Dollarama Inc Q3 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Back on the gross margin, so assuming that you held the line on price, like theoretically your gross margin should be flat, not down a 100 basis points -- not down 100-plus basis points all else being equal. So what were pressures on COGS? Was it things like transportation costs, contractual rent increases? Is that how we should think about it?

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : So does that mean you took some markdowns during the quarter? Is that what you're saying, Michael?

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Okay. My next question, I want to address transaction count, which I think you could use as a measure of traffic. Your transaction count has been down 3 quarters in a row. This quarter almost down a 100 basis points. On the other hand, based on your commentary, you're very confident about achieving the 1,700 stores. And usually traffic, like negative traffic count is an indication that store footprint is maturing. So I'm just wondering if you can reconcile the 2.

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : Okay. And then lastly, I just have a question, in the press release in the outlook section, you have a -- one of the like the bullet points under the guidance, where you talk about your assumptions. And one of the assumptions is, the third one, lower-than-expected impact of inflation on product margins for goods imported from China. Could you explain what that is all about? And directionally what it means? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 06, 2018 / 3:30PM, DOL.TO - Q3 2019 Dollarama Inc Earnings Call

Question: Peter Sklar - BMO Capital Markets Equity Research - Analyst : So you're saying that has -- that had a positive impact on margin?

Question: Vishal Shreedhar - National Bank Financial, Inc., Research Division - Analyst : Just wondering why management perceives there to be or is observing limited inflation in the market and the goods which -- with which they then -- compared to where it sells or it competes in. Is it because your competitors are looking at DOL'S growth and DOL'S margins or saying they can compete more effectively there? Is it the consumer health is limiting [abilities], the price increases in the market? Different challenges think different things, so just trying to reconcile what your view is?

Question: Vishal Shreedhar - National Bank Financial, Inc., Research Division - Analyst : That's right, Neil.

Question: Vishal Shreedhar - National Bank Financial, Inc., Research Division - Analyst : Okay, that's helpful. In the past, management has indicated that their performance across Canada is generally fairly consistent. Is that still an observation that you have?

Question: Vishal Shreedhar - National Bank Financial, Inc., Research Division - Analyst : Okay, wonderful. And this on the bit of a -- maybe be a tough one for you guys to answer, but as management looks at long-term margin power of this company, call it, on a rate basis, I don't know if that's the way you look at. When you look at it, is management's primary goal here to maintain that relative value versus its competitors and the products that it competes in? Or does management also consider that margin rates, as it looks for the long term? Like how do we think about the way you guys will orient as the competition kind of not intensifies or potentially intensifies in your products?

Question: Vishal Shreedhar - National Bank Financial, Inc., Research Division - Analyst : Okay. And with respect to the buyback, a pretty large buyback indication. How active that's -- how active does management intend to be? And what are the parameters around if it'll be active or not?

Question: Patricia A. Baker - Scotiabank Global Banking and Markets, Research Division - Analyst : I want to go back to your opening remarks, Neil, about the other -- getting other opportunities to drive sales, traffic and basket. And then you mentioned that you're getting better and better with data quarter-by-quarter, and so you have better tools available. So I'm just curious about whether or not you've begun to deploy these tools or is that is something that will see you deploy, in a greater manner over the course of the next year or so? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 06, 2018 / 3:30PM, DOL.TO - Q3 2019 Dollarama Inc Earnings Call

Question: Patricia A. Baker - Scotiabank Global Banking and Markets, Research Division - Analyst : And would I be -- would that -- would it be fair for me to say that this is a really -- a new set of tools and a new way of looking at the business or something that you've not done in the past?

Question: Patricia A. Baker - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay, that's very helpful. And then Michael, could you refresh for us what the plastic penetration was debit and credit versus cash in Q3?

Question: Patricia A. Baker - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. I apologize I forgot that you weren't going to give it, but it continues to grow is what I wanted to hear.