Dollarama (TSX:DOL) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.

This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.

Access the full call at https://edge.media-server.com/mmc/p/gwecbw8n/

Summary

Dollarama Inc. reported a strong Q1 fiscal 2027 performance with a 5.6% same-store sales increase in Canada and 21.4% total sales growth to nearly $1.9 billion.

The company opened 28 net new stores in Canada, bringing the total to 1,719, and remains on track to open 60-70 net new stores this fiscal year.

Dollar City, the company's Latin American operation, opened 20 net new stores, now totaling 741, and continues to expand in Mexico with 13 stores.

In Australia, Dollarama began implementing its transformation strategy, starting with renovations and the introduction of Dollarama-sourced products, aiming to renovate 60-80 stores this fiscal year.

The company maintained its guidance for same-store sales growth at 3-4% and gross margin at 45-45.5% for the full year amid global economic uncertainties.

Dollarama's EBITDA increased by 17.4% to $583 million with a margin of 31.6%, while net earnings reached $302 million, and diluted EPS was $1.11.

Management highlighted ongoing supply chain pressures and geopolitical uncertainties but expressed confidence in their flexible and resilient business model.

Full Transcript

OPERATOR

Good morning and welcome to Dollarama's first quarter fiscal 2027 results conference call. On today's call are Neil Rossi, President and CEO and Patrick Boye, CFO. They will begin with brief remarks followed by a Q and A with financial Analysts. Before we begin, please note that today's remarks may contain forward looking statements about Dollarama's current and future plans, expectations, intentions, results or other future events or developments.

Forward looking statements are based on information currently available to management on reasonable estimates and assumptions made by many factors could cause actual results, future events or developments to differ materially from those expressed or implied. You are cautioned not to place undue reliance on these forward looking statements. Forward looking statements represent management's expectations as at June 11, 2026. Except as may be required by law, Dollarama has no intention and action undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

You are invited to consult the Cautionary statements on Forward Looking Statements in Dollarama's Management Discussion and Analysts dated June 11, 2026. All forward looking statements on today's call are expressly qualified by this cautionary statement. In addition, dollarama may refer to certain non GAAP measures during this call. Please consult the Non GAAP and Other Financial measures section of Dollarama's MDNA dated June 11, 2026 for definitions, reconciliations and appropriate GAAP measures and other information.

The disclosure documents related to this call are available in the Investor relations section of Dollarama.com and on Sedar Plus. I will now turn the call over to Neil Rossi

Neil Rossi (President and CEO)

Good morning everyone and thank you for joining us. We delivered a strong performance in the first quarter of fiscal 2027 as we pursued profitable growth in our core Canadian market while advancing our priorities across our international growth platforms. Starting in Canada, our value proposition continued to resonate with consumers as affordability and everyday value remained top of mind in an uncertain economic environment. We generated an impressive 5.6% same store sales increase in Q1, supported by both traffic and basket growth, reflecting once again the relevance of our offering and year round value proposition for Canadian consumers.

On the real estate front, we opened 28 net new stores during the quarter, bringing our total store count in Canada to 1,719 stores at quarter end. We remain on track to achieve our fiscal 2027 target which is to open between 60 and 70 net new stores this year. As previously discussed, front loading store openings during the fiscal year is always the objective given that the back half historically represents our seasonally busiest sales period. This ensures that we can maximize focus on store operations and serving customers.

Congratulations to the operations and real estate teams on the strong execution early in the year. Work also progressed well on the construction of our future logistics hub in Western Canada. This project is an important component of our long term growth and future two node distribution model in Canada. I am pleased that we remain on budget and on schedule with the facility expected to be fully operational by the end of calendar 2027. Turning to Latin America, Dollarcity also had a solid start to the year generating continued profitable growth supported by strong same store sales and ongoing network expansion while the team simultaneously executes the ramp up of the Mexico business. During the quarter, Dollarcity opened 20 net new stores across our Central and South American markets, bringing the total store count in the region to 741 locations. In Mexico, we ended the quarter with 11 stores consistent with prior period end and opened 2 new stores earlier this month. As with previous Dollarcity Market entries, we are scaling this new growth platform carefully and progressively over time. In Australia, we have now begun advancing our transformation roadmap in earnest.

On the merchandising front, the first Dollarama source products started reaching shelves after quarter end. As a reminder, this will be a gradual rollout as we work SKU by SKU to introduce even more compelling value to Australian consumers. Leveraging our proven low price point value oriented product offerings, we don't expect to reach a critical mass of Dollarama import products before year end, by which time we expect to have about half of our import products transitioned.

In terms of shopping experience, we fully renovated 13 stores during the quarter and opened 8 net new stores. By quarter end, 28 of our 410 locations in Australia were operating with the Dollarama layout and fixtures. Beyond improving store navigation for the consumer, the updated format allows for greater SKU density. Although these customer facing changes remain preliminary, we have seen encouraging signs in terms of customer interest in reception to the new layouts and to our import SKUs as they gradually make their way across Australia.

While it remains far too early to draw conclusions with such a small sample size, these initial indicators are certainly motivating the team as we continue to execute our roadmap. Looking more broadly, uncertainty persists across the global economy driven by ongoing geopolitical developments which are driving further inflationary pressures for consumers and businesses. From a retail operating perspective, these conditions are impacting global supply chains and costs related to raw materials transportation.

The duration of the conflict in the Middle east and its ripple effects will ultimately determine the magnitude of these pressures. In this context, and as always, we remain focused on the elements within our control. Our business model continues to provide flexibility and resilience to mitigate some of those pressures supported by our direct sourcing capabilities, operational excellence, disciplined approach to pricing and multi price point strategy.

Looking ahead, we expect our strong value positioning to continue resonating with consumers as they remain mindful of their spending. Our job is to leverage our agile business model, sourcing expertise and retail execution to continue delivering affordable everyday value and convenience across our markets. With that, I'll pass it over to

Patrick Bui

Patrick thank you Neil and good morning everyone. Starting with our consolidated results, sales for the first quarter of fiscal 2027 increased by 21.4% to nearly $1.9 billion. The increase reflects network and same source sales growth in Canada as well as the sales contribution from Australia. EBITDA increased 17.4% coming in at $583 million for Q1, representing an EBITDA margin of 31.6%. Net earnings totaled $302 million and diluted EPS increased 13.3% reaching $1.11 compared to diluted EPS of $0.98 last year.

Similar to Q1 of last year, we recorded an unrealized gain during the quarter on the fair value of the Dollarcity call option, positively impacting EBITDA margin by 90 basis points and EPS by $0.06. While this represents an accounting adjustment rather than an operating item, it reflects the strong underlying performance of Dollar City. Our core Canadian business generated a strong financial performance in the first quarter of fiscal 2027 across our KPIs.

Same source sales increased by 5.6% over and above 4.9% growth last year with sustained demand for our everyday products elevated. Same store sales in Q1 also reflect the recovery in demand following the weather related disruptions that impacted traffic in Q4 of last year. Following years of inflation, consumers continue to face more inflation and rising costs including on fuel and everyday goods. While this reinforces the importance of affordability and value in purchasing decisions, overall consumer confidence appears to be weakening as a result.

We remain cautious and our outlook for SSS is unchanged at 3% to 4% for the full year. Still, in Canada, gross margin came in at 45% of sales compared to 44.2% in the first quarter of fiscal 2026, with the increase primarily reflecting lower logistics costs as well as the positive impact of scaling. We do expect an uptick in supply chain related pressures in subsequent quarters, but we believe we have the tools to partially mitigate these impacts assuming they level off over the near term.

As such, we remain cautious on gross margin and our guidance is unchanged at 45 and 45.5% for the full year. SG&A for the Canadian segment in Q1 was 15.1% of sales compared to 15.3% last year. The slight improvement primarily reflects the absence of transaction related costs in Q1 of this year. Full year SG&A guidance remains unchanged at between 14.1 and 14.6% of sales, with the positive impact of scaling expected to help offset higher store labor and operating costs.

Our share of Dollarcity's net earnings grew 27.1% to $51.2 million for Q1. This reflects a 37.7% year over year increase in net earnings from our Central and South American operations, partially offset by a $4.3 million loss related to the Mexico ramp up in line with expectations as disclosed last March, we made a capital contribution of US $38 million towards Mexico expansion plans in Q1. Our contribution was again funded using a portion of our US $75.1 million share of the dollar City dividend declared in February.

Mexico will remain in investment Mode through fiscal 2027. Looking now at Australia, the work underway represents a critical first step in our multi year plan to deliver an attractive return on investment over time and we are pleased with progress so far. From a financial performance perspective, results are tracking in line with our expectations which remain unchanged for the full year. We continue to anticipate the merchandise changeover to lower price items as well as the pace at which these new products are introduced to weigh on sales in fiscal 2027.

We anticipate that impact to be more pronounced in the second and third quarter of fiscal year as we accelerate the pace of the transition to lower priced SKUs. Capital expenditures related to store renovations and new store openings, as well as expenses related to the deployment of operational initiatives are also tracking according to plan. As a reminder, we expect to renovate 60 to 80 stores and to open 15 to 25 net new stores in fiscal 2027 as we invest in our growth priorities in Canada and the transformation of our business in Australia.

We also continued to deploy excess cash to create immediate shareholder value during the quarter we were active on share repurchases. We bought back nearly 2 million common shares for cancellation under our NCIB program for a total consideration of $339.1 million. We also announced today that the Board approved a quarterly cash dividend of $0.12 per share. Despite an uncertain macroeconomic environment, our expectations across our markets remain broadly unchanged and our priorities are clear.

As we move towards the second half of the year, the fundamentals of our business are strong. Our value proposition continues to resonate with consumers and and we believe we have the tools and flexibility to help mitigate some of the external pressures we are seeing today. We will continue to focus on the disciplined execution of our priorities in all markets, serving customers with value and convenience and deploying capital in a manner that supports long term shareholder value creation.

With that, I'll now turn the call back to the operator for the Q and A.

OPERATOR

Certainly. Ladies and gentlemen, we ask that you please limit yourself to one question each. And our first question comes from the line of Irene Nattal from RBC Capital Markets. Your question please.

Irene Nattal (Analyst)

Thanks and good morning everyone. Great to see the same store sales recovering in Q1. Can you give us some more color, Neil or Patrick? Just on the cadence of sales, what people are buying. Obviously poor weather. How did that impact and if you can, what we've seen Q2 to date. Again, recognizing that weather just wasn't our friend.

Neil Rossi (President and CEO)

Yes. Look, I could maybe comment more specifically about Q1. I mean I think in Q1 we saw fairly consistent trends throughout the quarter and including as we exited the quarter, there appears to have been some strength, some pent up demand in the front end after a softer Q4. And then as we move through the quarter, like other retailers, there was some variability in the back end due to the late arrival of spring and summer.

OPERATOR

Thank you. And our next question comes from the line of Brian Morrison from td. Your question please.

Brian Morrison (Analyst)

I want to ask a question on Australia maybe. Neil, I appreciate the details you gave, but help me understand the progression of store renovation, your format to merchandising the store, to putting it under a dollarama banner. I heard the renovation totals and targets, but did you say half of your imported product will be here by year end? And the question I have is when will there be sufficient imported merchandise to call a store one of your own?

Will the new merchandise not be placed in a store until the renovation is complete? And I know it's early, but you stated initial positive reception of the merchandise. What makes you say that?

Neil Rossi (President and CEO)

Thank you, Brian. So our goal is to renovate 400 stores over the next four years. So averaging 100 stores a year in Q1. So far we've renovated 13 this year our goal is to renovate between 60 and 80 by the end of the year we should have about half of our imported SKUs in the stores as you mentioned and that will continue to trickle in as time goes on. In a very Linear fashion. From the perspective of rebannering, we will never rebanner a store until it has been renovated or unless it's a new store.

And there's not going to be a specific SKU count that's going to trigger that. It's going to be more a question of management from Canada. Honestly, since we have the experience going to Australia and judging that the overall shop feels like the value that we're trying to portray is dollarama value. And at that point, we will change the brand. Now, as we're building out the new stores, we are building them out in our colors with the The Reject Shop (TRS) branding so that the capital being spent is being spent in a strategic manner for the long term.

But for certain, it will not change until the shop feels like a dollarama shop.

OPERATOR

Thank you. And our next question comes from the line of Martin Landry from Stifel. Your question, please.

Martin Landry (Analyst)

Hi, good morning. In Canada, I was wondering if you can talk a little bit about your product offering. Is there any categories that you've added recently that are doing well? And can you talk about maybe two categories of interest, pet and toys, to see how these categories are doing for you guys?

Neil Rossi (President and CEO)

Sure. No, there hasn't been any new categories added to the store. The existing categories flex over time, depending on the interest of the customer. So when there are trends in the toy industry that make toys hot, we tend to buy more toys. And when crafting is experiencing a trend, we tend to have more craft items in the store. So as retailers, within the limits of our fixed price points, we're always trying to offer as much as we can in the categories that are hottest. And toys happens to be quite hot right now with a few trends going on. And for certain, that's helping the toy section of our store perform.

OPERATOR

Thank you. And our next question comes to the line of Chris Lee from deschartins. Your question, please.

Chris Lee (Analyst)

Good morning, everyone. Sorry if I missed this earlier, but Patrick, can you elaborate on the drivers of the lower logistics costs that help margins during the quarter and then sort of what are the main puts and takes for the rest of the year as we think about the gross margin? Thanks.

Patrick Bui

Yeah. So in terms of logistics, I mean, we clearly benefited from scaling of having a 5.6 SSS, but also from a logistics standpoint, it was a smooth quarter. So we did not incur any friction or detention costs that we would normally incur in a normal quarter. I would like to point out that when we talk about the impacts of higher fuel, so none of that actually impacted the first quarter. And so these costs are to be expected later on in the year and specifically in the second half of the year. That being said, for the time being we're maintaining the guidance, the 45 to 45.5, but we do assume that the conflict will end soon and that fuel prices will normalize in short order.

OPERATOR

Thank you. And our next question comes from the line of Xuhen Ma from Bernstein, your question please.

Xuhen Ma (Analyst)

Hi. Thank you. Back on the Australia side of things, could you talk about the timeline of when some of the TRS assortments are being retired and when you're introducing the new assortment? Is there going to be some sort of a gap in between that may impact sales this year? And broadly speaking, how are you getting awards out to the Australian consumers? Are you going to pass marketing campaigns or. This is going to be more of a word of mouth? Thank you.

Neil Rossi (President and CEO)

The transition from The Reject Shop (TRS) Goods to dollarama Goods is a progressive transition. So for example, I'll use a very specific example. If we bring in five new sponge skus in the cleaning department, as we see the timing of those SKUs arriving into Australia, we'll know how many months of inventory we have of the, for example, five existing The Reject Shop (TRS) sponge queues and we'll have sold down our inventory levels so that the transition doesn't lead to gaps but also doesn't lead to excess inventory.

So timing it perfectly never works, of course, but give or take, you're trying to do a transition that's manageable at store level and inventory level.

OPERATOR

Thank you. And our next question comes from the line of Mark Petrie from CIBC Capital Markets. Your question please.

Mark Petrie (Analyst)

Yeah, thanks. Good morning. I wanted to ask about dollarcity. Just curious if you could give some color on what looks like a strong same store sales performance in Latin America. And then with regards to Mexico, wondering how you think we should look at sort of no new stores in Q1. I think you said you opened two early in Q2. And then also just an update maybe on how those Mexico stores are performing.

Patrick Bui

Yeah, thanks for the question. Look, Latam, yes, the business continues to perform well. You know, it's very similar trends that we're seeing here in Canada. So we're quite happy with the progress of the business in Latin America. Mexico at the end of the quarter we were at 11 stores. It's just the way how the pipeline worked. You know, we were very happy to pull forward a few stores into the end of last year, but we're happy to, you know, to see the progression. And as Neil mentioned in his prepared Remarks. We've already opened another two stores, so we're at 13 and a few others to come.

OPERATOR

Thank you. And our next question comes from the line of John Zampero from Scotiabank. Your question please.

John Zampero (Analyst)

Thanks very much. Good morning. I wanted to ask about cost of goods inflation and in particular inflation in China has accelerated fairly quickly. I wonder what you're seeing on your end and does that make you want to accelerate or revisit your product refresh rate or do you need to get more creative with your suppliers on how to navigate within your $5 price LIM? Any color on that would be helpful. Thank you.

Neil Rossi (President and CEO)

Sure. So there's no question that there's pressure on pricing in China, especially in the plastics. The heavier and larger the item, the more plastic there is, the greater the impact on that item. So much like during COVID where freight rates were astronomical and we parked a few items, we are parking some very large HiQ plastic items. But that's really extreme as a case. In general, we're using our ability as importers to always change the mix throughout the whole year for a multitude of different reasons to provide a mix that heads to the margin percentages we're hoping to achieve, while of course always keeping the best relative value to the market that we can provide our consumers.

OPERATOR

Thank you. And our next question comes from the line of Vishwal Sridhar from nbcm. Your question please.

Vishwal Sridhar (Analyst)

Hi, thanks for taking my question. With respect to the same store sales growth that you saw in Canada, could you give us a sense of has inflation in that actual comp accelerated and is that due to product inflation from your suppliers or is that due to Dollarama creating a mix shift within its basket by allocating more items to higher price points?

Patrick Bui

Yeah. So if you recall, towards the end of last year, there were some. Some price increases on the domestic side which led us to increased pricing as well. So what you see in the SSS is a carry forward from those price increases from last year. And you could assume that those price increases at the end of last year should tail off as we advance throughout the year.

OPERATOR

Thank you. And our next question comes from the line of Ed Kelly from Wells Fargo. Your question please.

Ed Kelly (Analyst)

Hi, good morning, everyone. Nice quarter and thanks for taking the question. I wanted to circle back on Australia and how we should be thinking about the impact of all the investments that are being made this year in the business. The Q1 gross margin at 34,400 looks a little bit on the low side versus sort of what we saw the rest of the year. I'm Just kind of curious, Patrick, as to how much gross margin pressure you might see from here. The investment that you talked about last quarter, is that still the right number? And then as it pertains to the loss that the business might see, it's not hard to get yourself in the neighborhood of like 55, 60 million dollars, something like that, or more. I'm just curious, is that ballpark? Thank you.

Patrick Bui

Yeah. So I would say all the comments with respect to how we're thinking about the forecast in Australia that we presented last quarter, nothing has changed. So as we completed Q1, we're exactly on that plan. And so if we go back to the commentary about the three pillars, all of that remains the same and we're happy that we're tracking exactly on plan.

OPERATOR

Thank you. And our next question comes from the line of Mark Cardin from ubs. Your question, please.

Mark Cardin (Analyst)

Good morning. Thanks so much for taking the question. So, want to circle back on the supply chain? You guys called out the higher costs resulting from the conflict. Factoring in a resolution in the near term. If the conflict did persist, though, over the course of the next few quarters, how much of an impact could it have on your margin structure as those pressures ramp up in the second half of the year? Just how should we think about the sensitivity there? Thanks.

Patrick Bui

Yeah, that's a really tough one. I mean, who knows what the price of fuel and the impact on the cost of products will be? The only thing that we could say is that after Q1, it certainly dragged on longer than we had initially anticipated. That being said, we've kept the margin at 45 to 45.5. We're comfortable reiterating that guidance with the assumption that, you know, things will resolve themselves in short order. Now, certainly, you know, if the conflict and fuel prices, you know, increase and drag on for a much longer period. While at that point, you know, we may need to revise our assumptions. But if things calm down very quickly, you know, we feel comfortable reaffirming that guidance on the gross margin.

OPERATOR

Thank you. And our next question comes from the line of Cory Tarlow from Jefferies. Your question, please.

Patrick Bui

Great. Thanks. Patrick. I wanted to ask on the outlook, is there any consideration around any change in the leverage point? And the reason I ask is that your SGA guide on a three to four component embeds both leverage and deleverage. So I'm wondering what the swing factors are or drivers to get from one end to the other. Thanks so much. Yeah, look, I mean, you know, leveraging SGA is, you know, truthfully a greater challenge in the business. We feel that a lot of the material improvements that we've done in the business, a lot of it is more behind us than ahead of us.

So we always remind people that continuing to improve on that SG&E remains a challenge for us. There are certain line items that are increasing at a very, very high rate, you think, at funding recycling programs. A good example of line items that are increasing quite materially year over year. So when you look at the balance of the year and what we had planned when we provided our guidance is that to the extent that we could achieve same store sales within that range, there should be some incremental leverage in the business, but then again, not to expect any material improvements on that end.

OPERATOR

Thank you. And our next question comes from the line of Luke Cannon from Kenaccord Genuity. Your question, please.

Luke Cannon (Analyst)

Yeah, thanks. Good morning. I want to ask about the competitive environment as it relates to the three jurisdictions that you participate in, and then more specifically, whether or not the price gaps relative to what you view as your closest competitors in those markets, whether those have changed materially over the course of the quarter. Thanks.

Neil Rossi (President and CEO)

So they haven't changed. By a margin. Worth discussing. But certainly each market has a different competitive set and a competitive situation. In Canada, you know, we consider. Well, I should say in every market, we consider everybody competition, of course, but, you know, as you would expect, there are stronger competitors that we focus on in each market. The Australian market's a very competitive market at this point in time. It was less so a couple of years ago, but we've seen that in Canada. We've seen it now in our Central and South American operation. It comes in waves. You know, the level of competitiveness goes up and goes down over the course of time for different reasons, of course.

But I would say consistently, our job, regardless of all of that, is to ensure that in each market our relative value is, you know, is the best and that our execution at store level is on par or better than everybody else's. And that a customer who comes to a dollarama sees great relative value in a nice, clean shopping environment, in a very convenient sized shop and as close to their house as possible over the course of time. So that's what we remain focused on. And of course, to do that, we have to keep an eye on all of the competition in every one of the three countries or regions we're in. And that will be the case forever.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.