and safety measures and temporary wage increases. EBITDA was $213.7 million, representing 25.3% of sales. Net earnings were $86.1 million and diluted earnings per share was $0.28. Capital expenditures increased by $17.3 million to $48 million for the first quarter of fiscal 2021. This increase largely reflects a planned investment in additional self-checkout machines. The piloting of self-checkouts has been an ongoing project for the last two years and we continue to gradually extend it. Additional self-checkout machines will be installed in high-traffic locations across the network to help accelerate the checkout process and free up our employees for other in-store tasks. As of the quarter end, we had just over 50 self-checkouts across Canada and we expect to at least double that by fiscal year-end. We are proceeding with planned capital expenditures where the work can be completed without requiring air travel and as long as all COVID-19 related safety measures can be followed. This applies to self-checkout installations, but also to new store openings and other ongoing initiatives such as security cameras and others for optimization projects. As a reminder, we have suspended guidance for the fiscal year due to the ongoing situation. We will continue to reevaluate this decision on a quarterly basis. So looking now at Dollarcity. At its latest quarter ended March 31, 2020, Dollarcity had a total of 232 stores compared to 228 as at year-end. Currently Dollarcity has three temporarily closed stores down from 40 closures in mid-March 2020. However, strict COVID-19 government measures remain in place in El Salvador, Guatemala and Colombia, including curfews and other measures impacting store hours of operation and customer traffic. Dollarcity's contribution to our net earnings for the first quarter was $2.4 million and was only slightly impacted by COVID-19, since the pickup is for the period ended March 31, 2020. We expect the fuller impact of COVID-19 on Dollarcity to be felt in their next quarterly results. As a reminder, the calculation of the final purchase price for the 50.1% interest in Dollarcity was acquired -- we acquired in August 2019 will be based on 20-month period ending June 30, 2020, so in a few weeks from now. In the context of COVID-19 and its projected impact on Dollarcity sales and operating results, we have adjusted the estimated purchase price from US$ 92.7 million to US$ 80.4 million. An upfront payment of US$ 40 million was already made in August 2019. The balance of the purchase price based on audited financial statements will be paid in our third quarter of fiscal 2021 with available free cash flows. Dollarama also made a US$ 20 million capital contribution subsequent to quarter end to Dollarcity to cover our share of the costs associated with a series of transactions aimed at bringing real estate assets into the Dollarcity group, eliminating existing related party leases and in-sourcing logistics activities. No further capital contributions are expected to be required from stockholders in the foreseeable future. Dollarcity's management is proceeding with caution regarding ongoing projects and is focused on respecting directive in place including health and safety measures. They continue to manage the business prudently and as the situation gradually improves, we'll carefully resume our growth plan. In Q1 fiscal 2021, we did not repurchase any shares under the normal course issuer bid in order to preserve liquidity in the context of COVID-19 pandemic. We also increased borrowings and drew down on our committed revolving credit facility and issued notes under our recently implemented U.S. commercial paper program to further improve our liquidity in an uncertain context. At the end of the first quarter, our leverage was identical to year-end at 2.9 times adjusted net debt to EBITDA. We will maintain our prudent approach to capital allocation as the situation normalizes. The Board has approved a quarterly dividend of $0.044 per share and will maintain its approach of evaluating the dividend on a quarterly basis. Cash flows from operations together with cash on hand and credit available will continue to provide Dollarama with a solid financial and liquidity position. So Neil, back over to you to -- for the concluding remarks.

Thank you, Michael. In conclusion, during the first quarter of fiscal 2021, our teams in Canada and Latin America as well as our customers faced an unprecedented situation. We adapted quickly and accomplished a lot in a very short period of time to serve customers safely and efficiently in these markets. Our business model and supply chain have shown their resiliency in challenging time so has our strong and dedicated team. The relevance of our convenience and strong value proposition to consumers also shown through in every corner of Canada as well as in the markets where we are present in Latin America. As we enter the second quarter and the summer months, we expect shopping patterns to continue to evolve, keeping in mind that physical distancing measures will continue to have an important impact on store traffic. We remain committed to providing our customers with a compelling assortment of everyday products at affordable prices along with a safe and convenient shopping experience. With that, I'll now turn it over to the operator. Thank you.

Thank you, Mr. Rossy. We will now take questions from the telephone lines. [Operator Instructions] And the first question is from Irene Nattel from RBC Capital Markets. Please go ahead.

Thanks and good morning, gentlemen.

Good morning.

I was wondering -- Good morning. Could we just please start with a little bit more color around Q2 to-date? And I know it's really early, but as things have started opening up a little bit are you seeing a little bit more demand for, let's say, some of the more boredom busting or outdoor items, number one? And number two, is there anything you can do about the way new items are displayed or located in the store to facilitate purchase of those kinds of items when people are trying to respect that social distancing?

Okay. So maybe I can start, Neil. So following a volatile sales environment in Q1, we are happy and pleased with the momentum we're seeing in our business right now in the early part of the second quarter. So we are seeing seasonal sales like summer picking up in early Q2. So we -- and as Neil alluded to in the opening text that as the confinement happens this is the type of reaction we're seeing.

That's great. And others, for example, Canadian Tire has talked a little bit about seeing an uptick in sales of boredom busters. Certainly you guys seem to be well-positioned from that perspective at lower -- at sort of more accessible price points. Would you -- when you look at your lineup for seasonal-ish types of items would you agree?

Well, I think -- well I'll give you an anecdote that might answer your question. So in our evolution of training next-generation buyers and building our bench strength, the buyer of summer gardening, watering, accessories et cetera changed last year to this year. And I can tell you that the new summer gardening, water accessories buyer looks like a genius right now and he's ecstatic that his numbers are over the moon. And I told them with all due respect that it's exciting, but since everybody is at home gardening right now it might have impacted his performance a little. So yes, I think that what people are doing at home right now is certainly impacting what they're buying and at what rate. So there's more barbqueing and gardening and games going on at home than there usually is and less travel. But I think that's specific, of course, to this particular time and challenge in life. And I doubt that that's a new trend per se after we've solved the current crisis.

Thank you. And just wondering -- if we just talk a little bit about Dollar City for a moment, sort of, the purchase price provision downward is that purely because of current performance? Have you -- does it change at all, or does the current environment change at all how do you think about the potential?

Yes, a great question, Irene. The -- so in fact what's happening is that -- and if you recall the cost of the investment is formula-based. And so the formula as we've described in the past is 5 times EBITDA. The EBITDA is -- the period covered is for the 12 months ending this June -- upcoming June 30. And unfortunately, the COVID impacted as we stated beginning March, April and May and now June, had an impact on the calculation. So unfortunately for our partners that impacted negatively. So it's strictly formula base, has nothing to do with the potential of Dollar City in the future. And by the way, this adjustment that we are doing on the investment part also triggers a tax impact that we disclosed in our results in Q1, you will see that on the tax line, you will notice that the percentage has increased -- percentage of sales and that's due to a $4.5 million onetime adjustment or impact relating to the adjustment of that investment in Dollarcity. So our corporate income tax is $4.5 million higher because of this. And while I'm on the Dollarcity, I mentioned it in my text, but just want to make sure everyone understood is that, we incorporated -- we included in our Q1 results -- our Q1 period is February, March, April, their – Dollar City's period is January, February, March, so their results that we included in our results, does not include April. And so in our Q2 results, we will be including their April results. So expect that to have a negative impact in Q2 for Dollarcity. So that's what I've wanted to clarify and make sure everyone understood clearly.

And I'd like to thank you Irene for supporting Dollarama by buying your Lucky Mobile card.

Caught out once again. Thank you, Neil. Apologies for that and lots more questions but I'll hand it over to someone else. Thank you.

Thank you. The next question is from Mark Petrie from CIBC. Please go ahead.

Hey, good morning. I just wanted to follow-up with regards to your comments on the performance of Q2 thus far, aside from the categories where you've seen a big surge in interest related to the home and outdoor play, have there been sort of other significant changes in shopping patterns, in terms of which categories you called out seasonal recovering I guess from probably what was a pretty tough Q1? And then also, you also called out traffic as being -- continue to being under pressure. If you look at sort of the traffic trends for the non-mall stores have those changed materially over the last kind of six weeks from the end of Q1?

Well we've just reopened as we mentioned some of the mall stores. During Q1 we -- the last time we spoke in Q4 at that time we announced 55 closures. That went up during the quarter to 104-ish. And now is back down to 32. So, one for those stores that are reopening you've got some positive traffic kicking back in obviously. But I mean, it's a slow pickup where we're just beginning to see that. But I think people are still -- what we see is still caution. In other words, people not coming as often but buying more at a time. I think those are the -- what we're seeing right now.

Okay. And any other commentary about the category performance or where you've seen ups and downs over the last little while?

I mean as mentioned party is down. Greeting cards are down. The normal things that you would think that people are doing less of where large groups of people are necessary to generally to do those are down. And other things, I guess have taken their place and are compensating and are stronger than normal like a lot of our toys and summer toys, pool toys, gardening stuff like that.

Okay. And as you've sort of been planning your assortment for fall/winter and then I guess even into 2021, how has this experience sort of affected that process? And just sort of thinking specifically about mix, but obviously interested to hear any other comments? How do you sort of plan for how long these sort of impacts may last?

So there are two parts to that question. The first part is, the question of whether Halloween and Christmas will be normal, not normal. There'll be parties, no parties. There'll be a million kids at every front door or not. And the answer is nobody knows the answer to that question. And so, we are going to continue with the business as usual approach. If everything is back to normal fantastic, we'll be in a great position. And if it's not, then we'll have a bunch of Christmas and Halloween goods to carry over until the next year. And we're being more conservative how we buy the consumable things like the chocolates and the candies. But for the other stuff, it can last another year, it's not time sensitive. And so, we're going to take the risk of having too much holiday season goods in order to be sure that we have the goods, should things get back to normal. That's one piece. The other piece is, will people continue to buy hand sanitizer and disinfecting wipes at the mad pace that they've been trying to get them for the last several months go forward, once there's a vaccine or another solution to this crisis. And again, nobody knows how stringent people's mindsets will be post a solution to this problem, where they'll have a different default level of sanitary habits and protocols or not who knows. So, we are doing the best we can to put ourselves in a position that isn't overcommitted or under committed and taking the best educated guess as we can. But there are many questions that no one has an answer to. And therefore, we're simply doing the best we can to take our best educated guess on what the right way to handle them is.

Yes. Okay. I appreciate that. I guess, you commented that you expect to continue to invest in the value proposition to consumers. But I think also times you guys are a fast follower in the market when it comes to prices. So, is that a comment in that outlook that you will be holding price or investing in value, is that your respective of the competitive environment, or were you just simply highlighting your expectation that the market is going to remain competitive and just limit price increases overall?

So, that was more of a temporary sensitivity to the current pandemic situation. We don't want to be taking advantage in any way of our customers and we've taken on the responsibility of having been kept open as an essential business and a very, very, very let's say serious or responsible fashion to the best of our abilities. And regardless of what other retailers are doing, whether they're charging more, because they can, because there's a need, we feel we wanted to stay true to that responsibility. The question over the long-term of nonessential goods, we continue to follow the philosophy. We've always followed which is to be a price follower and not a price leader. And if the cost of goods goes up because the dollar is weaker or a million other things that affect what costs affects the cost of our goods. And therefore the retailers that we have to charge, we will follow the market and make sure that we remain competitive. But we can't simply absorb higher costs forever. Obviously, at some point, they get passed on in some form or fashion as conservatively as we can.

Okay. Thanks. And then just last one. With regards to the elevated costs in the period, I'm just wondering, if you can give any more specifics about the buckets of the $14 million of SG&A costs. Obviously, it's mostly labor, but maybe a number? And then also more broadly, I'm just curious, how you're looking at those elevated costs? How sticky you think it will be? What will go away? And how you're thinking about sort of some I guess semi-permanent changes to your cost base and how you operate be it in the DC or in the stores?

Okay. So the -- so we told you that the $14 million of G&A, the majority of that is labor cost. In fact, I'd say $13 million is labor and $1 million is equipment, plexiglass, hand sanitizers, mass, gloves, the whole kit. Now -- and the $13 million includes the 10% bonus and the greater -- the shift that we created in every store. So, all of that is a part of that cost. Obviously, that's going to continue into Q2. And so -- and we will highlight those again for you at the next Board meeting. Maybe the color we can give you short term this is moving into Q2. From a G&A standpoint, if you'd exclude the COVID costs, we expect G&A to perform in the same way or in line with what you saw in Q1, if you also exclude the COVID costs. So, that's what we're seeing right now. For the gross margin portion, we still expect a mix change impact to continue. We still expect an increase in products like, Neil just mentioned that we're not going to pass on to consumers. So that will have a – continue to have a negative impact on the gross margin. And finally, obviously, the COVID costs that impact the logistics mainly operations.

Okay. Appreciate all the colors. All the best, guys.

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

Hi. I guess, this question is maybe a little bit more difficult to answer and maybe you've already alluded to it. But as you're reflecting on what the consumer is telling you during this period of time, obviously the consumer is coming to Dollarama in that period of call it a distress. Are there any signals that you see, you are hearing – messages that you're hearing from the consumer that will cause you to change the way you're doing things maybe a little bit longer term. For example, the consumers are coming to Dollarama, obviously pressured and they're buying a lot in the basket, maybe that's causing you to reflect on maybe we need the price points higher, so we can offer consumers more or the types of merchandise that you offer or your e-commerce offer, any of those types of initiatives?

From the perspective of our bricks-and-mortar, stores, the answer is no. From the perspective of our online operations which are already not the norm and they're already specific to trying to accommodate our customers and bring a different sort of business plan and availability of goods to our customers than simply buying the same goods as they're in our stores, which is not why we built that platform, we've built it for people who wanted a large amount of the goods to not disrupt our bricks-and-mortar stores. We will continue to use that online platform to make all kinds of goods available that we think our customers might be interested in. And therefore, you might see different things tested or tried on the online platform, which will have nothing to do with our philosophy or our approach with our bricks-and-mortar operation.

Okay. Thanks. And just a few other quick ones here. In terms of – there's so many new costs coming into the system and they're hitting not only Dollarama but your colleagues and peers as well. And I know you're trying to maintain certain price points for your consumers but in the more discretionary items are you seeing inflation in the market yet?

I think what we're seeing in the market is inflation on the more essential items to be quite honest and less on the discretionary items and those are the items that we're sensitive not to move on as much as possible. But as a whole, there's been a little movement on the non-discretionary or the discretionary I should say. And the more it moves, the more of course, it allows us to move along with it.

Okay. And on the zero pay, some retailers have started to scale back those initiatives. I know you've given us a time line for that first tranche of zero pay the extended compensation there. Any thoughts on how Dollaramas thinking about that?

Well, we are thinking of it what's best for our employees, for our customers and our shareholders. And all of those three categories are incredibly important but they're all affected by every decision we make. And so we have to remain competitive for our employees to be able to have jobs and be able to provide the goods we have for our customers. And so we have to keep it all in consideration and we're sensitive to all of those parties. So it's a thing we study throughout the year every year for many years, trying to make sure that we're treating our team as well as we can while still being competitive.

Okay. And moving on here a little bit more technical. The inventories were down a bit year-over-year. I know last quarter I think last quarter it was commented that some inventory items were already in motion and there wasn't much ability to control the inventory at least if I recollect right. Just wondering if the inventories were down because there was some managing of working cap, or were there other factors at play?

No I think it's just timing. So there's nothing going on with inventory either good or bad. It's – for us it's more or less business as usual. It's just a timing here of what you see there. So there's nothing to be worried about or to be concerned.

Okay. And I meant quarter-over-quarter for the inventory?

Yes.

But the – and just moving on the last one here was on dividends. I know a Board decision obviously, management is encouraged with trends in Q2 and cash flow still seems to be strong. So I guess if you had to put on – good to put on the head of the Board, what do they need to see to get this dividend going again in your view and the buyback for that matter?

Well we said during – we just – and as things unfold, we will adjust. But it was key for us to during these uncertain times to freeze a bit the dividend or buying back of shares and just to make sure that -- and maybe over precautionary we'll see, but for the time being we stated that during this period those are elements that we would freeze. And as things unfold and come back more to normality then we'll discuss that again with the Board.

Thanks for the color.

All right.

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

Thank you. Neil, I just wanted to clarify your comments. So, on the 10% wage premium that you've put in place, are you saying that you don't have a view yet on the time line when that may come off?

Well, so far we've announced July 1st and until further notice that is the stance we've taken.

Okay. The other thing I wanted to ask you and Michael about is, on your gross margin, which was down about 80 basis points during the quarter, which I thought was a good performance given the real category shift you would have had into consumables. So I'm just wondering if you had any further comments about the gross margin beyond what you've said already anything that could have positively impacted it. Or any other color you could put on that?

Sure. So, we -- so out of the 80 bps, you've got 10 bps related to the COVID. The other 70 bps, I would almost split half and half scaling and mix.

Okay.

And there's a bit of cost also -- cost increase that we did not pass on, but it's mostly mix scale and last a bit of cost.

Okay. And Michael the last thing I wanted to ask you, you know how like every once in a while I don't know if it's every year or every two years use that consulting firm who kind of does an economic demographic study by all the submarkets across Canada and you come up with a view on store count. When is your next update for potential store count for Dollarama in Canada?

Yes. So that would've been -- that would be like this year, but right now because of what's going on with the COVID, we just want to make sure that we understand the dynamics coming out of this. And then once we're comfortable with that, we'll at the appropriate time come out and give you more color.

Okay. That's all I have. Thank you.

Thank you.

The next question is from Brian Morrison from TD Securities. Please go ahead. Mr. Morrison from TD Securities, your line is now open.

Hi, there. Sorry. Neil, can we just go back to price inflation? I want to understand or clarify exactly what you're saying here. So, we've noticed a handful of price increases in recent days on specific items and confirm that with store employees. And Michael's going to continue to be a headwind in Q2, but I'm really curious if you've started to responsibly take price recently as you see things such as FX forthcoming.

Right. So, it's all relative. The relativity of the number of price increases that we are doing now relative to what we do normal course of business or others do normal course of business is at an all-time low. Is that to say that you won't see any? No, definitely you'll see some. Where vendors have put through a large increase in our cost. And I can think of many items where the costs have gone up by 20% to 40%. And I can think of some items where they've gone up over 100%. We will be passing on some of those increased costs to our consumers. The question is more where the market is going up and we have a decision to make do we or don't we and we can keep our existing price particularly on all of the essential goods, we will hold our price and not take any markup.

So as we go forward will your price increases as we get into fiscal 2022, do you believe that they are going to be positive neutral to your gross margin?

Honestly, that's something I have to watch and see. It's not -- it's less dependent on us than it is on the market. We need to remain competitive. The market goes up, we will go up, because it means we're all absorbing the same higher costs for multiple reasons.

Okay. If I can ask a question on Dollar City, please. Can you just maybe just outline the seasonality of that business? I thought it was flatter than that of Dollarama, but just based on the Q4 and Q1 results clearly I'm incorrect.

Okay. Yes. The -- so for Q1, it's more or less the same as Dollarama except for April like I said, because there's a -- they can have…

Yes, an offset.

An offset right now between their quarter and our quarter. So like I said, we picked up their January, February, March results and not their April results. Our results are February, March, April, too. So, for Q1, it's more or less, the same Q2, Q3. Q4 is higher. But again, there's that month difference in Q4, because they've got October, November, December; we have November, December, January. So, there's an offset here between ourselves and them. But typically, if you look at it on a monthly basis, it's more or less the same as we have.

Okay, understood. And last question. In terms of your store count at Dollarama for the end of the year, can you provide us sort of an updated target on where you think that could land?

No. I mean, we're not giving any targets, Brian. But, I mean, you can see today going through the worst of it. We opened 10 stores compared to 11 last year. So, I think, it's going well. Maybe we'll give you a bit more color next quarter. We decided not to give out more now. But to date, it's going very well.

Thank you.

Thank you. The next question is from Chris Li from Desjardins. Please go ahead.

Hi. Good afternoon, everyone. Just a few quick questions hopefully. First one, Neil, you guys increased the number of SKUs by almost 1,000 last year. I guess my question is how are they performing so far? And does the higher number of SKUs increase your flexibility to perhaps launch higher price points in the near term?

Well, the first part of your question is that those SKUs are performing well, and in line with the overall mix. The second part of your question is that the bandwidth of more SKUs has nothing to do with the discussion about raising prices. They're entirely different questions. We can raise prices whenever we wish. We just choose not to for the time being. And what it does allow us to do over the course of time is, as our logistics and supply chain and replenishment systems get refined, it allows us in the same size retail boxes to have more SKUs without increasing our logistics costs for managing them, and that's why it's a slow, but steady procedure.

Okay. That's great. That's helpful. And then, do you expect to see more attractive real estate opportunities during this recession as other retailers might be shutting down? And therefore, is there a potential for Dollarama to perhaps accelerate your new store openings over the longer term?

Well, God willing every landlord in Canada is listening to your question and something good will come from it. But, for the time being, we remain diligent about finding and assessing every possible location that would be interesting to add to our current mix, based on geographies and population densities and all the other things that you would think one has to consider when looking at new store locations. Hopefully, without sounding insensitive to those locations that were occupied by other businesses, hopefully Dollarama will have opportunities that it hasn't had in the past. And that's being studied on a day-to-day basis by our real estate team. And if we're fortunate, the opportunities will be there more than they have in the past. And if we're not fortunate, it'll be what you've seen for the last number of years, which is still a very aggressive growth pattern that we're doing our best to continue.

Okay. That's great. And maybe just one more real estate question. Was the company able to obtain any type of rent relief? And then maybe secondly, are you able to review leases perhaps on more favorable terms given the current environment then pre-COVID?

So, the second part of your question, we don't disclose. On the first part of your question, I'm quite proud of the fact that regardless of what we could have done or what others did, we made a decision from day one to be sort of perfect corporate citizens and pay every landlord every lease, every penny whether that store was open or closed. So, even if the mall was closed, for no fault of our own, we continue to pay rent everywhere and absorbed all the costs of the pandemic in those locations and did not go back to the landlords to try to get anything from them. And I think part of our philosophy was one, it was our responsibility to do so if we could. And for two, that we hoped our partners on the landlord side would acknowledge the efforts we made now and go forward when they are resigning leases and renewing leases, how good we were as partners.

That's great. And then for the 50 stores that have self-checkouts currently can you share with us what is the average scan rate for those stores?

We don't disclose that Chris. But maybe what we can say is that it did increase during the COVID period. That's for sure. But otherwise no, we're not disclosing that information right now. So, it was an interesting project to start with. And I think our customers have really told us in the last little while in particular that they liked the idea and sort of -- there was much more buy in to the concept of checking yourself out than there has been in the past. Even if it made sense in the past from a customers' perspective, they like the idea and started to use it more than ever. And so in the end, the cash out process is a customer-centric process. We need to be sensitive to how to best serve our customers and they're telling us that they like that process very much. So. we're working on a nice balance of continuing to rollout and improve our self-checkout processes make sure that our employees who manage those self-checkout machines and are available to ensure that those processes are well executed are there for the customer. And so we're trying to keep a nice balance between customer service and making sure that we have the correct employee hours and the correct people at those machines to help with that service.

That's great. And then my last question is just on G&A expenses. I just want to confirm Michael I guess this Q1 if you exclude COVID G&A expense dollars were largely flat compared to last year. Did I hear you correctly that for Q2 it's going to be the same trend?

Yes. Yes.

Okay. And the reason it was flat was it flat mostly because of reduced hours and temporary store closures, or were there initiatives that you guys accelerate to manage the expenses better?

Yes. Well, to be clear and transparent there is -- it's flat with last year. There's some noise there related to COVID-19, but it also takes into account the fact that it's flat regardless of the downscale. So, -- but there's noise in there to be more -- not to lead you on a wrong path. So, let's just say that overall Q1 was good. We've got productivity initiatives in place that are -- and accelerating them with what you saw on the CapEx side in Q1 to help us offset any normal inflation for this year. So, that's moving along very well.

That's great. Have a great summer and continue to stay safe and healthy.

Thank you and you too.

Thank you.

Thank you. And the last question is from Patricia Baker from Scotiabank. Please go ahead.

Thank you and good afternoon everyone. Neil in your opening remarks you did talk about the fact that you had a strong online sales and that's not surprising. But I'd be really curious to hear which categories or which products did you see demand for in the bulk sell?

Sure. So, we did the best we could to make our essential COVID items available online. And there was a very strong following of customers whether they were individuals or small businesses or institutions that took advantage of that platform to help them solve their issues in sourcing PPE. There was also a very nice uptick in crafts and other project items for people who had to become I guess teachers to their children when their children could no longer go to school things of that nature.

Okay. Interesting. And then Michael I don't know if you'll answer this, but just on that question of store growth in 2020. Can you talk about how many projects are currently in the second quarter are currently still under construction?

No. But again in Q1, we have fared very well in the worst of the pandemic. So, hopefully with things getting common and common, it just makes it easier going ahead.

All right. Thanks Michael.

All right.

Thank you. We are unfortunately out of time and this will therefore; close the call at this time. So, thank you. Once again the conference has now ended, please disconnect your lines at this time and we thank you for your participation.