In its Fiscal 2025 Second Quarter Earnings Call, Dollarama Inc. (DOL.TO) showcased a robust performance with a strong earnings per share (EPS) of $1.02 and a 4.7% increase in same-store sales (SSS). Despite a decrease from the previous year's 15.5% SSS growth, the company reported a significant net earnings contribution from its LATAM subsidiary, Dollarcity, and an improved gross margin of 45.2%. President and CEO Neil Rossy expressed confidence in the company's strategy and outlook, with the Board approving a quarterly dividend of $0.072 per share.
Key Takeaways
- Dollarama's EPS for Q2 stood at a strong $1.02.
- SSS grew by 4.7%, though this was a decline from the previous year's 15.5%.
- Gross margin increased to 45.2%, attributed to lower shipping costs.
- Dollarcity, the LATAM subsidiary, opened 23 new stores, totaling 570, and nearly doubled its net earnings contribution to $22.7 million.
- The company maintains full-year SSS guidance of 3.5% to 4.5% and announced a quarterly dividend of $0.072 per share.
Company Outlook
- Full-year SSS guidance remains at 3.5% to 4.5%.
- A cautious consumer environment is acknowledged, but confidence in the business model is reflected in the dividend announcement.
Bearish Highlights
- Seasonal product demand was weaker, impacted by adverse weather conditions.
- Anticipated pressure on gross margins in the second half of the year due to increased volume needs in Q3.
Bullish Highlights
- Sales were driven by consumables, with a positive outlook on Dollarcity's expansion and performance.
- Improved logistics productivity and favorable shipping contracts bolstered gross margin.
Misses
- No specific data on customer composition or labor hour reductions due to the implementation of the Kronos scheduling tool were disclosed.
Q&A Highlights
- No information on whether higher-income shoppers are being attracted to Dollarama stores.
- The impact of seasonal events like Halloween and Black Friday on sales was discussed, with a projected comp range of 3.5% to 4.5% for the second half of the year.
Dollarama's Q2 sales approached $1.6 billion, with the company experiencing increased customer traffic and larger basket sizes in Canadian stores. The company's strategy to balance sales momentum and pricing, amidst a sensitive market, seems to be paying off with continued growth in SSS and an optimistic outlook for Dollarcity's expansion in Central and South America. Despite the unpredictability in locking in ocean freight costs, Dollarama has managed to maintain value for consumers while effectively managing costs. Patrick Bui, during the earnings call, emphasized the importance of balancing sales levels and product margins to provide value to consumers and highlighted ongoing productivity initiatives in stores. The company's performance and strategic direction indicate a stable outlook, with management prepared for the seasonal fluctuations expected in the latter half of the year.
Full transcript - None (DLMAF) Q2 2025:
Operator: Good morning and welcome to Dollarama Fiscal 2025 Second Quarter Results Conference Call. Neil Rossy, President and CEO; and Patrick Bui, 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've 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 any assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A dated September 11, 2024, available on SEDAR+. Forward-looking statements represent management's expectations as at September 11, 2024, 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.
Neil Rossy: Thank you, operator, and good morning, everyone. This morning we reported strong second quarter fiscal 2025 results across our key performance indicators, translating into an EPS of $1.02. Same-store sales grew by 4.7% in Q2 as they continued to normalize as anticipated. This is an impressive result when stacked up against the 15.5% SSS growth in the same period last year and given the cautious consumer spending backdrop. In Q2, demand for consumable products, which are primarily comprised of everyday essentials, drove the bulk of the increase in same-store sales. General merchandise sales remained stable while seasonal products were softer. This is consistent with prior quarters. Customers continue to seek out everyday essentials and deploy their discretionary spending prudently in the current economic environment. Our strong results in this context reinforce the fact that Canadian consumers recognize and consistently rely on our convenience and compelling value. The breadth of our offering across consumables, general merchandise and seasonal is allowing us to meet the current and evolving needs of the Canadian consumer at any given time. Our traffic trends quarter-after-quarter confirm that our work is hitting the mark. Turning to LATAM during their second quarter, Dollarcity opened 23 net new stores compared to 10 in the same period last year. This brings their total store count as at June 30th to 570 stores with 338 locations in Columbia, 101 in Guatemala, 74 in El Salvador and 57 in Peru. Dollarcity's pace of new store openings and increasing earnings contribution reflects the strong consumer response in these markets and the team's disciplined execution of our long-term growth plans in our current countries of operation. In parallel, the team is also actively working on our plans to enter Mexico by 2026 as announced last quarter, along with our increased ownership stake. While it is still early days for Mexico, our work on this front is progressing well and on plan. As we look to the second half of the year, our team will continue to work diligently to keep delivering convenience and great value to all Canadian consumers. We remain focused on our product offering while staying true to our price follower philosophy. Our aim is to provide customers with a broad selection of compelling every day and seasonal products at the best relative value in all departments and with a consistent shopping experience. With that I'll pass it over to Patrick.
Patrick Bui: Thank you, Neil, and good morning, everyone. Let's start with an overview of our KPIs for Q2 of fiscal 2025. Sales increased by 7.4% after Q2 of fiscal 2024 coming in at nearly $1.6 billion, while same-store sales grew 4.7% for an impressive two year stack of 20.2% SSS growth. Looking at our sales mix, we continue to experience strong demand for consumable products while seasonal sales experience softer demand impacted by unfavorable weather in many parts of the country, particularly during the key spring and early summer season and a cautious consumer. Same-store sales consisted of a 7% increase in the number of transactions and a 2.2% decrease in basket size. Our strong traffic reflects the underlying strength of our value proposition and all around product offering. We continue to be comfortable with our previously disclosed SSS guidance range of between 3.5% and 4.5% for the full fiscal year, which implies a continued normalization in SSS growth through the second half. This range remains an appropriate target given the strong comps we will continue to face and the cautious consumer backdrop. Looking at Q3, also note that two historically key Halloween sales days will fall to Q4, which should skew SSS in favor of Q4. Gross margin came in at 45.2% compared to 43.9% in Q2 of fiscal 2024. The increase is mainly driven by more favorable contracted shipping rates and lower logistics costs. Full year guidance remains between 44% and 45% with higher logistics costs expected in the second half of the year compared to the same period last year. SG&A as a percentage of sales remained flat compared to Q2 last year at 13.6% despite an increase in store labor and operating costs. We continue to actively work on offsetting these costs through ongoing efficiency and labor productivity initiatives, but expect more pressure in the second half of the year. Annual guidance for SG&A remains unchanged at between 14.5% to 15% of sales. With respect to Dollarcity, their net earnings contribution for the quarter almost doubled compared to the same quarter last year to $22.7 million. This was a transition quarter for our increase in ownership stake from 50.1% to 60.1%, which occurred towards the end of this reporting period. Their Q3 contribution will fully reflect our increased ownership stake. With a solid KPI performance across the board, Dollarama's Q2 EBITDA increased by 14.7% to $524.3 million and EPS increased by 18.6% to $1.02 per share. Turning to capital allocation, on the NCIB front, we remained active in Q2 with the repurchase of over 2.1 million common shares for cancellation for a total consideration of $263.1 million. This excludes the tax on share repurchases enacted during the second quarter. The Board also approved a quarterly cash dividend of $0.072 per share. Our second quarter and year-to-date performance once again proves the resilience of our robust business model and the enduring relevance of our value proposition to consumers both across geographies and through any type of macroeconomic environment. Our focus, as ever, is on continuing to deliver convenience and the best relative value we can for our customers. With that I'll now turn the call back to the operator for Q&A.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Irene Nattel with RBC Capital Markets. Your line is now open.
Irene Nattel: Thanks and good morning, everyone. I was wondering if you could just please spend a few minutes talking in a little bit more detail about what you're seeing in terms of consumer spending and you did call out the weather, you called out consumables. But what did you see as the quarter evolved and as the weather showed up? Can you give us any color on, for example, early back-to-school and how we should be thinking about spending trends in the back half of the year?
Neil Rossy: So good morning, Irene. Hope you're doing well. The summer sales started very soft. Weather across the country was terrible, which, of course, negatively impacted all retailers. The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season's horrible start. As far as back-to-school sales for us, back-to-school is a very, very small season. And I would say broadly, sales were in line with our expectations. It's too early to draw any conclusions or trends for Halloween. So other than that, general merch, stable as a whole and I think that covers it.
Irene Nattel: That's very helpful. Thank you. And are you seeing any change whatsoever in the competitive dynamic in terms of perhaps other players trying to sort of drive traffic by playing in your sandbox a little bit more?
Neil Rossy: Generally, no. I think everybody considers, all retailers in Canada, you know are realistic about the fact that everyone is everyone's competition on any given item or category. And so we all need to be aware of our relative values and we all have a different story to tell. Ours being one of relative value or maybe less one of assortment size or certain categories that we don't play in. But I think that generally the market in Canada is fairly stable with regards to who's come into the market. Loblaw has, of course, introduced a new concept in a single store so far and announced that they'll have three stores across the country that they're testing the concept out in low cost food. And as we've said many times, we're not in the grocery business. It's just one small part of our store. But we will keep an eye on all retailers like all retailers keep an eye on us to make sure that we're competitive. We understand what's out there.
Irene Nattel: That's very helpful. Thank you. I'll get back into the queue.
Operator: Thank you. Our next question comes from the line of Chris Li with Desjardins. Your line is now open.
Chris Li: Good morning, Neil and Patrick. Maybe I'll start with a question on gross margin. It was quite strong compared to our estimates. I guess, a two-part question. Can you elaborate a little bit more on sort of what drove the strong performance? Was there any sort of one-time factor? And then the second question is, on your opening remarks, you did say that you do expect the margin to soften up a little bit in the back half. And I was just wondering if you can also elaborate on what you expect in the second half in terms of softness -- softer margins. Thank you.
Patrick Bui: Yes, absolutely, Chris. So if you look at Q2, no, we can't point to any one-time or anything like that. As we said in our remarks, it's a function of lower shipping costs that we continue to see this quarter and to be expected in future quarters and also improved productivity and lower costs on the logistics side. So we're very pleased with the 45.2% margin. That being said, we all also reiterated our guidance for the full year. So you're right, we do expect some headwinds in the second half and it refers a lot to timing. So we do anticipate, for example, in Q3, needing to push more volume through the system. So that is one of the reasons why we do see a little bit of pressure on gross margins in the second half.
Chris Li: Got you. Okay. Well, that's helpful. And then, Patrick, maybe just if you are able to provide us with some indication on how Q3, same-store sales is trending so far, is it still kind of above your full year range or has it kind of now normalized towards that 3.5% to 4.5% range?
Patrick Bui: Number one, obviously, too early to say, but what we are saying is, if you look at our performance year-to-date, so the first half of the year, we're broadly at 5%. And we are reiterating today that the full year is 3.5% to 4.5%. So that does imply a normalization for the second half. And so that's the color we're providing there. I mean as far as the rest in terms of traffic and demand, I mean, it's continuing what we've seen in Q2.
Chris Li: Okay. That's great. And my last question, Neil, just because you brought up about sort of Loblaw, the box pilots. I was just wondering, can you share with us just, for you guys, roughly what percentage of your sales would be kind of in that overlap in terms of food? What percentage of your total retail sales?
Neil Rossy: That's not information that we disclosed. But certainly what makes Dollarama, Dollarama is a very wide assortment of different departments that somewhat represent the old five and dime local convenience store. And really we focus on a wide variety of goods to attract people in for, you know, far more than you know just food. That's certainly not our focus.
Chris Li: Okay. Thanks. I'll get back into the queue. All the best.
Operator: Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open.
Brian Morrison: Thank you. Good morning. A question for Neil or Patrick. When I look at the exceptional growth at Dollarcity continuing the buildout of your logistics in Colombia and El Salvador, it looks complete. And then the dividend you paid last year. It leads me to believe you're content with the Dollarcity balance sheet and that barring any major CapEx outside of store growth that it's throwing off substantial free cash flow. So excluding Mexico, would the financial position and cash flow comment be correct for LATAM? And then my follow-up question would be, can you utilize the LATAM infrastructure to service the Mexico startup? And can we expect Dollarcity LATAM to evaluate a potential distribution of more capital similar to what we saw last year?
Patrick Bui: Okay. I'll try to answer in two parts. One, there's a notion of leveraging infrastructure, and the second part is balance sheet and free cash flow. So if I start with infrastructure, I mean, yes, you're correct in assuming that we will leverage infrastructure in existing countries. Frankly, that's how Dollarcity has always gone about it. So there's nothing different here. Certainly, when we enter a country, they will also rely on some third-party providers as we enter the country. And that's reassessed in time as Dollarcity gains critical mass in that new country. So that's on the first part. The second part, in terms of free cash flow and balance sheet. What I would say is, just like Dollarama, in time Dollarama started generating strong free cash flows and built a strong balance sheet, which led to a very clear and robust capital return structure and policy. And we are starting to see the same thing at Dollarcity. And so that will be assessed in the future and see how Dollarcity can as well return capital to its shareholders.
Brian Morrison: That's very detailed. Thanks, Patrick. And the second question I have maybe for Neil. Is there any reason to think that the LATAM new store growth shouldn't be linear and the business model now is working in five countries? Mexico is a massive opportunity, but do you have the bandwidth to evaluate other geographies near-term or do resource constraints and getting Mexico correct push that ambition out?
Neil Rossy: So we're operating in four countries currently. Mexico will be the fifth. And we believe that the Mexico operations will be handled in the most part by the Dollarcity team. Obviously, the Dollarama team supports Dollarcity's team in the background on all fronts. But for the most part, the Mexican expansion will be handled by the Dollarcity team. And with regards to other expansion in other areas, that is the only expansion we plan to do on the Dollarcity front for the time being in Central and South America. And then with regards to the Dollarama front, across the balance of the world, we are always looking at other opportunities. And no, we do not feel that the Mexico opportunity means that we cannot look at other opportunities, depending on where those opportunities are, how complex they are, and the scale of them. But no, I don't think one precludes the other.
Brian Morrison: Sorry just in terms of Dollarcity's new store growth being linear, I mean, you're trailing new store growth like 112 stores now. I'm just curious on that front.
Patrick Bui: Yeah. Look, I mean, we've done, if you look at the past few years, we've done 90 plus. You look at what the team over there has achieved in the last quarter. We should be around that number this year. And we do see lots of potential in the four countries operations. That's why we increased our target last quarter. So we do believe that there's still ample opportunity in those countries to grow the business.
Brian Morrison: I appreciate the detailed answers.
Operator: Thank you. Our next question comes from the line of Tamy Chen with BMO Capital Markets. Your line is now open.
Tamy Chen: Hi. Good morning. Thanks for the question. My first one is coming back to Canada. So the composition of your same-store sales, three quarters of the basket is down. I believe historically your algorithm is to grow the basket size. Can you talk about in Canada right now the current competitive landscape with respect to pricing? Do you find there's any change or is it a bit more difficult than historically to implement the internal levers that you have for basket growth?
Neil Rossy: No, we don't think that the market has changed in Canada. I think the Canadian market has always been sensitive to being competitive from one retailer to the other. And we've never been solely focused on any given driver of basket or traffic. It's a combination of both that makes us successful. And I think as long as we're sensitive to the combination of both being the right mix at any given time, we're happy with the performance.
Tamy Chen: Okay. And my follow-up is, on Dollarcity, I'm just wondering, I guess a two-part question here is, for the last number of quarters, I think you said the trends at the consumer level were very similar to Canada. Is that still fair to say or are there some differences you're noticing now in the Dollarcity stores on the part of the consumer? And just thinking to your answer to the previous question on the cash flow generation. Is it fair to say where we're now at a point where in the existing four markets, Dollarcity is at this inflection point, where you're starting to get good operating leverage and margin expansion off the infrastructure that you've built there? Thanks.
Neil Rossy: So on the mix side, yes, we find that the trending in the four countries in Central and South America as well as Canada. The consumer behavior is surprisingly similar in many, many ways. And with regards to leveraging our infrastructure, obviously, some countries, which have been around for longer than others like El Salvador and Guatemala, we're able to leverage our infrastructure at a greater level. And in Colombia and in Peru, in particular, where we're newer to those markets. The evolution of our logistics and ability to leverage our infrastructure is still growing.
Tamy Chen: Thank you.
Operator: Thank you. Our next question comes from the line of Mark Petrie with CIBC. Your line is now open.
Mark Petrie: Yeah. Good morning. Just a follow-up, I guess, on the whole sort of assortment sales shift between different categories and the sort of performance there. I'm curious just with regards to pricing and slower inflation clearly. Is that relatively consistent across the different categories?
Neil Rossy: Yes, it is. It's very consistent across the categories actually.
Mark Petrie: Okay. And does this sort of shift in the sales mix? Does that affect at all how you think about your assortment heading into Halloween and Christmas, seasonal being slower?
Neil Rossy: Not really. For one, you can't change the fact that your seasonal spot almost a year out anyway. So that's all committed way in advance. The reality is that this has happened many times over the years. It's a normal cycle. When people feel squeezed, they tend to shy away from discretionary focus on the basics. And when people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary. So there's a cycle that looks that way and tells that story many times over my career. And at this point in time, we're at a point where people are more focused on basics and less on discretionary.
Mark Petrie: Yeah. Understood. Okay. And in that context like this is a particularly strong gross margin performance in this quarter. And I know Patrick you called out the impact of freight and logistics, but would you say that you're pleased with the balance you're striking with regards to sort of sales momentum and then the pricing and margin realization like are the Q2 results in line with sort of how you want to prioritize the balance between those two things?
Patrick Bui: I mean that's a great question. I mean, if I look at our Q2 results, the improvement in gross margin is mostly a function of things that we control, right, when you think of productivity in terms of logistics. So that part is always something we look to improve. In the same way, our shipping costs, we always try to enter into favorable contracts. So that part we always try to increase our margins from that perspective. And that's what you're seeing this quarter. That being said, there is a good balance when you look at the sales level and the margin of the product itself and making sure that we continue delivering the best relative value to consumers. So on that single piece, it's not a function of maximizing that piece. However, on the two other pieces, it's things that we always constantly look to improve.
Mark Petrie: Okay. Yeah. Understood. And one more if I could. Just can you just remind us when you start to lock in your ocean freight costs for 2025?
Neil Rossy: So ocean freight comes in, that's not a consistent thing I can answer because at certain periods, ocean freight could be locked in for two years plus, and other times, when ocean freight is much more, let's say, erratic we tend to not be booking in for as long. And also it's a function of how interested ocean freight companies are in locking in at any given time. But for the moment, we're looking at about a two-year horizon.
Mark Petrie: Okay. So you are locked in on your freight costs for 2026 on some basis?
Neil Rossy: On some basis.
Mark Petrie: On an above average basis or typical basis or I mean something, Neil, something.
Patrick Bui: We can't answer that. Look, I mean, obviously, I guess your underlying question is when you look at spot rates, they're higher than usual. I mean like Neil said we're not subject to spot rates. And frankly whatever the rates are I mean shipping costs are a component in the overall price of our products. So we manage around that mark.
Mark Petrie: Yeah. Understood. Okay. Thanks, guys. Appreciate it. All the best.
Neil Rossy: Thank you.
Operator: Thank you. Our next question comes from the line of John Zamparo with Scotiabank. Your line is now open.
John Zamparo: Thank you. Good morning. I wanted to ask a bigger picture question, particularly on customer composition. And I wonder given the resilience of the traffic numbers that you're generating. Do you get a sense that you're gaining new types of customers in this environment, specifically higher income ones? And I wonder what internal data you might have on that front that you're willing to share.
Neil Rossy: Unfortunately, we don't have anything to share on that front. We don't disclose that information. But I would tell you, again, much like the consumer who spends more on discretionary when times are good and more on basics. When times are bad, it's also natural that when the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at Dollarama generally or who enjoy shopping at Dollarama, but are -- have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods. Well, when times are tougher, they'll consider the extra five minutes to go to the store next door. And so I do think when times are tougher, consumers tend to be willing to spend a little more time going to lower-cost alternatives that they don't necessarily have to when times are better. And that's particularly the case for people with higher income because people with lower incomes tend to always be more focused on where they can get the best price for whatever they need.
John Zamparo: Okay. Okay. Understood. And then I wanted to follow up on the gross margin topic. And if you hold margins even close to flat in the back half of the year, you'd be above the high end of your guide. You did call out the higher logistics cost. But can you give us a sense of the magnitude of that for the second half? And is there anything else to be aware of on mix or some other items to be aware of? Would love any other comments you're willing to provide on the second half gross margin guidance.
Patrick Bui: Yes. It's hard to provide more color. I mean you frankly have a sense of where we, well, not a sense you know exactly where we landed after two quarters. We've given you the cold post for the full year. So it gives you a sense of what we're thinking about the second half. Sorry, I can't provide more than that.
John Zamparo: Okay. Understood. Thanks very much.
Operator: Thank you. Our next question comes from the line of Martin Landry with Stifel Canada. Your line is now open.
Martin Landry: Hi. Good morning, guys. I was wondering if you could touch a little bit on your in-store productivity initiatives. Perhaps maybe the Kronos scheduling tool that you've put in place. Wondering did that allow you to reduce your labor hours per store? And if so, by how much have you been able to reduce your labor hour per store, let's say, versus last year or two years ago? Any color would be helpful.
Patrick Bui: Yes. Look, that's a very detailed question. I mean, all we could say is productivity in our stores is always a big focus, right, like in-store labor cost is a big line item. We mentioned that we're always continuously combating inflation in wages. And what we do is productivity initiatives, a host of productivity initiatives to combat that. And if you look at our Q2 numbers, it seems that it's been paying off, and we see it on our financials. But we can't comment on any specific of these initiatives.
Martin Landry: Okay. I thought I tried. Maybe just to wrap up the labor discussion. The government has been tightening immigration policies. And I was wondering if that's having an impact on your business? What is the number of job openings that you have right now? And how does that compare versus historically?
Patrick Bui: Yes. We don't provide color there either. I mean all I could say is from the labor front and from the hiring front, I mean, we've talked in the past that it has improved from periods where it's been more of an issue. And today we don't see any major issues on that front.
Martin Landry: Okay. So no more openings than historically?
Neil Rossy: No. Openings are in line with the number of stores we operate and we're hiring every day in some part of the country, but in line with historical is the right way to look at.
Martin Landry: Okay. And then just lastly your traffic has been very strong. It continues to grow above historical levels. And you've talked a little bit about the dynamics there, but I'm just wondering if there's a difference in traffic patterns between your urban stores and your rural stores?
Patrick Bui: No, not particularly. We could read into that. I mean, honestly, when we look at the traffic, we're very pleased with those numbers. It just shows that more Canadians are coming into our stores. We're hitting the mark. Like Neil alluded earlier, I mean, it's what we look at is the combination of the traffic and the basket size. And ultimately we look at the SSS and we're very pleased with the results that we're seeing that we're publishing today.
Martin Landry: Okay. Thank you. Congrats on your results.
Operator: Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Your line is now open.
Edward Kelly: Hi. Good morning, guys. Nice quarter. I wanted to ask about the back half comp and just how we should be thinking about a few things. I mean if you look at the calendar, obviously, Q3, Halloween impact. I don't know if you have any color on how much you think that could be. As you get into Q4, Black Friday is a week later, does that matter? How should we think about that? And then obviously, you've had some weakness in seasonal and gen merch is a little bit slower in the back half. It was a bigger events for those categories. And your comp guidance implies roughly 2% to 4% range in the back half. I'm curious as to how you're thinking about all of these dynamics as you look at the back half comp guidance?
Patrick Bui: Yes, that's a full question. I mean you're right with your assumption what we're implying for the second half. We continue to believe 3.5 to 4.5 is the right range. So it does imply a normalization in the second half, as you pointed out, the thing that we do also point out is when you look at the retail calendar for Q3, Q3 does lose two key Halloween days leading to October 31st and those two days are shifted to Q4. So we did point out the fact that if you isolate just that factor, well, then Q4 will be skewed more positively versus Q3. The assumption in the range of the back half, I mean, frankly, is very much a function of key seasonal days that are upcoming. And so it's really too early to say how that's going to pan out in the back half. I mean it's still early for anything relating to Halloween and Christmas, but those are very important seasonal sales for us.
Edward Kelly: Okay. And just a follow-up. I know we've talked about the gross margin quite a bit. But it seems like you'd have some decent mix pressure just given the difference in the comps by the categories. You haven't really talked about it all that much. I mean have you seen that pressure? And has it just been offset by some of the other benefits in supply chain and freight? And does that potentially become more apparent as you get into the back half?
Patrick Bui: Yes. I mean you're right to point out that there is a mix shift, but it's not something that happened overnight either. In theory having more consumables in the mix does have a pressure on margins. But again that's just one factor that goes into our gross margins. You layer on top of that, the shipping rates, all the productivity we're doing on the logistics side and so on and so forth. So it's a mix of all of these factors.
Edward Kelly: Great. Thank you.
Operator: Thank you. As I'm showing no further questions at this time. This does conclude today's conference call. Thank you all for your participation. You may now disconnect.
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