Larry Rossy - Chief Executive Officer Michael Ross - Chief Financial Officer Neil Rossy - Chief Merchandising Officer

Peter Sklar - BMO Capital Markets Kenric Tyghe - Raymond James Irene Nattel - RBC Capital Markets Perry Caicco - CIBC World Markets Jim Durran - Barclays Derek Dley - Canaccord Genuity David Hartley - Credit Suisse Vishal Shreedhar - National Bank Financial Neil Linsdell - Industrial Alliance Keith Howlett - Desjardins Securities

Good morning and welcome to the Dollarama Conference Call for the Fiscal 2016 First Quarter Results. Today's call will be led by Mr. Larry Rossy, Chief Executive Officer. Also with Mr. Rossy on the phone today is, Mr. Michael Ross, Chief Financial Officer. Furthermore, during the question period, Mr. Neil Rossy, Chief Merchandising Officer will also be available for questions. They will begin with a short presentation followed by a question-and-answer period open exclusively to investors and financial analysts. For your convenience, the press release along with the first quarter financial statements and Management's Discussion and Analysis are available on the Investor Relations section of the Web site at dollarama.com. They are also available 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 and 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 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 on Dollarama's MD&A dated June 10, 2015, available at www.sedar.com. Forward-looking statements represent management's expectations as of June 10, 2015, 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 call over to Mr. Rossy. Please go ahead sir.

Okay. Thank you, operator, and good morning everyone. Today we reported financial results for the first quarter of fiscal 2016. I will briefly go over sales and store growth highlights of the first quarter before turning it over to Michael, who will provide with you more detailed update on our financial results and key operating initiatives. In this quarter, sales increased by 13% as a result of continued expansion of our store network and strong organic sales growth. During the quarter, we opened 17 net new stores compared to 25 net new stores opened in Q1 last year. Our total store count across Canada is now 972 stores compared with 899 stores at the end of May 4, 2014. Our fiscal 2016 – for fiscal 2016, we expect to open between 70 and 80 net new stores with these new stores being opened throughout Canada. We expect to open our 1000 store at the beginning of Q3 marking a nice milestone in Dollarama's history. In this quarter, we also achieved 6.9% increase in same-store sales to an increase in average basket size and an increase in the number of transactions. EBITDA grew 22.9% this quarter which is attributable to strong sales and margins, general and administrative costs that benefited from the scaling impact of sales and our continued focus on operational efficiencies. From a merchandising point of view, the summer sale season kicked-off quite strong and our customers are responding positively to our merchandise mix. Our goal is always to make sure that our customers leave our stores happy to have purchased interesting merchandise at compelling value. As such we strive to compliment our broad selection of everyday items with exciting new seasonal products at great prices and we believe that the summer selection meets this goal. With that, I will turn the call over to Michael for his comments.

Okay. Thank you, Larry, and good morning everyone. During the first quarter, we increased our sales by 13% to $566.1 million from $501.1 million in the prior year. The increase in sales was fueled by the opening of 73 net new stores over the past 12 months and a same-store sales increase of 6.9% during the quarter. The same-store sales growth consisted of 5.9% increase in basket size which reflects the consumer demand for our higher price point items and 1% increase in the number of transactions driven by higher traffic in our stores. In this quarter, 73% of our sales originated from products priced higher than the dollar compared to 62% in the corresponding quarter last year. Debit card penetration also increased as 46% of sales were paid with debit cards compared to 42% in the corresponding period of the previous fiscal year. In the first quarter, our gross margin was 36% of sales compared to 35.4% of sales in Q1 last year. This increase is mainly attributable to a slightly higher product margins to the positive scaling impact of strong comparable store sales as well as to lower logistics cost as a percentage of sales as a result of operational improvement. As we've stated in the past, we have been managing our gross margin by continually reinvesting in the value proposition offered to consumers and by refreshing up to 30% of our product offering on a yearly basis. We expect this trend to continue as we target a gross margin for the full fiscal year 2016 in the range of 36% to 37% in order to stimulate continued sales growth. Our Q1 G&A as a percent of sales was 17.3% compared to 18.2% last year. This progression is the result of continued improvement in labor productivity achieved through initiatives implemented at the store level. Overall, we still expect a slight improvement in the G&A margin for the full fiscal 2016 compared to fiscal 2015 as we target a margin between 16.5% and 17% for fiscal 2016. This margin target is based on expected scaling impacts of sales and continued efficiencies realized through labor productivity. In Q1, our EBITDA grew 22.9% to $105.9 million or 18.17% of sales. Our depreciation and amortization expense increased from $8.8 million in Q1 last year to $11.2 million this year. Both figures reflect a change in estimates for the useful life of leasehold improvements and store and warehouse equipment affected in Q1 last year. Q1 net earnings increased to $64.8 million or $0.50 per diluted share compared to $53.2 million or $0.39 per diluted share in the first quarter of fiscal 2015. Cash flows from operations decreased to $0.5 million in Q1 from $18.4 million in the corresponding quarter of the previous fiscal year. This is due to an increased use of cash to fund working capital, including inventory and to the timing of payment of normal operating expenses. Inventory is up $40.8 million in the quarter due to the continued growth of store network, a greater proportion of higher price point items in the mix and advanced purchases of imported goods made before the elimination of certain general preferential tariffs on January 1, 2015. We spent $20 million on capital expenditures in Q1 compared to $19.3 million last year. These expenditures relate primarily to new store openings as well as investments in information technology. In fiscal 2016, we expect to incur capital expenditures in the range of $95 million to $100 million depending on the number of new stores that we open. During the month of April, we modified our capital structure by issuing additional floating rates senior unsecured notes and the principal amount of $125 million. Those additional notes constitute an increase to $150 million aggregate principal amount of floating rates senior unsecured notes issued on May 16, 2014. The net proceeds of the 2015 offering used to repaying debt [indiscernible] outstanding under our revolving credit facility and for general corporate purposes. The notes were issued at a 0.336% discount and the offering has allowed us to lock in for a period of approximately two years a favorable effective interest rate spread of 70 basis points over three months CDOR. Our floating rate notes issued to-date are treated us single series and bear interest at a rate equal to the applicable three months bankers acceptance rate plus 54 basis points reset quarterly and will mature on May 16, 2017. Now looking at our normal course issuer bid, we repurchased for cancellation during the quarter a total of 537,000 shares at an average cost of $66.10 per share for a total cash consideration of $35.5 million. We continued to repurchase shares after the end of Q1 and have now completed the 2014 and 2015 NCIB program. Therefore since the launch of the NCIB on June 17, 2014, we have bought back a total of approximately 4.7 million shares, which represents 3.5% of the corporation’s total issued and outstanding shares as at June 11, 2014 at a weighted average price of $56.73 per share for a total cash consideration of $265.7 million. This morning we also announced that we will be renewing our normal course issuer bid, which will allow us to purchase for cancellation of up to 3.5% of issued and outstanding shares at June 9, 2015 or up to 4.5 million shares over the period from June 17, 2015 to June 16, 2016. From an operational perspective now, we have made significant investments in stores over the past few years to continuously improve our operational efficiencies and we are seeing the results in our SG&A margin that has steadily improved over the years. The in-store investments have resulted in improved control over employee time and attendance in the stores, a better assignment of hours to labor scheduling, improved accuracy at inventory replenishment and in-stock inventory positions. These investments have also allowed us to become more efficient by eliminating certain manual tasks. We are now further leveraging these investments to reduce a number of manual daily counts at store level and to fine tune labor scheduling to ensure that we have the right number of people in our stores at all times to offer the best service. Additional productivity investments in fiscal 2016 will include the rollout of Wi-Fi and complementary technology in all of our stores. For example, adding additional scanning capabilities will help further reduce the time to count inventory for replenishment purposes, improve service at the cash register by reducing weight times and reduce the amount of time needed to perform merchandise changeover from season to season. We expect to see the benefits of these new operational efficiencies next year in fiscal 2017. Overall, we are very pleased with the financial and operating performance of the company this quarter and the continued progress being made on our key initiatives. This ends our formal remarks and we can now take questions. So operator I will turn it over to you.

Thank you. [Operator Instructions] Our first question is from Peter Sklar from BMO Capital Markets. Please go ahead.

Okay. Thank you. We notice that your higher price point penetration continues to grow. Can you talk about the underlying dynamics? Are you offering more SKUs at higher price points or are consumers just buying more of existing mix of higher price point items, or just talk a little bit about how that penetration is growing?

Peter, it’s Larry. First of all, good morning. Second of all, I would think –- I don't have the numbers in front of me. But I would think we are increasing our selection of $3 items, which would result in greater sales of that category. The tendency when you are out there buying is to – we are not being offered very, very much at the dollar price point, especially the dollar price point today would have to absorb the 20%, 25% exchange rate. So we have more potential at the higher price points. I mean when we talk higher price points it's all relative of course. But our higher price points to give value and as a result that is being seen by the public, appreciated by the public and we are seeing those in the numbers.

Okay.

I think I have answered your question, Peter.

Yes, you have Larry. And I know people ask you this question often but what's your thinking about taking things above the high-end of the range, above $3?

I didn't think that would come so quickly. Well, for this year, we are holding. For next year, we are always thinking about what we have to do to maintain our gross margins and I would be a liar to tell you that we are not thinking about it. It's obvious, I think all retailers are looking at their margins very carefully these days if they are particularly in Canada and well, around the world, I guess. And we are interested in Canada. And to think that we can absorb 20%, 25% and maintain margins is unrealistic. So we are going to absorb what we can intelligently and handle the rest as time moves on. So certainly there is serious thought towards it. But for this year, we are going to maintain as if we are at par, all right, maintain and absorb in a sense. But I feel comfortable in that. We have enough hedging done to make us feel comfortable that we can maintain our retail.

Okay. Thank you.

Thank you, Peter.

Thank you. The following question is from Kenric Tyghe from Raymond James. Please go ahead.

Thank you and good morning.

Good morning.

Thanks Larry. I would like to drill down a little if I could on the inventory numbers in the quarter. Michael, you called out to the pre-ordering et cetera in the quarter. I wonder if you could give us an idea of how much of the inventory increase was on pre-ordering or at least sort of breakdown some of the inventory [indiscernible] for us? And then the follow-on would be just your comfort level or conviction around your inventory productivity as we sort of cycle through the pre-ordering et cetera looking to the rest of fiscal 2016?

Yes. Without going into the specifics, everything I mentioned had significant impacts. So pre-ordering, the mix and –- so –

Higher price points.

And yes, the higher price point mix, but you know and opportunity buying. So all of that, it is timing, so that did happen. And I am not preoccupied otherwise we have got good visibility on our inventory and so you will see the inventory levels coming down a bit to the more normal levels that we have been used to in the past.

Great. Thank you. And then just switching gears very quickly to gross margin performance. Are you able or inclined to share with us the compress -- FX driven compression or the sort of FX driven investment and the proposition? Just trying to sort of tease that out of your gross margin performance?

No. I mean the margin is doing very well for the factors I mentioned earlier. And I think that what we have to do, you have to do is come back to what our aim is. And our aim is to keep that within the 36% to 37% range, right now it's in the top-end of that. And so, we again we want to balance the offering that we give versus the return to our shareholder. And so that is as much color as we will give you. Like Larry said, hedging allowed us to absorb definitely a part of the headwind we got from the currency. But we – and as we said in the past it's manageable so it's a clear demonstration of that. But again, if you are looking at the future where we are still looking to keep it within the range I mentioned.

Great. Thanks so much. I will leave it there.

Thank you.

Thank you, Kenric.

Thank you. The following question is from Irene Nattel from RBC Capital Markets. Please go ahead.

Thanks, and good morning everyone. Just continuing with the actual sales mix. Larry you noted that you are seeing better sales of items at $3 if there is a higher penetration of higher-priced items. Can you give us an idea at this point of what the proportion of items sold in the store is? At the lower end of the price point versus the higher end of a price range?

I think, Michael, help me out on this. I think basically our sales are over 70%, over that price point, right?

Yes. In sales dollars it is 73%. But I think Irene's question is, try to give more color as to which price points --

That's a moving target and that's difficult to – I wouldn’t have a clue on unless I can get…

Yes, we prefer not to disclose –then we would be disclosing more or less the mix that we would rather not do.

Okay. Let me ask. In the past, okay, in the release it said that the majority of items sold are still at a dollar. I did not see that, so either I missed it or it is not there. Is it in fact in there, or did you take it out?

No. We took it out.

Okay. Thank you. That's very helpful. That answers the question. And then just coming back to the whole question, SG&A leverage and gross margins you mentioned the scaling benefit for both of those. So is it fair to say that if we see same-store sales kind of go more towards that 4% to 5% range or 5% for the upper end of that range to 6.9%, we could see a little less of that scaling and that could be a factor in terms of bringing both SG&A and gross margin down closer to your targets?

That is exactly. So and then in a certain way the formula works. So if you know you say we reinvest in the gross margin to protect the top line and even simulated. But if you -- and when again stimulated it creates scaling and it increases your margin. So then you have more room to maneuver and to make sure that you get that compelling this out there. So yes, you're absolutely right. If the same-store sales would go down in the future quarters, that would naturally have an effect reversed scaling if you want on the margin.

Okay. That is great. And then finally, if I might, could you just give us an update on the rollout of the Wi-Fi into the stores? How that is all coming along at this point?

Okay. So we have just begun the implementation and so there are different steps. One is setting up the antennas if you want in the stores. And then you have to train employees, implement the devices. So that all takes time. And by the time we've deployed if you want and trained employees and all of that we are getting more towards the end of the year that you would start seeing any form of benefit associated for that implementation. So that's why I mentioned earlier that the benefits from that will come in – kick in more next year. So we have to take our time and make sure that we do it correctly and that the employees and managers and everyone involved is properly trained and understands how we operate it. So --

Let me ask you a question. So if we are 50% deployed, you are not going to see any benefits from that 50% of the stores?

No. Exactly. There's a deployment and then there's the training and then there is the activating live on our system. So the benefits of that, those initiatives the savings of those we will see in the future years.

That is very helpful. Thank you.

Thank you, Irene.

Thank you. The following question is from Perry Caicco from CIBC World Markets. Please go ahead.

Thank you. So Larry has there been any easing of the rent situation for new stores out west especially in Alberta?

I would say no. They are not going up, but they are not easing. I think that answers your question. We are not getting higher rental rates, but I don't think we are getting lower ones. This afternoon as soon as I am finished with this session, I am off to the ICSE, the western downtown, I can give you a clear – that's – I mean I don't have to get there to tell you that's what's happening out west. I would say across Canada too.

And at this point what is your expectation for rents over the next year?

I would say similar to what they are today. I don't think they will go up. You have to absorb the target space and other people going under. I think the rates will be similar to what they've been in the last couple of years. You will not get any rate increases, I don't think.

Okay. And just switching topics. There's a topic we haven't discussed in quite some time which is the possibility of a Western Canada distribution center. Do you think now that is ever possible?

I don't like saying never. But at the moment it makes no sense. But ever is, I can never say never. But at the moment it doesn't make sense.

Okay. And just back into the store. Labor productivity, you've made – certainly some improvements. Should we be expecting much over the next six, eight months on improvements in labor productivity?

I will let Mike probably answer that one.

There is enough to show some improvement on the G&A and I gave you the target 16.5217, so definitely it is moving in the right direction.

Okay. One last question. Is there any chance that consumables would be expanded to your stores over the next year or so perhaps by adding larger scale coolers or refrigeration?

We have not talked about that at all. So my answer to you would be no. Again, I never say never, but we have not talked about that at all. I don't want to cut things off permanently, that would be unwise to do. But that is not certainly happening in the foreseeable future. And I don't see it happening I don't like to say ever, but I don't see it happening.

Okay. Thanks lot.

Okay.

Thank you. The following question is from Jim Durran from Barclays. Please go ahead.

Good morning, Jim.

Good morning, Larry. So Larry, are you surprised that how well items at the higher end of the price points have done, and secondly, are you finding more and more products that you don't currently carry in that price range that can help you keep the stores refreshed?

I think my answer to both of your questions is yes. Someone would've had to listen quite carefully then. I am pleasantly surprised and I think we can find more items at that midpoint from $2 to $3 much easier than we could have at the dollar price point.

And from a percent margin standpoint, I mean in the past when you've gone into new price points you've cautioned that the margins as a percentage might prove to be lower than some of your established product categories. Are you finding a change in that direction? Maybe perhaps you're gaining a bit more confidence in terms of how to price a certain item and what kind of volume you can get?

Well, I would have said yes before this foreign exchange problem. As we get used to the $3 price point, $2.50, $3 price point, sure, we are feeling a lot more comfortable as buyers and as merchandisers. And we are looking at our gross margins at those price levels more carefully. Because yes, I guess it's not a question of I cautioned you, it is a fact. So we are looking at those margins at those price points, but we have to absorb and deal with the foreign exchange problem that has come upon us rather quickly. So it is a fight, it is a constant battle. You're trying to find a happy medium in all of these price points.

Just looking at your hedging strategy, I was just wondering like the [indiscernible] has had some volatility obviously not just in terms of its compression, but in terms of modest rebound as the WTI trade is sort of unwound a bit. How did you approach hedging? Like were you systematically creeping out further in time, did you just got to make a big bet on the year? Just so we can understand whether there is heightened FX pressure risk as we go through the next year or how that's going to play?

Yes. The color we gave on hedging and it still stands – we hedge out of these the first six months ahead of us and typically we will pick it up it between six and a year. So that is the color within that's how we have been managing.

The question is, do we automatically in a month-to-month fill in the --

Fill it more by season, really and probably in terms of large inventory commitments. There's both. There's both. We are always looking at that problem. Can we call it a problem, can I?

Okay. My last question is still on sort of the same subject. In the press release you did mention that your product gross margins were up in the quarter. I'm just trying to understand like do you feel like you've taken prices up in certain categories ahead of future FX risk in those categories?

I don't think we've done that unless Michael, maybe he's had different opinion, go ahead.

Not all of that. So the question is if we – yes, the product margin did increase and that to pinpoint it exactly, Jim is very hard to do. But typically, it is a mix of all of that. As we said when the buyers commit – when we refresh 25%, 30% of our SKUs, the buyers commit they know what term [indiscernible] committing to and so on and so it is just part of that process.

Okay. That's helpful. Thank you.

Thank you. The following questions from Derek Dley from Canaccord Genuity. Please go ahead.

Good morning, Derek.

Good morning. Just really more couple of housekeeping questions. Can you guys provide us may be a sort of an update on the Latin America network?

Okay. Well, as usual, it is going very well. We are three years into it. It is going more or less according to plan. Still not material and we continue to participate and monitor and assist in accordance with our licensing and servicing agreement.

And just on the sales progression in Latin America. I think the fact that you guys said it's been sort of double-digit sales growth. Is that continuing?

The sales are doing very well over there. They are still doing very well. Yes.

Okay. Great. And in terms of what you guys are seeing in terms of your costs in Asia. What range should we be looking at there, or prices are going up or prices going down?

Well, in my opinion they are soft. In other words they are stable, we are getting some breaks in certain categories, certain categories are a little more difficult and other categories, Neil, do you find some categories going up in fact. Very little. So we are status quo are getting some price breaks. But the price breaks, if you get 1% or 2% or 3% that is pretty good. It certainly doesn't cover the foreign exchange issues.

Right. Okay, but it is certainly is not acting as another headwind. Okay. That's great.

No, it' not. No, it's not. No. It's not at the moment. No, it's not.

Great. Thank you very much.

Thank you. The following question is from David Hartley from Credit Suisse. Please go ahead.

Hi.

Good morning, Dave.

The question I have for you is with relation to your new store builds. I think a year ago you had 27 new stores in the quarter. This year 17. I was just wondering how that might affect your gross profit margins and your SG&A and if that has a bit of a fleeting affect positive or negative in the quarter and that we will see some kind of normalization if you will into the next quarters?

No. It does not have an effect, the new store openings and the timing doesn't have material impact. You wouldn't really see it.

I think, David, it is a question of timing here. It could have been 25 late 17. And then the next quarter would be reversed. It's just a question of when we are handed over those stores ready and when we can open them. I mean we open them as soon as we get them or a couple of weeks thereafter. So it is a question of timing. But your question I think was answered by Michael.

Okay. That is it.

That's okay.

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

Hi. Thanks for taking my questions. Just wondering your thoughts – to get your thoughts Larry perhaps for you on product safety – on product safety as you know some U.S. retailers have had challenges with that particularly related to imported products from Asia into North America in different standards and call it customer trust in the brand as well. Just wondering how you guys think about that? And any color there would be appreciated.

Yes. I will let Michael answer it, but don't jinx us here because we've been pretty good lately.

I think our track record talks to that pretty well. Obviously, we are very – how can I say? It's priority for us and we want to maintain the highest standard and vis-à-vis that's how we make sure the quality of our products and the safety is looked at very much. And so we again, looking at the record hasn't had any major cases. And few cases over the past nine years in fact.

I will now add a little part, which is all the products that are more sensitive to safety issues, baby products, food, et cetera all go through an entirely different process than general merchandise. And for example, for food every single delivery of food, even if it is from the same vendor of the same product, every delivery products are sampled and tested. And we have a ton of processes in place to make sure that we are doing everything we can to avoid any issues. And when there is an issue very, very infrequently it is dealt with immediately to remove the issue from the stores and from the table sort to speak.

Okay.

And in spite of everything having been said, anything can happen.

Understood. Just wondering, are your processes with regard to product safety and regulation are those increasing where those fairly stable over the last couple of years?

We increased what we do about three years ago and for the last three years, they've been stable. We've increased our processes and our testing on sensitive categories about three years ago, and we've been very diligent about making sure those test protocols are all kept in place and monitored constantly.

Okay. Thank you for your color. And just another quick one here. I think I know the answer but I just want to get your thoughts. As you enter into H2 for the fiscal year, the second half, the comps become more difficult. And given that Dollar doesn't substantially rely on flyer marketing. I was just wondering how the company looks at that, are there merchandising adjustments, or is it just business as usual?

My answer would be business as usual. We don't get involved in flyers, advertising and we count more or less on our good value to keep things going and its business as usual. Some might call it boring, but there it is.

Thanks for the color.

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

Hey, good afternoon guys.

Hi, Neil.

Larry, you were talking about looking at potentially going above $3 price point. But I'm curious, as we are looking at this inflationary effect from the foreign exchange. Are you getting a broad increase in the pricing of the products all through the $1 to $3 price point or is it incrementally more than $3 price point that you seem to – a lot more stuff there?

No. I don't think we're getting any prices increases period whether it's $1, $2, $3, I can't tell you about $10 because we don't go there. But, we are generally speaking not getting price increases from the Orient, the Orient being in our case more than 98% China. So the answer to that is no. We are not pricing --

No. As you are moving to more sales from units or items above the $1 price point, is that spread equally again on the products above it at $1 price point or is there -- ?

I don't think we concentrate on saying so many at $2 and so many at $2.50. So it's just where we buy what we feel is good value. Yes. It's the same as real estate is, even though it's opportunity driven. So if it happens to be good value at $2 so be it. If it happens to be $2.50 so be it. I don't think we're saying stop buying things at $2.50 in order to buy more $3, we never use that as space.

Okay. And then if you look at the competitive environment, you always have this really sweet spot right below the $3 level. If you do consider, just from your thoughts of moving into the $4 or $5 price point or stuff like that, does it change anything as far as your competitive status versus say a Dollar Tree or a Wal-Mart or such is that everybody under the same pressure to look at those higher items?

I would think everyone is under the same pressure. I can't see absorbing 15% to 25% foreign exchange differences and not think that every retailers going to be concerned with it. So yes, our business is to give good value, excellent value where we can keep our whole operation simple to be able to do that. And I don't think we want to go, if we do think it's going above $3, I don't think we want to go above $4 if that thought comes to be. But certainly I can reemphasize that we are doing nothing for this year, I would say for the next year, not only this year for the next year about pricing about going above $3. And because I don't like speculating too far ahead, that's why I say that everything is possible after that, I don't know. We will see as time goes on. We will see we getting with all those. If it goes to 140, we have another product.

Okay. Fair enough. And just from the locations that you have your guidance for the number of new stores this year is maintained I assume, and then can you --

70 to 80 new stores, we are good to 70 to 80 new stores. With the amount of stores we have today, we often I don't know, I will take an example in Magog, Quebec we have a better location opportunity, we have opened it and we are going to close another one. So it is a new store, yet, it is a reduction of another store that is next to it. So I think we can manage 70 to 80 net new stores this year in that area.

Okay. And no commentary about locations that might be available beyond that?

I don't think we can get much beyond that. If it happens, it happens. But, no.

Okay. Thanks.

Thank you.

Thank you. The following question is from Keith Howlett from Desjardins Securities. Please go ahead

Yes. I was wondering about regional breakdown of sales, I'm thinking the weather was very good in British Columbia, very cool in America, was there significantly more variation across the region unusual?

When Keith, I don't even know if we can answer the question but what are talking about?

In the Q1, I was seeing the February, March period was quite difficult in Atlantic Canada?

You are probably right. It's very difficult.

But it was difficult last year too. So I think that you shouldn't put too much emphasis on that.

I think you're right Michael.

Okay. And then just in terms of the two months since all the Target stores have closed, is that affected traffic or your -- ?

My impression is now. But I will let Michael, who has got more --

No. It hasn't. You are right.

No. It hasn't.

Yes. No impact. It's neutral. As we told you the last quarter, the liquidation had a small impact and seems to have a stable out and –

And we had a negative impact when [Dollar] [ph] closed when Target was liquidating. And that will only last for that period of time, they can only liquidate for so much and so long in so many stores. So it is a temporary thing, but it does not help when the time when it happens. But it is not serious.

And then just in terms of freight, I guess the U.S. dollar price of oil has gone down with the Canadian dollar is going down. So what is the net impact, are you doing better on freight or some freight?

I personally can't give you the net impact, but I can tell you that our freight costs have increased. Michael?

That is accurate. So the cost our bound transport has decreased due to the decrease in energy costs for sure.

Great. And just in terms of SG&A, if you x out the scaling impact in the first quarter, what were the most significant elements of reduced SG&A percentage?

Well, it's the start labor initiatives, the efficiencies that we gain from a system which we implemented over the past three years. And so as we told you in the past, when you implement the systems they offer a ton of functionalities a lot of functionalities, many that you will never use. Others that you activate as you go along in a logical way. And so that is what we have seen and should continue to see throughout the year. And we are working on other initiatives to sustain that type of savings, hopefully to offset future headwinds in the future.

Let me add. I guess we are out of a COO for about a year and the addition of Jo-Ann and the amount of attention that she is giving to the stores is also another factor. It is an intangible, but it is there and it is important.

And in terms of minimum wage outlook there seem to be some proposals, some actual changes, how – what's your outlook across Canada on that issue?

It's hard to say. The color we got from anywhere to 2, on [indiscernible] last year and a few other provinces that and in the future they would follow the inflation rate index, so that is kind of the color we heard, so we will see.

And then just sort of a question on your positioning in the market. I guess the major competitor talks about the largest single price sort of single price dollar store in Canada. And you know that about 73% of your product sales are priced above $1. Do you see a segment – like that the segment splitting in two here or how do you see that?

Okay. So you made the statement – we will say Dollar Tree is the largest – what did you say?

They call themselves the largest single price dollar store meaning that $1.25. Your product mix is shifting increasingly to higher price points. And I'm just wondering whether you see a segmentation occurring in the dollar store segment between --?

Well, they are – they are right in making their statements. And I guess the dollar store segment in the states includes Family Dollar and Dollar General that's – they are way above a dollar. So I don't know who is creating these categories but I don't think I get too involved in those things. We are who we are, they are who they are and somebody out there is saying, they are a dollar store and they are not a dollar store, you lost me on this one, I'm sorry.

Yes. I'm just wondering whether consumers are looking at you differently than your competitor as their average price point per unit is higher in your store than the other or you think it is the same customer just going for the best value?

I think it is the same customer. They are going for value. We have a lot of articles still at a dollar that our competitor may be $1.25 at. I think it is the same customer. It's not the customer – I mean this is the same customer. This is the same customer that goes to Wal-Mart for all intents and purposes. So I think it's the same customer certainly between Dollar Tree and Dollarama.

Great. Thanks very much.

Thank you, Keith.

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