Dollarama Inc. (DOL) Earnings Call Transcript & Summary

Good morning, and welcome to the Dollarama Fiscal 2024 Second Quarter Results Conference Call. Neil Rossy, President and CEO; and J.P. Towner, CFO, will make a short presentation, followed by a question-and-answer period open exclusively to financial analysts. The press release, financial statements and management's discussion and analysis are available at dollarama.com in the Investor Relations section as well as on SEDAR. Before we begin, 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 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 September 13, 2023, available on SEDAR. Forward-looking statements represent management's expectations as of September 13, 2023. 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. For the second quarter of fiscal 2024, we delivered excellent operational and financial results, including a 15.5% increase in comparable store sales, a nearly 24% increase in EBITDA and an over 30% increase in earnings per share. More broadly, our performance through the first 2 quarters of the year reflects our ability to execute on our long-standing commitment to providing convenience and compelling value across our product mix. Clearly, day in and day out, Dollarama continues to solidify its position in the shopping habits of consumers and as a key destination for a broad range of affordable everyday goods. We are extremely pleased by the sales momentum we are seeing across our product categories in addition to the sustained value-seeking behavior from Canadian consumers. We are staying true to our price follower strategy to remain competitive and sparing no effort to help our customers get the most for their hard-earned money. Through our ongoing merchandising activities, product refreshes and disciplined pricing actions, we are successfully delivering year-round value to our customers on every product we sell, while also maintaining strong margins. In the current macroeconomic context and based on what we have been seeing year-to-date, including the quarter currently underway, we expect strong customer demand to continue through the second half of the fiscal year. This is reflected in the upward revision of our same-store sales guidance range for the full year. On the real estate front, we opened 18 net new stores this quarter. This is compared to 13 in the same quarter last year and 21 last quarter. This year, our team worked hard to front-load net new store openings to take some of the pressure off our fourth and historically busiest quarter of the year. These results speak to the execution of that plan. As mentioned last quarter, this acceleration has no impact on our annual target of between 60 and 70 net new stores. Subsequent to quarter end, we completed the previously announced acquisition of industrial properties adjacent to our centralized logistics operations in TMR in the Montreal area. As a reminder, the objective is to leverage these strategically located properties to the benefit of our logistics operations as we continue to move toward our 2,000 store target for Canada by 2031. In LATAM, the team at Dollarcity also continues to execute on its long-term growth plans and consistently delivering strong financial and operational results. In their second quarter, they opened 10 net new stores, bringing the total number of Dollarcity locations to 458. They are seeing and experiencing many of the same trends in their 4 markets of operation as we are here in Canada. That is to say, strong traction from their customers on the value and convenience they are offering in the current economic context. This, coupled with the team's solid execution of its growth strategy is resulting in strong performance quarter after quarter. Finally, on our CFO search. We launched a robust search process earlier this summer, and I am pleased to say that it has been moving along well. We will, of course, provide the market with an update in due time. In the meantime, J.P. is still very much in the chair until the end of the month and we have a skilled team to lead this function in the interim until an announcement is made. I'd like to take this opportunity to acknowledge J.P.'s outstanding contributions to Dollarama during his tenure with us and I wish him the very best in his new endeavor. J.P., over to you to review our Q2 financial results in more detail.

Thank you, Neil, and thank you for your kind words. It's been a real pleasure for me to work alongside such a talented team and for such an outstanding business. But now let's take a look at our KPI performance and expectations for the remainder of the fiscal year. Dollarama delivered strong top line growth with a nearly 20% increase in sales and a 15.5% increase in same-store sales in the second quarter. This is all the more notable because this SSS growth is over and above our 13.2% in the same quarter last year. We are seeing robust performance across the board in terms of our 3 main product categories and their departments. We generated a strong gross margin representing 43.9% of sales compared to 43.6% of sales in the same quarter last year, driven by lower inbound shipping costs, partly offset by higher logistics costs. SG&A as a percentage of sales was 13.6% compared to 13.8% in the same quarter last year. This improvement year-over-year reflects our strong top line performance and the scaling benefits it is generating, which have enabled us to absorb increased labor costs. Our 50.1% share of Dollarcity's net earnings was $11.4 million compared to $7.7 million for the same period last year, continuing to reflect their strong execution. On the back of our strong KPI performance, EBITDA increased by 24% to $457 million, representing 31.4% of sales and EPS was $0.86 and representing a 30% increase over last year. On the capital deployment front, we were active on the NCIB in the quarter. We renewed our program in July, allowing for the repurchase of up to 4.8% of our public float over the next 12-month period. Utilizing our former and renewed NCIB, we repurchased nearly 2.9 million shares in Q2 for $248 million. The Board also approved a quarterly cash dividend of $0.0708 per share. We expect to remain active on our NCIB and to allocate excess free cash flows towards our share repurchases. Some housekeeping regarding cash on hand. Our Q2 cash balance is inflated by the $88 million, which was subsequently used to settle the land acquisition in August. As a reminder, this capital expenditure is over and above our previously disclosed annual CapEx range outlook. Turning now to our expectations for the remainder of the year. Last quarter, we were cautious on same-store sales growth in upcoming quarters as we wanted to see how the consumer would lap last year's strong performance. But that value-seeking behavior has held strong and across all our product categories. Based on that performance and what we're seeing so far in the third quarter, we have revised our full year SSS guidance to a range of between 10% and 11%, this will be over and above 12% annual SSS last year. So far in Q3, SSS cadence is pacing at a 2-year stack of approximately 21%. While the last mile of supply chain normalization is now behind us, we continue to expect additional margin expansion in the second half of the fiscal year. This will bring us in line with our annual guidance range of -- for gross margin of 43.5% to 44.5% of sales. On SG&A, we also continue to expect to meet our guidance range of between 14.7% to 15.2%, given that our strong sales performance is enabling us to scale SG&A as a percentage of sales. So all in all, a stellar performance through the first half of the year. This is thanks to the team's ability to deliver on our value promise to Canadian consumers who appreciated more than ever in what remains a challenging economic context. That concludes our formal remarks. Now I'll turn it over to the operator for the Q&A.

[Operator Instructions] Our first question comes from the line of Mark Petrie with CIBC.

Congrats on an excellent quarter. I wanted to ask first maybe about -- about just consumer traffic and spending patterns. Obviously, a lot of shifts there within your business and just more broadly. And I'm curious to hear your perspective on your assortment and shelf space allocation today? And is there opportunity to make adjustments there? Or are you comfortable with where you're sitting?

Yes. So thanks for the question, Mark. It's interesting because last year, we were seeing trade down in the consumable space. And this year, there's still a lot of activity in consumables, but our general merchandise categories are also outperforming across all the departments. So we're very comfortable with our mix in store, we're very comfortable with the shelf space that we have for each apartment in each category. In fact, those -- that shelf space hasn't moved that much over the past 2 years, and there's just more activity in each of those departments. And then in terms of price points, I think we've made good progress on the rollout of the new price points. And more importantly, we're able to maintain our relative value across all categories and across all price points with the introduction of our new price points last year.

Yes. Okay. Perfect. Could I also ask you just about some of the factors within your SG&A? Obviously, the Q2 performance was fantastic. And your guidance implies some bigger increases in the second half of the year sort of on a per store per week basis. Is that a reflection of the October round of minimum wage increases? Or are there other factors that we should be considering?

Part of it is what you mentioned on the October round. But part of it is also that we've been able to scale with a strong top line performance, our SG&A line. And I mean, you can derive our second half expectations. And so we would hope to achieve probably the better end of our SG&A guidance range if all things remain equal. But definitely, it's a question of scaling, but then there's the October round which we're watching as well.

Yes. Okay. Makes sense. And I'll just squeeze in one more, if I could. And just on the AIR MILES arrangement, I know it wasn't a factor in Q2, but hoping you could just talk about and any impact from that? And also, if you could just elaborate on the opportunities to leverage the data that you're going to get from this?

We're too early in the process to really have a good idea of what kind of leverage can or might be gained from that test.

Our next question comes from the line of Irene Nattel with RBC Capital Markets.

Thanks. Can you hear me?

Fantastically.

Thank you, Neil. First of all, let me just say thank you to J.P. and we're going to miss you. And now on to my question. So I'm listening to your commentary and I'm looking at the implied guidance for the back half of the year. And if we're kind of at 10-ish percent same-store sales 6 weeks into Q3, it looks as though the 4% to 6% implies same store sales guidance in H2. It looks fairly conservative. So can you walk through what the thinking is there and whether you're seeing any red flags that caused you to be more cautious than usual?

So -- I mean, I think part of it is just our general philosophy around guidance. And there's no red flags. That's quite -- it's quite the opposite. I mean we were having a similar discussion, if you recall, in Q1 and June on the back of 17% SSS in Q1 and we wanted to see how we would be lapping last year's trade down. And we're very pleased with what we've seen in Q2, where we delivered 15.5% over 13% last year. And then so far in Q3, as I mentioned in my remarks, we're seeing a 2-year stack of 21%. So definitely pleased with how our value proposition is positioned, very pleased with the traction we're seeing and the guidance is what it is, but there's no red flags.

But our conservatism often comes from things that have nothing to do with our execution, obviously. And so we're also just wary of contextually the situation with coming out of the pandemic, recovering and now there's a sensitivity you see in schools and this and that. And so this we want to remain conservative for reasons that may have nothing to do with internal red flags.

Understood. And then just sort of thinking through kind of what the cadence of what happened during Q2. So when we had the call in June, I think you said same-store sales are running about 11%. You ended the quarter 15.5%. So can you talk about performance through, I guess, June and July? What you're seeing in back-to-school? And then if I may, just as we think about the assortment for the holiday season, where are you in terms of price point penetration versus where you might have been a year ago?

So historically, with the introduction of price points over the course of time, the mix itself has not really shifted very much not just the last 2 years, but many, many years. And so the mix within any given department may shift yearly to some stuff that's a little on the lower end of our price range and other years, a little higher depending on what's available to the buyers. But the amount of space we allocate per section and the amount of SKUs we list in any given department is extremely consistent. So when you see slight changes in sales patterns, they have more to do with volume than they do with a change in our offering. That's really important because I know that the flavor of the day is all of these YouTube things about grocery and food and Dollarama, but the reality is we haven't grown our food sections or grocery sections we have. It still remains a small piece of our offering, just one of the many things we offer. And it's important to just keep things fact-based as opposed to notionally based when we're having these discussions. For the question about the season coming up. Our sales -- our mix of goods is the same as it has been in the past with the introduction of the new price points, which will be scattered throughout our Halloween and Christmas offerings in the same percentages approximately as they have been in our everyday goods.

Our next question comes from the line of Chris Li with Desjardins. Our next question will come from the line of Brian Morrison with TD.

J.P., it's been a pleasure, and I certainly wish you well in your future endeavors. I want to turn to price checks. We're starting to see a slowdown in your degree of price increases that are being put through, just wondering if you can talk through with the slowing of the inflation, what you're seeing in terms of pricing with respect to the competition?

So you're correct. We feel that even though domestically, we're still feeling inflationary pressures on costs. On the import side, costs are fairly stable and controlled. And we're always, as you know, a price follower. And so we're just following the market, making sure that we're best value all year long and the same story, nothing has changed.

Okay. I guess, Neil or J.P., can you just talk about the timing of new store openings? I know you're looking to even them out throughout the year, but the second half typically has more availability. And with the economic challenges, I assume your phone has to be ringing. So -- what's your view on this? And is there obviously potential upside to your annual target of [indiscernible] I think 39 to date?

Well, I wish you were right. But the phone never rang -- real estate -- real estate is something that we must always chase down and stay on top of and manage. And so the amount of availability hasn't changed from years past to now. The difference is we've always wanted to open the bulk of our new store openings at the beginning of the year and it has always been something that escaped us even though we've tried just to help our operations be able to focus on the fourth quarter sales. And the change is nothing more or -- the other way to look at it is it's an incredible achievement by our real estate and operations team to just keep pushing the landlords, keep pushing our construction teams and our store execution to front-load it because the world has not changed. The real estate market has not changed. The availability has not changed. It's purely just a question of effort to get them opened at the beginning of the year, even though we've always wanted to and failed in the past. We've succeeded this year and we're all very proud of it.

So Neil, does the effort translate in upside to your annual target?

We're still very comfortable to our -- with our annual guidance, and we don't see any upside. So you should expect 60 to 70 net new stores this year.

Our next question comes from the line of Chris Li with Desjardins.

I hope you can hear me now.

Yes, we can hear you, Chris.

Yes, sorry about that. I know it's probably too early to talk about next year. But just at a high level, what do you think are some of the key puts and takes for same-store sales growth for next year? Because on the one hand, you'll likely still have the benefit from good demand, skill refresh, higher penetration of the higher price points. But on the other hand, maybe some reversal from discount, inflation that's moderated and macro conditions improved. So just wanted to see, get your thoughts on, do you think positive same-store sales is a reason of expectation for next year? And again, what are some of the key puts and takes we should be thinking about for next year?

So I think you started your question in the right way. It's too early to talk about next year's same-store sales. As we're just in -- just in September. So -- but the puts and takes are all of the puts and takes that we would have in any year. So our business hasn't changed. The fundamentals are the same. And so as the year progresses, we'll start to have better visibility on next year's same-store sales, and that will translate into our guidance in March. But at this point, I mean our focus is on delivering Halloween, delivering Christmas, delivering on our annual guidance that we just raised. So it's too early to talk about what will happen 12 months from now.

Okay. That's fair. And maybe a follow-up is just on the higher price point. It's been more than a year since you launched them. In our pricing surveys, we noticed that only a small percentage of products have been discontinued and this is probably a rhetorical question, but does that mean that you're generally happy with how the consumer acceptance has been with the higher price points? And then secondly, what are some of the key learnings so far from the high price points that you can share with us?

I think the learnings are the same as they have been for every price point introduction, which is one, we don't like to add price points until we really feel pressured that to offer the proper assortment to our customer, we pretty much feel we have to, to give a great shopping experience. And two, each time we do that, because we wait so long and we spend so much time preparing, it's been well accepted. And so our price point introduction has been well accepted because we use the same philosophy as we do for the other existing price points, which is great relative value. We try to ensure that it's an additional sale and not just a multiple. So if we had a 10-pack pencil, we're not making a $5 item a 50-pack pencil because that's not adding anything to our offering to the customer. So we want it to be something that we could not otherwise offer before. And so really a new customer or a new sale that makes the shopping experience more interesting.

Got you. Okay. Thanks, Neil. And J.P., let me also add best wishes to you as well. Thank you.

Our next question comes from the line of George Doumet with Scotiabank.

Congrats on a strong quarter and J.P., just want to wish you continued success at your future role. Just want to get started, maybe Neil, you mentioned product refreshes. Can you talk a little bit about any themes there? And how should we think of maybe that quantum versus historically how it's been?

Product refreshes are in line with historical. Nothing's changed, I don't think there's a cadence increase or slowdown. We are seeing -- over the last few years, there's certainly on the import side or overseas sourcing side a slowdown in creativity and the desire of manufacturers to spend money on new molds and creation. So the owners shifted to the retailer in our case, to ensure that we were either creating or finding with more effort than before new and exciting items. That still remains the case. The world is not pouring creativity and orders into our overseas manufacturers yet. I think it's all cyclical and will likely come back at some point in the near future. But for now, our team has to keep doing what it's done for the last 2, 3 years, which is to spend more of its time being creative as opposed to shopping what's being created by the manufacturers.

Okay. And based on the midpoint of the guidance, it looks like you guys are looking for 80-ish basis points of expansion in gross margins in the second half. How should we maybe think of the cadence between Q3 and Q4? And is the lower versus the upper end just predicated on kind of where consumers -- sorry, consumables land for the year or maybe other factors in there to consider?

Well, as we said since the beginning of the year, we think that second half gross margin is going to be stronger than first half in terms of the year-over-year improvement and then the question is really a question of mix, George, depending on what we see on the mix side in terms of general merchandise versus consumables versus seasonal, which we can't predict. But so far, what we're seeing is a well-balanced mix, as I mentioned and Neil mentioned, between our 3 main product categories.

Okay. That's helpful. And just one last one, if I may. Can you maybe talk a little bit about the appetite for M&A when it comes to potentially another acquisition kind of outside of the Americas or our core markets where you can share best practices?

We're looking and have always looked at what other markets in the world were doing with regards to our sector. We will continue to do so and when an opportunity makes sense and would be additive. We will jump on that opportunity as we did in creating the Dollarcity business with our partners there. But for the moment, it's business as usual, and we continue to keep our eyes on the world.

Our next question comes from the line of Vishal Shreedhar with National Bank.

And best of luck, J.P. and congrats on the quarter. Regarding shrink, what are you seeing? And how do you expect that to unfold over the quarters ahead? Do you expect that to become an increase of pressure? Or is it largely stable?

No, I think it's largely stable. We've completed the vast majority of our accounts. And so we're -- I would say, in the gross margin comment that I made earlier, the shrink trends are included in there. And so we're comfortable with the shrink position that we have. The reality is it's gotten worse over the past 12 to 18 months, but we knew it going in the year. So we were able to factor it in our guidance.

Okay. And with respect to Dollarama's performance, obviously, the same-store sales growth has been outsized for many quarters now. Wondering if management see that same-store sales growth and its discerning any customer messages from it in that maybe there's opportunity to increase store sizes and that maybe the capacity plans that you have need to be revised earlier than anticipated, what should the market look into these accelerated trends?

So obviously, we're all very satisfied with all the hard work we always put in, and we're grateful that our customers recognize that hard work and the value and shopping experience we try to present to them. I think we all feel Johanne Choiniere and the rest of the leadership team, particularly the ones who spend the most time at store level that our store size feels like a good size to us, that 10,000 square feet box. There's always going to be exceptions where we have truly strong stores in smaller locations. And as always, our real estate team works on trying to grow the size of those stores. But corporately, I don't think we have any change in our philosophy, our outlook on what the right box looks like as a whole. And I think it's that simple.

Our next question comes from the line of Luke Hannan with Canaccord Genuity.

Thanks. J.P., maybe one for you. I may have missed this in the discussion earlier. But as far as the mix assumption for H2, is the assumption that demand remains well balanced for the rest of the year? Or I seem to remember on a prior call, you had mentioned that there was a view that potentially mix could continue to normalize towards general merchandise and seasonal products.

I mean as we mentioned, I think, so far and unfortunately, I can't predict the future. But so far, the -- what we're seeing is a well-balanced mix. I wouldn't say there's a major shift from consumable to general merchandise or to seasonal. We're continuing to see all the categories performing strongly, and we're pleased with the results.

Okay. And then for my follow-up here, it's on the labor environment and more specifically, what you guys have done internally to be able to be more efficient when it comes to staffing and sourcing labor? You've made some investments in the past from an IP perspective on improving what you're doing there. I'm curious to know if the full benefit of those investments have begun flowing through the P&L yet or if that's a multi-quarter expectation for benefits that you expect to see on the SG&A line?

I'd say, as always, when you think about our SG&A line, we're always looking for ways to be as efficient as we can be. We're in the labor market that where we have to always put our best foot forward and be competitive and so far, we're pleased with the results we're seeing from our ability to track talent and to retain talent as much as possible in the current environment. And we haven't had to curtail opening hours or any major disruptions to our operations like you may have heard in the industry in general. So -- so far, from an HR perspective, I think we've done a good job of being efficient while making sure that we offer the best service possible to our customers and we have stores that are well merchandised day in and day out.

Our next question comes from the line of Martin Landry with Stifel Canada.

My first question is on your -- the rollout of your $5 price points. I was wondering where you're at in that process? Our analysis would suggest that roughly 15% of your SKUs are above $4. And I was wondering, are you done with that process? Or there's more to come?

It -- There's no target just to clarify the situation. There never was a target, and there won't be a target with regards to how many SKUs are in any given price point. It's fluid and it really is dependent on the offering. So if the next 6 months presents a greater percentage of truly amazing $5 items, we will have more $5 item. And if the next 6 months produces a fantastic, let's say, offering of $2 or $2.50 items, then that's the price point range that will grow. It's really truly dependent on the items we create and the items presented to us and the costs associated with those items as the raw materials and the other things that affect those items, the cube size, so if they're large, then clearly, they're going to be pushed to the highest end of our price point range because freight will have a much greater factor. But again, it's all truly dependent on the offering. And if you see ebbs and flows of price points, it's purely just a question of opportunity.

Okay. That's helpful. And then just in terms of my second question, I'm trying to understand better the magnitude of your success. And trying to look at past recession. And if we look at the 2008, 2009 recession, I believe that your same-store sales growth were increasing by 7%, 8%. In the last year now, you've been growing twice as fast, your same-store sales. I'm wondering if you can compare and contrast a little bit of the situation of 2008, '09 versus the current environment?

I'm much too young to do that. So I'll ask J.P. to do that.

They're not comparable. If you look at '08, '09 at the time, we're starting to introduce the $2 price point. So first of all, we didn't have a product offering. Number two, from a macro context, we were not in the hyperinflationary scenario with government stimulus. You then have a supply chain driven recession, but a financial crisis. So very hard and almost impossible to compare '08, '09 to what we're going through right now and debate as are we in a recession right now or not, I mean, someone also he can opine on that. But just jelly speaking, if you look at the Dollarama business model today versus '08, '09. And if you look at the macro environment, they're both very different. So hard to draw any parallel from one or the other.

Our next question comes from the line of Tamy Chen with BMO Capital Markets.

I'll be quick here. Just going back to the gross margin improvement year-over-year because it's quite notable. I just want to confirm, so J.P. was it all due to the better year-over-year shipping costs? Like was there anything else maybe just good performance in general merchandise that contributed as well? And did I hear correctly in terms of the shipping cost tailwind, you're expecting that year-over-year improvement to be greater in the second half of the year?

So you heard correctly on both fronts. The gross -- I mean, there are many lines to go from sales to gross margins. But the lion share of the improvement is a function of our ability to make our cost structure in the supply chain more efficient than it was last year. And given our inventory turns over approximately 3.5x a year, a lot of those benefits will be felt more in the second half than in the first half.

Okay. Understood. And I wanted to ask about your earnings pickup from the Dollarcity. The last 3 quarters has been a little volatile, like I think in your fiscal Q4, it was $20 million than last quarter's $13 million this quarter, $11 million. I don't know if that's from FX translation or something like that. Has there been any sort of shift in the underlying business' momentum?

No, it's more seasonality. Keep in mind that Dollarcity year-end is a December year-end, so they tend to pick up Halloween and Christmas in their Q4, whereas we have Halloween in our Q3 and Christmas in our Q4. So their seasonality tends to be a little bit more skewed towards Q4, and that explains most of what you're describing as volatility.

Our next question comes from the line of Zeyn Burak with Credit Suisse.

This is Zeyn. Congrats on a great quarter. I wanted to go back to traffic. Can you talk about the strength there? Clearly, there are some macro pressures that are making the consumer more budget conscious. But beyond that, can you point to anything specific of all your initiatives fueling that traffic, especially versus your discount peers whether it be new price points, merchandising, private label marketing, et cetera? And separately, when I looked at the model historically, prior to COVID, I should say, your comps were largely driven by ticket growth, although transactions also tended to be positive. I guess with double-digit transaction growth over the past 7 quarters now, do you think the composition of comps going forward will be different than historical trends, meaning we're over indexed through traffic? And how does that affect your long-term algo going forward? Sorry, I know it's a lot there, but any color would be helpful.

Well, that's a full question. The -- so on the first part, when you're talking about initiatives, I mean, all the items you talked about price points, mix, value prop, merchandising, these are not initiatives. This is what we do day in and day out. So the team has done a fantastic job at executing very well on all those fronts. And that's translated in the results that you're seeing in Q2. So there's no specific initiative that I would point to, except, of course, we've introduced a new price point, but that's not an initiative. But it's just the combination of our value prop in the current environment with good merchandising and making sure we're in stock with the right goods and the right assortment and that's driven our results. But there is no specific initiative and it's just good consistent execution. Then on your second question on the composition of the comps. For sure, we've seen elevated transaction levels as there's been trade down over the past 18 months. So that's resulted in more frequent trips and more transactions. The thing that we were really questioning is what will we be able to maintain the basket size with the increased transaction and we've been able to maintain and increase even the basket size over the past 18 months. So that's really what's driven the comps.

Got it. And I guess somewhat related to that, I know you updated your long-term store target in Canada not too long ago. I think it was a couple of years ago, but I guess given the strength in traffic, is there a consideration of accelerating unit growth in outer years, such that maybe there's more of a land grab opportunity than you previously considered? And relatedly, should we expect an update on the long-term store targets anytime soon? I guess can you speak to any work or analysis you've done on that front recently.

Yes. So to the focus right now -- well, first of all, it was updated 2 years ago. So the focus right now, 2 years in is just to deliver and execute. As we discussed earlier, we funded the growth of stores in the year. The pipeline in terms of real estate is looking good. But right now, it's just delivering on this year and next year, and then we'll see what the future holds.

Understood. And it's been great to work with J.P. and best of luck to you in the next chapter. Appreciate it.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.