Dollarama Inc

TSX:DOL

Earnings Call Transcript 2024-Q1

[Operator]

Good morning and welcome to the Dollarama Fiscal 2024 First 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 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, 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 statements regarding forward-looking information contained in Dollarama's MD&A dated June 7, 2023 available on SEDAR.

Forward-looking statements represent management's expectations as at June 7, 2023 and, except as maybe 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. Please go ahead, Mr. Rossy.

[Neil Rossy, President and Chief Executive Officer]

Thank you, operator. And good morning, everyone. This morning, we announced outstanding first quarter results, including a 17% increase in same store sales and a 29% increase in diluted earnings per share to CAD 63. Clearly, Canadians from all walks of life are still responding positively to our compelling value proposition and affordable product mix.

While we continue to experience strong demand for consumables in the context of persistent inflationary pressures, we are also seeing strength across our seasonal and general merchandise categories. I am particularly pleased with the performance of our Easter season this year, demonstrating our strong fundamentals and the fact that the full mix is continuing to drive traffic to our stores.

Our entire organization is delivering on our value promise, whether that value promise comes from pricing, merchandising or assortment breadth. With our inventory rebuild mostly behind us, I am pleased with our product offering across our price points and with our now solid in-stock and in-store inventory levels.

With the goal of increasing proximity to our customers, Q1 was a particularly active quarter on the real estate front with the opening of 21 net new stores. This reflects a concerted effort by our real estate and operations teams to frontload net new store openings this year. The strategy is to take some of the pressure off the last quarter of the year, which is always our busiest quarter.

Note that the acceleration and the net new store openings in Q1 has no impact on our annual target, which remains between 60 and 70 net new stores by fiscal year-end. Among those 21 stores in Q1 was our 1500th store in Canada, which opened in the Rockland Center here in Montréal this past April, a milestone we were pleased to reach in our hometown and celebrate as a team. Hats off to our real estate, field and operations teams for their disciplined execution on our long-term growth plans of reaching 2,000 stores across Canada by 2031. Today, about 85% of Canadians live within 10 kilometers of a Dollarama store, which represents no small feat and it's something we are very proud of.

The team at Dollarcity also continues to execute on their long term growth plans in the four LatAm countries where they operate. In the first quarter of this year, eight net new stores were opened, bringing their total store count to 448. It's been just over two years since Dollarcity launched its first store in Peru. With 24 stores and counting in that country, we are very pleased with how this new market is performing and with the team's execution.

Turning to ESG, we published our latest comprehensive annual ESG report this morning, outlining our evolving ESG strategy as well as our progress against goals. Our commitment to managing our business responsibly, we are further building organizational ESG capacities and integrating ESG into our daily decision making.

Last year, we created an ESG function and, earlier this year, we established an ESG steering committee responsible for the advancement of our ESG strategy across the organization.

We continue to move our climate strategy forward, including the introduction of our first generation GHG intensity reduction goal for Scope 1 and 2 emissions last year. We are proud to have taken this initial step and of the progress made year-over-year. We are now further advancing our climate roadmap and alignment with TCFD by focusing our attention on identifying and tracking relevant Scope 3 emissions.

Across our ESG pillars, our operations, our people, our products and customers, our supply chain and our governance, we will continue to implement goals and initiatives that are meaningful and actionable and that enable us to deliver on our value promise to our customers and our shareholders.

J.P., over to you to review our Q1 financial results in more detail.

[J.P. Towner, Chief Financial Officer]

Thank you, Neil. And good morning, everyone. As expected, we continued to benefit from sustained demand for affordable everyday items during the first quarter of fiscal 2024. This translated into strong demand across our three product segments and the same store sales above 17%, as mentioned by Neil.

SSS was comprised of a strong 15% increase in traffic and a 1.4% increase in average basket size. This quarter, we also maintained our industry-leading gross margin, which was 42.2% of sales compared to 42.1% in the same quarter last year. Q1 represented the tail end of supply chain related cost pressures on our margin, with higher logistics costs, and saw continued product mix pressure, offset by lower ocean freight costs.

For its part, SG&A also remained relatively flat year-over-year at 15.1% of sales compared to 15% last year. Our strong financial performance has enabled us to absorb continued wage pressures to date with additional minimum wage increases in the pipeline and reflected in our annual guidance. While the persistent tight supply in the labor market that has impacted the entire industry remains a concern, it has not resulted in any significant disruptions to our operations.

Our 50.1% share of Dollarcity's net earnings grew by 50% to CAD 13.1 million compared to CAD 8.7 million for the same period last year, reflecting the ongoing strong financial and operational performance of Dollarcity.

With an acceleration in same store sales, along with active gross margin and SG&A management and a higher equity pickup from Dollarcity, EBITDA increased by over 22% to CAD 366 million, representing 28.3% of sales and net earnings were CAD 180 million or CAD 0.63 per share, representing a 29% increase year-over-year.

Finally, once again, inventory remained stable sequentially this quarter at CAD 938 million as at April 30, 2023 compared to CAD 957 million as at the end of January.

In light of our Q1 performance, we are maintaining our fiscal 2024 guidance ranges published this past March. While we acknowledge that there may potentially be some upside to our same store sales guidance, we prefer to remain conservative at this point and wait to see how the consumer laps last year's very strong Q2 SSS performance. That being said, so far in Q2, SSS cadence is generally in line with Q1's two-year stack SSS.

On the capital allocation front, the Board approved a quarterly dividend of CAD 0.0708 per share. While there were no buybacks in Q1, primarily due to higher CapEx with a large number of net new stores, combined with the racking of our Laval warehouse and the forthcoming closing of our previously announced industrial property acquisition, we do intend to remain active in subsequent quarters contingent on market conditions.

As mentioned on our last call, our strategy is to maintain a balanced approach to capital allocation by continuing to invest in organic growth and returning capital to shareholders. We intend to continue to allocate our excess free cash flows towards the repurchase of shares through our NCIB.

In conclusion, we continue to execute well from an operational and financial standpoint in what remains a complex environment. As always, we're focused on maintaining our value promise to our customers and maximizing long term value for our shareholders.

That concludes our formal remarks. I'll turn it over to the operator for the Q&A.

[Operator]

[Operator Instructions]. The first question is from Irene Nattel from RBC Capital Markets.

[Irene Nattel, RBC Capital Markets]

Clearly, consumer demand remains extremely robust. Can you talk about – I think Neil mentioned something about Easter. Can you talk about what you're seeing, from a category demand perspective, both for Q1 and Q2 to date, now that the weather has turned, although not so much this week, and also in terms of the price point, please?

[Neil Rossy, President and Chief Executive Officer]

We're starting to get some traction, Irene, on summer, although, as you said, it's unseasonably chilly still in many parts of the country, along with other natural disasters, unfortunately, which are challenging in many areas of the country, which is a challenge that none of us needed.

But the customer has started to move towards our summer offering. We had a good Easter, as mentioned. And so, there's a slight move away from the consumables and back a little bit towards the traditional mix.

As far as price points, again, no change there. We still have the same balanced purchasing and sourcing approach to having all the price points available for all the categories of goods and the consumer continues to partake in all of those price points with no real move in any specific price point.

[Irene Nattel, RBC Capital Markets]

That's really helpful. Just a couple of follow-ups, please. Firstly, I seem to remember that refreshes were below normal targeted levels to last couple of years because of some of the difficulties in China. How should we be thinking about, now that China has opened again, the offering and maybe more of the sort of the treasure hunting kind of element and the wow factor in sort of the current year and next year?

[J.P. Towner, Chief Financial Officer]

We're seeing a slight increase in creativity and production, both overseas and domestically, but it's still a slow progressive curve. There's nothing extreme happening on that front. We're optimistic that the next year or two should help bring things back to normal on that side, but for the moment, it's a slight increase, not a huge increase.

[Irene Nattel, RBC Capital Markets]

Just finally, on the whole same store sales guidance, so if we take Q1 and we sort of don't change the overall guidance for the year on implied same-store sales in the 1% to, I think, 2.25%, 2.5% range in subsequent quarters. And with what J.P. just said about Q2 to date same store sales were probably running in that, say, 10%, 11%, so how should we be thinking about all of that?

[J.P. Towner, Chief Financial Officer]

Irene, the way to think about this is, similar to last year, we prefer to be thoughtful about our guidance. We'll likely, all things remaining equal, provide an update to the Street in September, but we want to see how the next few months unfold. As you mentioned, Q2 to date, we're seeing the same trends as what we've seen in Q1. So it's just to be thoughtful about our guidance.

[Operator]

The next question is from Chris Li from Desjardins.

[Chris Li, Desjardins Securities]

Maybe I'll start with a question on private label. I know penetration is already very high. I think close to around 70%. But just curious to see if you see room in certain categories for further increase in private label penetration, especially in this environment?

[Neil Rossy, President and Chief Executive Officer]

I don't think any category will increase in private label, honestly. I think we'll continue to focus on putting our best foot forward from an art and branding perspective, continue to focus on ESG, reducing packaging where it makes sense. We're converting packaging to something that's more recyclable, more user friendly. But an actual penetration of private label, I don't see any change.

[Chris Li, Desjardins Securities]

Maybe a question on how we should think about unit volume growth. Average basket was up 1.4%, but traffic was up very high at 15%. Does it mean the customers are effectively frequenting your stores a lot more, but perhaps buying less each time, such that your overall unit volume is still growing?

[J.P. Towner, Chief Financial Officer]

There's a mix of patterns. Of course. the key element is, what we saw during COVID was basket consolidation. So we had fewer trips and bigger baskets. We're expecting the baskets to deconsolidate and have traffic increase. What effectively happened and is happening is we're seeing traction in traffic size, while the basket size is slightly increasing. So we're happy with the outcome on both fronts.

[Chris Li, Desjardins Securities]

Maybe last question is maybe on shrink. I know some of the US dollar peers have called out shrink as having a bit of an outsized impact on the margin. Just curious to see how is shrink impacting your business these days.

[J.P. Towner, Chief Financial Officer]

Shrink has been increasing for the past few quarters, and it's embedded in our guidance.

[Operator]

The next question is from Tamy Chen from BMO Capital Markets.

[Tamy Chen, BMO Capital Markets]

Neil and J.P., I just want to go back again to your comp on the traffic side. It's just so strong, especially lopping last year's quarter, which was already strong. And so, we know at a high level, there's the consumer trade down. That's a big factor. But I'm just wondering, can you talk a little bit more about where exactly this really continued strength is coming from, whether it's immigration or is it just continued elevated level of capturing new customers?

[J.P. Towner, Chief Financial Officer]

I think it's broad based. So, when you look at our category performance, we're seeing those trends, as Neil mentioned, across our categories. So there's nothing overly specific to point out. I just think and we believe it's our value proposition and our strategy just playing out. So not saying that's overly newsworthy in terms of specific elements. I just think it's, broadly speaking, a general outperformance on many fronts.

[Tamy Chen, BMO Capital Markets]

I'm just curious. Inflation is starting to decelerate in Canada here, albeit very slowly, but it is starting to decelerate. Though it sounds like at least so far, in fiscal Q2, where your comp is trending, that at the margin, you're not really seeing a bit of a change in traffic trends or other consumer behaviors in your stores, that it's still quite strong and that the trade down is still continuing. Would you say that's fair to say? Or at the margin, are you seeing a little bit of change because this high inflationary environment is starting to ease a little bit?

[J.P. Towner, Chief Financial Officer]

You have to consider many factors, despite the inflationary environment. There's wage growth. There's the interest rate environment. So there's many economic factors over and above just inflation to consider when you look at consumer behavior. And so, what we've experienced so far is all those factors at play, and we can't just isolate one factor and drive conclusions from that factor. But your statement is right from Q2 to date perspective.

[Operator]

The next question is from George Doumet from Scotiabank.

[George Doumet, Scotiabank]

J.P., can you help us dissect the gross margin performance in the quarter? The extent of the negative mix impacts, maybe the lower product and freight costs, and maybe how should we think of the cadence of the improvement as the year goes on?

[J.P. Towner, Chief Financial Officer]

In Q1, we had the benefit of lower container costs, so what we call ocean freight costs. That was offset by higher logistics costs. And when we talk about logistics costs, we're thinking about our Canadian supply chain, and there was some mix impact. So, when you put it all together, it drove flattish gross margin year-over-year. When we think about the rest of the year and we think about our guidance, the assumptions are that the lower container costs will continue.

In terms of mix, that will depend on consumer demand, and that's going to be tightly related to our SSS performance. So that one is harder to assess at this point. But usually, from a GM dollar and an EBITDA perspective, it's a net positive.

[George Doumet, Scotiabank]

Neil, can maybe help us think about maybe the second half of the year in terms of consumable volumes? To what extent maybe you expect them to grow? And consumables have been kind of steadily going since 2010, I guess, in good and bad times. So if you're looking at the business five years out, couldn't this category be 50%, 55%? Any color you can provide there?

[Neil Rossy, President and Chief Executive Officer]

I would love to provide you with color because it would mean that I'm much smarter than I actually am. Unfortunately, I haven't got a clue what's going to happen in the future. But I can tell you that it's pretty stable the last month or so, and we're hoping it continues in that direction.

[George Doumet, Scotiabank]

Last one for me on Dollarcity. The contribution margin came in a little bit higher than expectations. Can you maybe talk a little bit about the margins of that business, how they performed year-over-year or any color, maybe they can help us understand what drove that delta?

[J.P. Towner, Chief Financial Officer]

There's a bunch of puts and takes because you're looking at the net income margin. We will not go into details of the Dollarcity margin profile. But I'd say that, overall, when you think about Dollarcity and its performance, a lot of the trends that we're seeing in Canada would be applicable to our Dollarcity business.

[Operator]

The next question is from Brian Morrison from TD Securities.

[Brian Morrison, TD Securities]

I appreciate your store count, the frontend loading comment, Neil. Last time you did this, so you opened 89 stores. So I just wonder, I know store openings are planned some time ago, but was the thought here to take possession of some planned openings early just do the strong traffic levels, and so we now think the high end of the range is more reasonable? And maybe, J.P., you could provide us the planned openings by quarter for the rest of the year?

[Neil Rossy, President and Chief Executive Officer]

It really has more to do with wanting to do this for many years. And quite honestly, our team is just in a better position, stronger, more well aligned with the real estate landlord market and capable of executing on something we've wanted to do for a decade, which is to frontload at the beginning of the year, and this is the first time we've achieved that goal because it's very challenging. Every year, it's our goal. And every year, things happen, so to speak, that they call us and say, oh, we can't deliver this or we can't deliver that. So our goal as of two years ago was really to put the team's efforts towards getting to this spot. And I'm super proud of the team and their ability to line up the timing of these things to be in a schedule that's much easier for our team to execute and much less stress on our ops team during the fourth quarter, which is always extremely challenging.

And I'm also happy to say that the pipeline seems to be lined up nicely to be able to execute this same concept going forward. It really doesn't have anything to do with a change in number. It has to do with a change in timing. J.P.?

[J.P. Towner, Chief Financial Officer]

On the quarterly front, of course, it means that usually in the past, you would see our Q4 being the lion's share of our store openings. Now, we're front loading some of that growth. So we're going release some pressure from our Q3 and Q4 store opening numbers.

As to the exact quarterly sequencing, it depends on many factors, but we're still very comfortable with our guidance.

[Brian Morrison, TD Securities]

Neil, what is the key change that enabled you to open new stores early this year?

[Neil Rossy, President and Chief Executive Officer]

I would tell you, it's partially the real estate landscape. And mostly, our team is just better than it's ever been before and more aligned with the people they deal with. It's really a very challenging thing, particularly, of course, during the three years of COVID. But even before COVID – I would tell you, before COVID, it was a work in progress, getting the team where we wanted to be, and it had more to do with the team just having a hard time getting alignment. And then COVID made it difficult for everybody. And now I would say, it's more normal course from a real estate landscape perspective and our team is better than they've ever been.

[Brian Morrison, TD Securities]

Can we talk about the shift to consumables here for a sec? I know there are many categories within this segment, whether it be papers, plastic, confectionery, food, drinks, is the growth really across the entire consumable board? Or when you dive down, is it particularly food that stands out?

[Neil Rossy, President and Chief Executive Officer]

No, it's really across all of it. If it was food, we would tell you. But, no, it's across all of it. And the concept of consumable is extremely subjective. Is it cleaning? Is it batteries? What is it? Where does it end? Where does it start? And since there's not a hard definition of that, except across the planet, within the subset of what we call consumable, it's pretty much across the board.

[Brian Morrison, TD Securities]

I guess last question, if I can. Just more directly to Irene's question. I'm just trying to understand the potential of conservatism that you mentioned in your comments earlier. If Q2 remains constant at current levels, is the expectation of negative H2 same store sales growth, is that potentially reasonable in your view?

[J.P. Towner, Chief Financial Officer]

Brian, I missed the first part of your question.

[Brian Morrison, TD Securities]

I'm just saying, I want to understand the degree of conservatism, J.P. It looks like you're going to have negative same store sales growth based on your same store sales growth guidance to date. So I'm wondering if that's potentially reasonable in your view, just based on your comment that there's a degree of conservatism in here.

[J.P. Towner, Chief Financial Officer]

As I mentioned, we'll see how the next few months unfold. So far, Q2, the trends that we've seen in Q1 are remaining stable and in line. So stay tuned for our guidance update, if there's any in in our Q2 results.

[Operator]

The next question is from Vishal Shreedhar from National Bank.

[Vishal Shreedhar, National Bank Financial]

It's been addressed several times on the call of the possible upward pressure on same-store sales guidance. Wondering if similar comments would apply to gross margin rate, just given we're seeing a bit of – Neil mentioned a bit of slowdown in consumables, continued strength in seasonal, possibly favorable operating leverage, and all these factors seem to conspire favorably on gross margin. Hoping to get some perspective there.

[J.P. Towner, Chief Financial Officer]

It's J.P. We're very comfortable with our gross margin guidance range.

[Vishal Shreedhar, National Bank Financial]

Moving on to the buyback. I know you've talked about it off the top and I may have missed it. But I think you said you're looking to renew that buyback activity. But what was the decision behind pausing the buyback? And I think, last quarter, management stated it was looking to run leverage a little bit lower than the threshold levels. And are you happy with where your leverage is right now and what level should investor look for Dollarama to target throughout this fiscal year?

[J.P. Towner, Chief Financial Officer]

In terms of a buyback, it was mostly a cash preservation strategy because we have, as you know, the upcoming land acquisition combined with higher CapEx from net new stores. And in addition, we're racking our Laval warehouse. So, there's many cash outflows. So that's the main reason. And combined with the fact that, in Q1, we only have one month of buyback window compared to two months in the other quarters.

Our intent is to remain active on our buyback. And if the market allows, deploy that capital in the second, third and fourth quarter of this year. So, our cash balance should, all else being equal, revert back to more normalized historical levels.

In terms of the leverage, as we mentioned in our last conference call, the way we think about our buyback strategies, more about using our excess free cash flows to buy back our shares, rather than targeting a specific leverage, just given the cost of debt compared to the accretion numbers. So that's how we think about it.

[Vishal Shreedhar, National Bank Financial]

And last quarter – you can correct me if I'm wrong, but I recall you saying we're looking to run leverage levels a little bit lower in part due to economic uncertainty. Does that thinking still prevail? And if so, what leverage should we – and I know you just gave me some caveats there. But is there any appropriate level lower that you would consider as responsible, given your concerns about the backdrop?

[J.P. Towner, Chief Financial Officer]

Our objective is to maintain that balanced capital allocation strategy. The way to think about it is really, we will be using our excess free cash flows to buy back our shares. And then the leverage will be a function of that and our EBITDA growth.

[Vishal Shreedhar, National Bank Financial]

Maybe just one last question here regarding the – the transaction growth continues and augmenting the strong basket as well. Just wondering, in that transaction growth, is that predominantly your existing customers shopping more with Dollarama? Is it you're gaining new customers? Is there any skew one way or another that you would call out?

[Neil Rossy, President and Chief Executive Officer]

Honestly, it's a great question because J.P. is looking at me and I'm looking at J.P. Neither of us has the answer. The truth is, it's coming from our existing, it's coming from some trade down, no doubt. Our goal and job is to ensure that wherever it's coming from, it stays and continues to grow. And so, truthfully, to get exactly where it's coming from is almost irrelevant, because even if it was from trade down, and we knew it was from trade down, the same job exists, which is keeping them. And so, we're focused on keeping who we have and getting more customers to come in and experience the Dollarama shop, and that's what we remain focused on.

[Operator]

The next question is from Karen Short from Credit Suisse.

[Karen Short, Credit suisse]

A couple of questions. With respect to shrink, I guess I'm curious why that's not becoming a bigger issue. Obviously, a lot of retailers have talked about that and given significant dollar amounts on shrink impacts. And then, with respect to just rule of thumb, no one knows if we will and Canadian inflation/deflation will be deflationary later in the year, but to the extent that there may be the risk and potential for deflation, what would be the rule of thumb on percent comp decline as it relates to EBIT decline? I don't know if there's any numbers that you can put on that.

[J.P. Towner, Chief Financial Officer]

In terms of inflation/deflation and linking that to our comp and then our profitability, it's a very subjective equation because if you look at our historical growth, we've seen phases of deflation, inflation, stagflation, and we've had a range of usually very good SSS and profitability performance. So, it's hard to make that linkage.

On your other questions, which was around shrink, when we think about shrink, it's an important line item for us, but keep in mind that usually we have smaller square footage in our stores than some of our of our other competitors that you may be thinking about. We also have cameras installed in a lot of our stores. It's an important line in our P&L. As I mentioned earlier, it's a line that has been growing, but it's embedded in our guidance. And we're not surprised by anything because we saw that trend coming back in Q3 and Q4. So we baked it in our guidance numbers.

[Karen Short, Credit suisse]

Just one more question. And with respect to labor and wages, are you embedding within your guidance labor wage increases? Or are you embedding that you're stable and where you actually need to be?

[J.P. Towner, Chief Financial Officer]

We're embedding in our guidance. And I think we discussed it back in March, but we're embedding the current wage growth of the Canadian labor market to the best of our knowledge. So, that's baked in our guidance as well.

[Operator]

The next question is from Martin Landry from Stifel GMP.

[Martin Landry, Stifel GMP]

You are clearly gaining market share against other retailers with your customer traffic up mid-teens. So as you mentioned earlier, customers are trading down with you. And I was wondering, what exactly do you do to ensure that you keep these trade down customers and have those new customers return back to Dollarama?

[Neil Rossy, President and Chief Executive Officer]

Well, firstly, we make sure that the shopping experience, I guess, meets all of their expectations with regards to value, number one, the cleanliness and efficiency of the shop itself, making sure that the assortment is interesting and something that brings them back, trying to cash them out in an efficient way that doesn't cause any disruption. And, overall, we want them leaving thinking that the experience as a whole was great and that the value was great. And then lastly, that when they get home, they're completely satisfied with the goods that they bought, and that our quality and our packaging and all the things we put – the hours we pour into trying to make sure that you're satisfied when you actually use the product is the case. And so, it's really a combination of thousands of things that hopefully bring that person back. But high level, those are the most important points.

[Martin Landry, Stifel GMP]

And are you able to track, are you tracking new customers returning?

[Neil Rossy, President and Chief Executive Officer]

No, we do not track new customers returning.

[Martin Landry, Stifel GMP]

And then I'm wondering, how does the retail environment looks like? Are you seeing increased promotional activity? Are you seeing some of your competitors reacting to your success, just trying to see a little bit what's going on out there, given that you're a price follower, trying to see if there's promotional activity that you may have to react to?

[Neil Rossy, President and Chief Executive Officer]

Well, our approach from day one has always been the day in/day out lowest price in the market. We don't react to promotional activity. We never have. So when somebody is promoting, often their price is better than ours. Not usually by a lot, but by some, and we don't go chasing that price. We're not changing our price. If they're going to beat us on something that they've decided to have as a loss leader or to take terrible margins on, that's their businesses decision. We're in the everyday low price business. So if you come in our stores at back-to-school, you're probably going to pay more for the 100 pack of looseleaf of ruled white paper than you will walking into another retailer that's giving it away at that time of the year. But for the other eleven-and-a-half months of the year, we're cheaper. So, that's the approach we've always taken. And I think our customers understand that and have come to decide that, for the most part, they like that approach.

[Operator]

Thank you. There are no further questions registered at this time. The conference call has now ended. Please disconnect your lines at this time. And we thank you for your participation.