All participants please stand by. Your meeting is about to begin. Good morning. And welcome to the Dollarama Fiscal 2023 First Quarter Results Conference Call. Neil Rossy, President and CEO; and J.P. Towner, CFO, 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 remark 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 beliefs are appropriate and reasonable in their circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors can cause actual results, level 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 8, 2022, available on SEDAR. Forward-looking statements represent management’s expectations as at June 8, 2022, and except as may be required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise. I would now like to turn the conference call over to Neil Rossy.

Thank you, Operator, and good morning, everyone. Dollarama delivered a strong financial performance in the first quarter of fiscal 2023, with a 12.4% increase in sales and nearly 21% increase in EBIDTA and over 32% increase in EPS. With the lifting of COVID-19 restrictions across Canada early in the quarter, we were also pleased to see a double-digit increase in customer traffic. This contributed to driving same-store sales growth of 7.3% over and above 5.8% SSS growth in the same quarter last year. Our excellent performance in the first quarter reaffirms the relevance of our business model and unique retail concept in Canada. It also echoes the positive consumer response to our value proposition in a high inflation environment. This is driving particularly strong demand for our broad offering of everyday essentials and consumable products, in addition to our seasonal and general merchandise. Actively managing supply chain challenges, rebuilding our warehouse and store inventory, and making sure stores are well stocked in a timely manner our top priorities. This has been more challenging than ever and we are managing well all things considered. I am impressed by the flexibility, dedication and creativity being deployed by our team to ensure that we deliver for our customers. Inventory is now up year-over-year and our in-stock positions have continued to improve. Despite the inflationary environment, we continue to feel comfortable with mitigating gross margin pressures with the tools at our disposal. This is based on our current visibility from an open orders perspective and our ability to move on pricing where needed, while continuing to maintain our relative value in the market. We are gradually gaining additional flexibility with the introduction of price point up to $5, but never at the expense of our value proposition. The rollout of new price points is now underway with items making their way to stores in the coming days. While this will be a gradual introduction, we are excited to be able to bring back SKUs that were appreciated by customers in the past, but were discontinued because of cost increases, as well as being able to offer new compelling items. We will continue to provide a wide array of products at each price point ranging from $1 or less and up to $5. Turning to Latin America, Dollarcity continues to perform well, generating strong sales growth and a solid net new store opening. Dollarcity entered Peru in May of last year and continues to be happy with the performance of its fourth country of operation. With each additional year of operation and increased store densification, Dollarcity continues to be recognized as the destination for compelling value on a broad range of merchandize much like Dollarama. I am also pleased with Dollarama’s progress on the ESG front with the publication of our climate strategy and an annual ESG update this morning. We approach our sustainability commitments as a journey on which we must continuously raise the bar higher. Committing our -- to our first GHG intensity reduction target by 2030 is a major milestone. We believe in setting measurable and achievable goals that consider our business and operations. Unique role we play in the lives of Canadian consumers and the expectations of our stakeholders. Through all of this, we are always guided by our shared purpose, which is to provide Canadians from all walks of life with convenient and compelling value on every dollar they spend. Our ability to provide affordable everyday products resonated throughout the pandemic and continues to ring true in this high inflation environment. Over the last 30 years, Dollarama has managed through several economic cycles, while pursuing its growth and our relevance to Canadian consumers from coast-to-coast has only grown throughout this time. During these uncertain times, we will continue to deliver on our customer brand promise, while generating sustainable and profitable growth for our stakeholders. J.P., over to you. J.P. Towner: Thank you, Neil, and good morning, everyone. In the first quarter of fiscal 2023, we deliver a strong quarterly performance across all metrics. Sales grew 12.4%, reaching $1.1 billion and SSS grew 7.3%. This is over and above SSS growth of 5.8% in the same quarter last year. For Q1 this year, we saw 14% increase in the number of transactions, coupled with a 6% decrease in average transaction size. This reflects a continued trend reversal from the pandemic and corroborates the fact that when not restricted, customers seeking value, shop our stores in large numbers. It also reflects the strength and quality of our value proposition, especially in an inflationary environment when Canadians are seeking more value for their money. We generated strong earnings growth in Q1. EBITDA increased by 20.9% to $300 million or 28% of sales and diluted EPS increased by 32.4% to $0.49. This earnings growth reflects our excellent topline active gross margin management, a good SG&A performance and a higher equity pickup from Dollarcity. Gross margin was 42.1% of sales, compared to 42.3% in Q1 last year. This slightly lower margin year-over-year reflects a shift in our sales mix, namely strong demand for consumables in a high inflationary environment, which tend to be lower margin products. The shift in mix was partly offset by lower logistics costs at our distribution center and our warehouses in Q1. SG&A came in at 15% of sales, which reflects lower COVID costs. We had $1.6 million indirect COVID costs this quarter, compared to $18.3 million in the same quarter last year. We do not expect to incur COVID costs in coming quarters unless restrictions are reimplemented. Our 50.1% share of Dollarcity’s net earnings was $8.7 million, compared to $3.4 million last year, reflecting a strong financial and operational performance. During their first quarter ended March 31st, Dollarcity opened eight net new stores, bringing their total store count to 350 in their four countries of operation. On the capital deployment front we have remained active on our NCIB with the repurchase of 1.4 million common shares for cancellation. At quarter end, our adjusted net debt-to-EBITDA ratio was 2.74 times, just slightly below our comfort zone of 2.75 times to 3 times. The Board also approved a quarterly cash dividend for holders of common shares of $5.53 per common share. Last quarter, we provided guidance for fiscal 2023 on select key metrics. One quarter into the year, we continue to feel comfortable with the guidance ranges provided, and as such, these remain unchanged. For the first half of the year, we expected the benefit -- to benefit -- we expected to benefit from a favorable sales environment with the lifting of COVID-19 restrictions and this materialized in Q1. For Q2, that has remained the case to date as we comp against in negative SSS quarter last year. This was due to the ban on the sale of non-essential goods in Ontario and impacted over 40% of our stores last year. Looking at our Q2 SSS performance to-date, five weeks into the quarter, we are comping against five consecutive weeks of the ban. As such, our SSS performance to-date, whether compared to last year or on a two-year average basis is not a helpful measure to illustrate our underlying performance. To cut through the noise caused by this ban and exceptionally this quarter, we are looking at our SSS performance on a three-year stack. Based on this metric, second quarter to-date, we are currently pacing at the three-year stack of approximately 12%. On gross margin, we anticipated that supply chain and other inflationary pressures would be felt more in fiscal 2023. This assessment remains true and is factored into the full year guidance range of 42.9% to 43.9% disclosed at the end of March. As a reminder, the impact of the new price point introduction was factored into our guidance range and should be felt more next year as it is a gradual process. Looking at SG&A as a percentage of sales for the year, although wage inflation remains manageable at a consolidated level, we have observed increasing regional pressures over the past few months. As such, wage inflation in fiscal 2023 looks to be more sustained than anticipated. No changes on annual CapEx envelope and we are also unplanned on the new store front, with eight net new stores in Q1 and with a solid store pipeline ahead to get us within our 60 to 70 target for the year. Finally, we also expect to remain active on the NCBI program as part of our commitment to returning capital and generating value for our shareholders. That concludes our formal remarks. I will turn it over to the operator for the Q&A.

Thank you. [Operator Instructions] The first question is from Irene Nattel from RBC Capital Markets. Please go ahead.

Thanks, and good morning, everyone. Really appreciate the update on Q2 performance to-date. But wondering why are now we seeing in terms of the mix of sales relative to pre-pandemic and I am thinking both on the consumable side, but also maybe on some of the more celebration categories or other categories that were depressed during COVID?

So you are seeing a slight change in the mix to more consumables, but partly due to the fact that like most retailers. Our inventories are not in a perfect position. That continues to improve. But there’s no question that we don’t have our full mix to our liking. And we are very happy with the turn over the last few months towards returning to a normal full perfectly assorted store. But for the last quarter, there’s no question that our mix was more heavily reliant on consumables than the normal mix. J.P. Towner: And if I could just add Irene to what Neil just said, strong consumables performance on the kind of general merch and seasonal categories, we are still seeing a relatively good performance, not as strong as last year, but the relatively good performance in the context of, what Neil just mentioned.

That’s very helpful. You mentioned that the in-stock positions are improving. But if you were to think about it on a scale of, I don’t know, 1 to 10, when you look at the sort of the more seasonal products, the non-consumables, where are you now and do you see that normalizing as we go through the next few months?

So our inventory is up year-over-year, which is good. Now when you look at the reason why it is up, a lot of our inventory at the end of Q1 was on water. So what we expect to see and what we are seeing now is, the on water inventory making its way to our DC and gradually making its way to our stores, we expect the inventory position, as we mentioned in March, to be in a relatively good position which we are -- we would be very comfortable with in the second half of this year.

Okay. So, thank you. Appreciate. And that brings me to sort of a related question, which is, obviously we have seen a lot of distortion in retailer results across North America more recently, because of, let’s call it, a mismatch if you will between, when inventory gets to the store, when inventory sells through the store. How should we be thinking of that, in your case, is there any risk that we could get that kind of a mismatch and if it does happen -- and if that does -- situation does present itself, what happens?

Well, we don’t expect to miss a season, like, that’s the most important. We think from an inventory perspective, I commented on our Q2 performance. To-date Q1 was strong. Our seasonal general merchandize categories are still doing, okay, and the circumstances were not as full as we would like it to be. But that situation will normalize and we don’t expect to miss a season as a result of that. Now, the point that’s important is the gross margin impact of what I just said. So in Q1, one of the reasons why our gross margin was only down 20 bps given the mix change is the fact that we had lower activity levels in our -- at our DC. That had an impact of approximately 20 bps to 30 bps on our gross margin, a positive impact. So that’s something to keep in mind as situation normalizes in the second half of the year, our DC and our warehouse cost structure will also normalize as well.

That’s helpful. But and again, last follow up, I promise. Presumably, though, the -- if the mix does shift a little bit more too seasonal, those are naturally higher gross margin categories? J.P. Towner: Yes. But we are still seeing from a consumer perspective a very strong consumables demand. So, ultimately, the inventory will make its way to our stores. But the consumer is always right and what we are seeing at this point in time is consumables is continuing to perform ahead of our expectations.

There was also…

Okay.

… temporary cost inflation on some of the seasonal goods at Appleby for certain seasons, which also changes that a little bit and adds to what J.P. just said.

Got it. Thank you.

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

Hey. Good morning. Thanks. I know product refreshes are an important and ongoing part of your business and looks like you have been quite active with new product introductions and more coming in at the higher price point. So could you just talk about that and I know you don’t disclose it specifically, but can you just give some sort of high level commentary about the mix of goods by price point in the store and how that sits today versus a year ago?

Yeah. I mean, the mix in store, I’d say, has moved in line with our pricing strategy. So we are continuing to be heavily reliant on our lower price points, because we think that’s where customers see the best value and then we have been gradually of course over the past few quarters adjusting our pricing strategy. So naturally there has been a mixed movement towards higher price point, but our lower price points remain a significant percentage of our sales in units.

Okay. Thanks. And then I just wanted to follow up too, just on the comments with regards to the lower logistics costs. So what you are saying is that, that was strictly driven by the fact that, there was less of an inflow of new product into the system and that you are going to see some higher logistics cost through the balance of the year basically as that normalizes, is that right?

Exactly.

Yeah. Okay. And then just another one, I guess, just with regards to sort of the outlook, I mean, obviously, it was a great start on same-store sales for Q1 and there is clearly inflation in the market and in your business. And so, I guess, from that perspective, wondering what held you back from increasing your outlook, particularly on the same-store sales growth?

Yeah. Look, given the macro environment, the macro picture, the global fluctuations, we prefer to be a little bit more patient, see how Q2 unfolds. Q2 is a noisy quarter given what we are comping last year and stay tuned when we release our results in Q2. But for now we would prefer to be a little bit more patient.

Understood. Thanks and all the best.

Thank you. J.P. Towner: Thanks Mark.

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

Hi. Thanks for taking my questions. I just wanted to get your perspective on wage pressures and how you are seeing that unfold? What regions are more challenging and what management can do to accommodate those wage pressures to remain within its framework outlined earlier in the year?

Yeah. So we are seeing wage pressures regionally, particularly in regions where immigration levels are tend to be lower and we have to adjust, we have to pay competitive wages. We are still comfortable with our guidance range that we provided, but there’s more regional pressures that we expected and we are adjusting accordingly. Priority is making sure that our stores are well staffed and so we are taking action to make sure that that happens.

Okay. Can you comment on the regions of focus?

I won’t go into specifics, but it’s regionalize across Canada.

Okay. And with regard to the comp, the strongest comp that Dollarama has posted in some time and I understand there is trending issues on a year-over-year basis that are impacting. But I am wondering the extent to which this comp is due to you are seeing trade down and demand for Dollarama’s products or is it due to inflation or is it just the circumstances on a year-over-year basis with the restrictions. Obviously, all of them come into the mix, but I am wondering if there is anything you would call it specifically that’s driving the strong performance?

I would answer all of the above. So we have seen, first of all, keep in mind that last year’s Q1 was on the back of the start of the restrictions in March 2020 as the inception of pandemic, where we had 0.7% SSS. So when you look at it on the three-year stack, you get to 13% to 14% on a three-year stack SSS. So that’s number one. Number two, I think our value proposition is very well received. We are there for Canadians and our relative value is intact and so when you put A and B together, you get the results that we generated this quarter.

Okay. And can you give us a sense was the pricing in the system, was that materially more year over year in terms of the comps that help substantially on a year-over-year basis?

I’d say, look, there is as -- we had a well-balanced quarter. So there is our pricing strategy, but also you saw 14% increase in traffic, consumers coming back more and more to our -- to the physical retail experience. So it was a well-balanced SSS performance.

Thanks.

Thank you. The next question is from Patricia Baker from Scotiabank. Please go ahead.

Yeah. Good morning, everyone. Most of my questions have been answered, but I just want to maybe dig a little deeper into the inventory situation. And just can you talk to us about where, I know that you expect that you won’t miss a season, that you have inventory in a good position in the second half, but where in the first quarter and the second quarter, what categories were you missing inventory or was it a across the Board? J.P. Towner: So we were lighter on our imports categories, which would naturally tend to be a little bit more towards seasonal and general merchandise. But those categories, as I mentioned, still performed well in the circumstance. But we were light in terms of inventory in those categories. As I mentioned, those inventories are on water making their way through to our DC as we speak and so that will normalize in the second half.

J.P., can you can you tell us how delayed were these shipments, were they significantly delayed? J.P. Towner: I’d say anywhere from six weeks to eight weeks, depending on the shipment and…

Okay. J.P. Towner: …what we are doing -- what we have been doing, Patricia, to counterbalance that, as we mentioned in March, is we have been pre-ordering a lot more goods than we had in the past. So, that -- those pre-ordering will flow through over the summer and so very comfortable about our seasonal in-stock position for the rest of the year.

Okay. Excellent. Thank you.

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

Hi. Good morning, Neil and J.P. Hi, Neil. Based on your opening remarks or comment, is it fair to assume that most of the products at the higher price points will be products that consumers really haven’t seen in a while, because like you said, the costs were too high or new products. In other words, I am trying to guess like the new higher price point product will not be sort of a marketable existing products that we have seen a lot of the product that consumers haven’t really seen in a while, is that correct?

So certainly throughout the price point, some of the price points will reflect the cost inflation discussion, but at the highest price point, namely $5. There’s been a tremendous focus to ensure that those are really reflective of new items or tremendous values that we have had in the past that have disappeared because of major cost increases over the last two years, three years and four years that we can bring back and serve our customers with a more well-rounded assortment. So it’s a combination, but at the highest price points, it will be mostly new.

Okay. Thanks. We will look forward to that for sure. And then another question I have is, have you -- has there been any notable changes in the competitive environment, are competitors largely remaining rational and then passing on their higher cost?

I think all competitors have had no choice but to pass on costs, ourselves included, because that the quantum of the cost increases from an FOB, a transportation, a labor, et cetera, perspective had just been incredible and so everyone has passed costs on. Our job as Dollarama and we remain ultimately focused on our job and not so much other people’s job is to ensure that we move on priced laps and that our relative value and the delta to the rest of the market remains what it always has or better. That’s the goal of the team at Dollarama.

Okay. And then, and maybe still early, but based on your internal data, what has been the consumer reception to the higher price -- prices? Are you seeing any decline in unit volume that is out of the ordinary as a result of these markups that you have done?

So the amount of markups last year was certainly far greater than historical amounts the three years, four years, five years prior. But there will continue to be cost increases that you are going to see at store level for the goods that are ordered in on, on the water that are all at these new higher FOBs and higher freight rates. So just like the goods coming in other people’s stores, you will continue to see the goods coming in to retailers across the country at higher retail simply because there’s no choice.

Okay. That’s helpful. Maybe a couple of questions for J.P. Thanks for the incremental colors on the gross margin breakdown and I am trying to maybe be a bit greedy here and maybe ask for some more disclosure. I am just wondering for gross margin, are you able to quantify how much headwind we saw from just higher freight -- ocean freight costs during the quarter? J.P. Towner: Well, Chris, you can’t separate what Neil just mentioned and the freight discussion. I mean, the reality is we have been adjusting our pricing structure to reflect those pressures. So you really have to look at it on a net basis. And I think the proof is in the pudding, you have seen our Q1 results and we have -- when -- even when you adjust for my comment on our distribution center logistics costs, I think we were able to manage a good portion of the pressures coming at us and maintaining our relative value in the meantime and the focus for us is the latter is making sure that we always have the best relative value and that will determine the impact on our gross margin.

Okay. That’s helpful. And my last question, maybe just on SG&A, for the quarter, I think, if you exclude the COVID year-over-year impact, the increase in the SG&A dollars were I think were around $19 million for the quarter. Is that a good run rate for us to model for the rest of the year? J.P. Towner: I look at it more in terms of the range provided in our guidance. So, as I mentioned, we are seeing more sustained wage growth than we expected three months, four months ago. But we are still comfortable with our guidance range.

Okay. That’s helpful and all the best. Thank you. J.P. Towner: Thanks, Chris.

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

Yeah. Hi. Just following up on the inventory comments, have you guys changed your inventory, I guess, buying habits or procurement habits? Are you trying to buy more at once or you are trying to secure shipping containers with longer lead times using expedited freight or anything of that nature, have you sort of evolved in how you are managing the disruption that we are seeing.

I’d like to think we have evolved and we are dealing with the realities of the market to the best of our ability. Certainly, as J.P. mentioned, we have ordered some of our holiday seasons much earlier than we normally would, which means willing incur some warehousing costs, et cetera, but reduce the risk of missing goods when they need to be in our stores. And there will be of course a massive refilling of our warehouses and warehouse inventory, which we usurped as the delays in freight deliveries incurred. And other than that, it’s pretty much business as usual, while we keep an eye on what’s happening at the ports in the countries of origin of the goods and the ports both in the U.S. and in the West and East Coast of Canada, because there are exciting new events happening all the time at all the ports these days and so it’s a constant battle to keep up with where the goods are coming from, where they have to be transferred to, whether there is damage costs or detention costs, et cetera, and so the team is busier than ever been just trying to get the goods from factory to warehouse. I guess, that’s the best I can give you, because truthfully, it’s changing by that.

Yeah. No. Understood. And then just on the gross margin front, it just -- it sounds like there is some more headwinds than perhaps previously expected and just your comment on the new price point really sort of benefiting the margin in the next fiscal year. Is that -- does that imply that you are leaning more towards the lower end of the guidance range that you gave us at the end of Q4? J.P. Towner: No. I mean that we are still very comfortable with the range we provided. The -- as I mentioned, there was a mix impact in Q1 that was partly offset to the tune of 20 bps to 30 bps by lower distribution center and warehousing costs. And as the situation normalizes, we hope in the second half of this year, those warehouse and distribution center costs will normalize as well.

Okay. But the warehouse cost that was a positive impact, right, this quarter 20 bps to 30 bps…

Yeah. J.P. Towner: Exactly. Yeah.

Okay. Got it. Thank you. J.P. Towner: Thanks.

Thank you. The next question is from Karen Short from Barclays. Please go ahead.

Hi. This is actually Zain Barak [ph] on for Karen. Thanks for taking my questions and congrats on a nice quarter. My first question is on discretionary and inventory. It seems like you are still playing a little bit of catch up on inventory. Meanwhile, as you are well aware, there’s a seismic shift happening in the U.S. with regards to consumer demand shifting away from some discretionary categories and many retailers are facing markdown risk over sudden. So how are you thinking about your inventory positioning if Canada followed the footsteps of the U.S.? Although, I understand there are different dynamics in play in Canada versus U.S. So how do you expect to manage inventory in general in the latter part of the year? J.P. Towner: Yeah. And so I think it’s important to keep in mind two things. Number one, on seasonal, we have the ability and we have done it for years to pack away inventory at the end of a season if it’s sold less than or more than we expected. We always pack away from most season at the end of the season. And our goods don’t go out of fashion on an annual basis. They tend to remain relevant over the course of time. So the situation that you are alluding to is not something that’s overly concerning to us as given our strategy and our inventory strategy.

Yeah. That’s fair. Appreciate that. And a follow-up on the trade down question. Maybe talk a little bit about what you are seeing in terms of that behavior evolving in Q1 and so far in Q2, and comment on the health of the Canadian consumer today in general. And related to the trade down, are you seeing a sequential acceleration of consumables on a one year basis so far in 2Q? J.P. Towner: So the trends that we have seen in Q1 are mostly remaining true in so far in Q2. So, as Neil mentioned, as a start, consumables remain strong, and the reality is our value proposition and our relative value in that context is very relevant to the Canadian consumer. And so, what we are seeing is a lot of the same things and trends that you would have seen in our Q1 results is just carrying through so far in Q2.

Got it. And maybe one last one, J.P., I don’t mean to pick on it, but the slight resell on the three-year stock from 13.8% in Q1 to 12% so far in 2Q. Is that related to maybe lack of inventory in some categories or slower organic demand and more discretionary items any color would be appreciated? J.P. Towner: I mean, the -- we are only a few weeks in the quarter and we will see how things evolve in the next two months. So I wouldn’t draw too many conclusions on the trending of our SSS based on five weeks, but I wanted to provide color as to how we are trending so far in Q2, given the noise that we are facing in terms of comps when we look at our performance on a year-over-year basis. I mean, we are let’s be honest, we are comping against the noisiest quarter in Dollarama’s history last year at minus 5.1% SSS. So I think it’s way too early to draw any conclusion, and yeah, so five weeks doesn’t make a quarter.

No. That’s fair and I appreciate the color and congrats once again. J.P. Towner: Thank you.

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

Hi, guys. Good morning. I wanted to ask you about Dollarcity. Contribution from Dollarcity was once again strong and it’s been strong for a while and I thought that I remember to you talking about some investment in that business this year. I am just kind of curious as to how well, I guess one, how performance is sort of tracking versus expectation, and then, two, how we should be thinking about the contribution from Dollarcity this year relative to last year? J.P. Towner: The Dollarcity performance, first of all, we are very pleased with. We are seeing good traction in Peru, so our new country of operation is tracking well. We are doing our home works on what the new store count could look like. We will be updating investors in the second half of this year on that specific topic. But that’s just as far as I can go really, I mean, the performance been good, we are pleased and stay tuned on the store target for Dollarcity.

Okay. And then a second question for you is, sorry, this is kind of a stupid question. But do you guys participate at all in the closeout market? And I’d only ask because it’s been talked in a little bit about U.S. retail and order cancellations and things like that that were happening out there at the moment and it does seem like there could be opportunity. I think U.S. dollar stores participate a little bit. So I am just kind of curious if this is something that you -- that could be an opportunity?

So, we do participate a little bit. But, of course, the goods that are sold in the U.S. are really marketed and branded and the ,rules and regulations that apply to those goods are generally for the U.S. market and a lot of goods cannot be brought to the Canadian market regardless of cost. So the amount of goods that we can look at is much, much smaller. Secondly, because most retailers had a major shortfall in the amount of inventory they had of their own goods, they bought up certainly last year and I expect them to buy it this year, the vast majority of closeouts at very high prices, that one would not historically have called those closeouts inexpensive. Now they are actually paying full import costs on a lot of those closeouts, because the retailers in the U.S. simply need the goods. So it’s often less expensive to buy those closeouts goods in the U.S. than it is to pay today’s freight rates and today’s FOBs on the same goods. So what have been a closeout there is no longer a closeout, so to speak. But I do not think that the percentage of closeouts available to Dollarama will be any more than was in the past. If anything, it will probably be less.

Okay. And then just last one for you on the pricing that you are taking on sort of like-for-like items how has elasticity been around that, has it generally kind of been as expected?

Yes. It -- I would say a very fair assessment is as expected and the relative value remains intact. So that also plays into that elasticity equation.

Right. Thank you.

Thank you.

Thank you. The next question is from Martin Landry from Stifel GMP. Please go ahead.

Hi. Good morning. I had a question on Dollarcity. I was wondering, as it’s been said, it’s been a very strong quarter. It looks like the earnings were up more than two-fold, which would be the fastest growth rate in recent quarters. I am wondering, is there any details you can give us? Is this a factor of margin expansion? Is it a factor of sales growth? Any color would be helpful.

Yeah. Thanks, Martin. So, the operational performance of Dollarcity is a key driver of the results. There’s no special one-time element. That’s number one. Number two, a lot of the trends that we just discussed for Canada were also true for Dollarcity. So when you put those two things together, I think, you get to a good -- just a good core operational performance from that business.

Okay. And another question on your mix, we have heard recently from U.S. retailers that new shoppers are appear to travel more, participate more in gatherings than make up from the restrictions we have had in the past years. And I was wondering if you have had -- if you have adapted your merchandizing mix to capture a little bit of these trends?

Certainly, we were not selling many luggage tags over the last two years. So I can tell you that our travel department is coming back into the stores, whether that’s travel size, cosmetic products or luggage tags or neck pillows or you name it. And so on that particular category, it went to almost nothing for the last couple of years and now we believe that it will return to a more normal situation. So the stores are going back into in-stock position. But other than that, nothing much has changed of a meaningful nature.

Okay. That’s it from me. Thank you for your results.

Thank you.

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

Hey. Good morning, J.P. Good morning, Neil. A couple of follow-up questions please. So when I look at your 12% stack that you are guiding us towards for Q2, I am just going back to my notes a couple of years back for Q2 fiscal 2021. You had a 5.4% SSS in that quarter. But if you included the store closures, it was 2.5%. So I am wondering which number you have got factored in there? J.P. Towner: Yeah. It’s actually great question. So it’s the former, it’s the former, the 5.4%.

Okay. Thank you. And then I want to follow up on Dollarcity as well. So you have got these exceptional results here, and I am just wondering, within the context of your current guidance, is there any sort of growth rate you can provide us for the year, what you expect for Dollarcity or even for Q2? J.P. Towner: Look, as I said, a lot of the same comments that I, that Neil and I made for Dollarama applies to Dollarcity, and that’s true for their Q2 to-date performance. So that’s as far as I can go. But the trends that you are seeing at Dollarama are also true for our Dollarcity business.

Okay. So fair enough. Fair to say we should see Q2 exceed the Q1 results just based on seasonality. J.P. Towner: Stay tuned for Q2 results.

Okay. And then, J.P., turning to the put option, I know you have one coming in October. I don’t believe it can be done in full. But does this have any potential to impact your degree of aggressiveness on your NCIB. And then furthermore, if the put option is exercised, would that lead to a consolidation of your Dollarcity results into DollarM at that time? J.P. Towner: So I will start with the last question. So no consolidation would be triggered. So we would remain equity accounting. That’s the most likely scenario if the put option were to be exercised. And then in terms of our buyback and capital allocation, we are staying the course and maintaining that 2.75 times to 3 times adjusted net debt-to-EBITDA and we have capacity if needed to fund -- there are capacity needed to fund the liquidity from a put exercised if that was required, but the capital allocation for now remains the same.

But would that be at the expense of your NCIB is what I am wondering. J.P. Towner: Well, I will, I mean, it depends on too many factors, right? It will depend on the percentage…

I think it’s important… J.P. Towner: … that gets exercised that would depend on the valuation. So depending on the answers to those two questions, I think, it could or could not have an impact on NCIB. But for now, we are staying the course and capital allocation remains the same. And keep in mind, Brian, that option window that gets opened on October 1, 2022, remains open for all the following years. So the -- we are not going to change our capital allocation in function of something that could or could not happen at any given point in time.

All right. Very helpful. Congratulations. J.P. Towner: Yeah. Thanks, Brian.

Thank you. This concludes today’s question-and-answer session and the conference call. Please disconnect your lines at this time and we thank you for your participation.