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Good morning, and welcome to the Dollarama Fiscal 2021 Second Quarter Results Conference Call. Neil Rossy, President and CEO; and Michael Ross, CFO, will make a short presentation, which will be 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 and any other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, levels of activity, performance, achievements, future events or developments to differ materially from those expressed or implied by the forward-looking statements. As a result, Dollarama cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements.For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in Dollarama's MD&A dated September 2, 2020, available on SEDAR. Forward-looking statements represent management's expectations as at September 2, 2020, and except as may be required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.I would now like to turn the conference call over to Neil Rossy.
Thank you, operator, and good morning, everyone. We are pleased with our financial and operating performance in the second quarter of fiscal 2021, highlighted by strong sales growth and gross margin performance.Throughout the second quarter, provincial reopenings plans unfolded and economic activity gradually resumed in communities across Canada. During this time and to present day, our teams remain focused on providing Canadians with affordable everyday products and a safe and efficient in-store shopping experience. Our strong top line performance reflected the relevance of our product offering and value proposition to Canadian consumers, and Dollarama's positioning as a shopping destination of choice for all Canadians from coast to coast.Compared to the rollercoaster we experienced in Q1, with the shift from panic buying to full lockdown, the situation stabilized on several fronts during Q2. We saw a steady improvement in customer traffic throughout the quarter. And by mid-June, we were able to reopen the last 30-or-so stores that were still closed temporarily as a result of government-imposed mall closures in the Greater Montreal area. Store opening hours have also been normalizing, and sales of some of our nonessential categories, such as summer seasonal, picked up as lockdown measures were lifted. Overall, when looking at sales performance by department, our sales mix reflects the fact that our customers are spending more time at home, think more gardening, barbecue, things of that nature.Looking at the bottom line, as shopping patterns and sales mix continue to evolve, customers purchased more higher-margin items, namely summer seasonal, and less impulse items, such as chewing gum and candy, resulting in a strong gross margin performance.On the real estate front, we opened 13 net new stores during the quarter. Our plan is to press ahead with as many new stores openings as possible for the remainder of the year, in line with our long-term growth plan. As I speak, conditions appear favorable, but as with everything else these days, the number of new store openings will depend to some degree on how well communities across the country control the spread of the coronavirus. In other words, the exact timing of openings is harder to forecast this year, but there is no lack of opportunities.From a public health standpoint, we are very pleased with the effectiveness of the numerous health and safety measures put in place in our operations. Our more than 20,000 employees have remained vigilant in protecting themselves and our customers. We recorded a very low number of COVID cases among store staff and in our logistics operations in Q2, despite the lifting of lockdown measures and the resulting increase of in-store traffic. We will continue to make the required investments to maintain COVID-19 measures to protect the health and safety of employees and customers for as long as necessary.While the situation stabilized throughout the quarter, the impact of the pandemic remains and the experience of the past 6 months continues to shape customer shopping patterns. In this context, we are closely monitoring what our customers are buying to ensure our store offering remains relevant to Canadian families. The third and fourth quarters will be particularly insightful since they are historically seasonal heavy quarters for our company. We anticipate that Halloween, a historically significant season in terms of high sales and positive margin contribution, will be negatively impacted by COVID restrictions, including social distancing. Our Q2 results show the resilience of our business, and we enter the second half of the fiscal year with a good tailwind and 1,314 stores ready to serve customers across Canada.With that, I'll hand it over to Michael for a closer look at our financial and operating results. Michael?
Yes. Thank you, Neil, and hello, everyone. So sales for Q2 increased by 7.1% to a little over $1 billion, driven by a higher overall store count and 5.4% same-store sales growth. Sales were boosted by demand for summer seasonal products, including gardening, barbecue, pool toys as well as our everyday products. We started the second quarter with 104 stores temporarily closed due to the mandated closures, primarily in Québec malls. In addition, 84% of our stores were operating with a 10% or more reduction in opening hours to stock shelves outside of opening hours or due to mandated closures of stores on Sundays in Québec.By June 19, all stores had been reopened. And as of today, only 83 or 6% are operating with approximately 10% reduced hours. Mall stores, which represent about 22% of the network, continue to underperform from a customer traffic perspective compared to the rest of the chain. While customer traffic increased during the course of the quarter, customers, nonetheless, continued to make fewer trips but spend more on each visit. This is well illustrated in our same-store sales results comprised of a 41.7% increase in average ticket and 25.7% decrease in the number of transactions.If we include temporary closed stores, same-store sales increased by 2.5% year-over-year. Looking at online sales, while they remain not material to our overall sales, these continue to see a strong increase, and we are pleased with the continued progression. Gross margin was 43.9% of sales in Q2 this year, up from 43.7% last year as a result of increased sales of higher-margin summer seasonal products and the positive effect of scaling due to higher sales. However, the margin continues to be impacted by the incremental direct costs related to COVID-19 measures, which amounted to $1.9 million in Q2 or 20 basis points.G&A was 16.7% of sales compared to 13.9% in fiscal 2020. This variance mainly reflects incremental costs of $32.4 million related to additional health and safety measures and temporary wage increases. These costs had a 320 basis points impact. The 10% temporary wage premiums for the store employees, initially scheduled to last until July 1, ended on August 2, 2020. Other measures, for example, the execution of additional cleaning protocols, which represented about 2/3 of the costs incurred to date will remain in place for the foreseeable future.EBITDA was $277.9 million, representing 27.4% of sales. Net earnings $102.5 million, and diluted earnings per share was $0.46, a 2.2% increase compared to Q2 last year. Cash flows from operating activities totaled $282.3 million compared to $182.8 million in Q2 last year, driven primarily by improved working capital due to the deferred -- deferral of tax installments allowed by Canadian tax authorities in the context of the COVID-19 pandemic. Working capital also improved due to reduction in inventory as purchases were impacted by consumer shopping patterns at the height of the pandemic with higher sales of higher turnover domestic goods compared to lower turnover of important goods -- imported goods.Inventory at the same date last year was pushed upwards by the early delivery of Halloween and Christmas stock to our warehouses. CapEx increased by $4.1 million to $34.5 million, reflecting our continued investment in self-checkout machines. As of quarter end, we had self-checkouts available to customers in over 90 stores across Canada. We expect to double that number by fiscal year-end. Our objective is to install these in high-traffic stores only to help accelerate the checkout process. Based on our pilot to date, installed machines are helping us achieve this objective.Dollarcity's contribution to our net earnings for the second quarter was $2.5 million. This contribution stems from Dollarcity's second quarter ended June 30, 2020. As you will recall, confinement measures in Dollarcity's countries of operations were very strict from the outset of the pandemic. But as of the quarter ended June 30, 2020, Dollarcity had 2 stores temporarily closed and only 42 stores out of 232 operating with reduced hours. As of this date, all stores were open and 40 stores were operating with reduced hours. Most importantly, most restrictions have been lifted in El Savador, Guatemala and Colombia, resulting in increased customer traffic in stores. Store openings were on hold at the end of Dollarcity's second quarter, but have since resumed slowly but surely.In the context of COVID-19 and its forecasted impact on Dollarcity's sales and operating results, we had adjusted downwards the estimated purchase price for Dollarama's 50.1% interest in Dollarcity from USD 92.7 million to USD 80.4 million at the end of our first quarter ended May 3, 2020. This estimate has now been readjusted back to $92.7 million based on Dollarcity's June 30, 2020 preliminary unaudited financial statements. The lifting of strict confinement measures imposed by governments in these countries and increased store opening hours resulted in higher-than-forecasted sales and earnings.Based on latest estimate, the balance owing recorded in payables stands at USD 52.7 million or approximately CAD 70 million. It will be paid shortly following the completion of the audit and the final adjustments, if any.Now looking at our capital allocation strategy, we will maintain our prudent approach as the situation evolves. The Board approved a quarterly dividend of $0.044 per share and we'll continue evaluating the dividend on a quarterly basis. We did not repurchase any shares during the second quarter again in order to preserve liquidity. At the end of the second quarter, our leverage was at 2.8x adjusted net debt to EBITDA compared to 2.94x at the end of the previous quarter and 20 basis points below our comfort zone of 3x. Planned cash outflows for Q3 include the balance of the purchase price for our 50.1% interest in Dollarcity as well as the deferred tax installments of approximately $100 million.Looking at our capital structure, we have 2 series of notes set to mature in 2021 in February and in July. We are mindful of the conditions currently available in the Canadian bond market, as such are currently exploring different possibilities. So overall, we have a solid financial and liquidity position. We will continue to manage our balance sheet prudently to continue to fund our growth as well as create value for our shareholders and maintain flexibility in uncertain times.Neil, over to you for the concluding remarks.
Thank you, Michael. To summarize, our operations from coast-to-coast gradually stabilized throughout the second quarter, and we saw a healthy increase in comparable store sales year-over-year. Customers continue to consolidate trips, but they leave our stores with larger baskets. Entering the third quarter, all of our stores were open to serve customers maintaining near-normal operating hours. We continue to closely monitor consumer shopping patterns to ensure our store offering remains relevant to Canadian families and the evolving socioeconomic environment shaped by the pandemic. The health and safety of our employees and customers remains paramount. We will diligently maintain our COVID-19 operating procedures and health and safety measures in accordance with public health directives for as long as required.That concludes our formal remarks. I'll now turn it over to the operator for questions from financial analysts.
[Operator Instructions] The first question is from Irene Nattel with RBC Capital Markets.
Thank you for your overall commentary. You mentioned a couple of times, Neil, that you're monitoring very closely customer shopping patterns. Wondering if you could share with us what those might look like today? What kind of the exit rate was as you came out of the quarter? What kind of demand you're seeing? Just category performance? Any color that you can provide that can help us kind of frame our expectations for the balance of the year.
Sure. I'm not sure it will help frame the balance -- for the balance of the year, to be honest, because we do live in a very uncertain time with regards to shopping patterns. But there's no question that the lack of international travel and reduction in domestic travel means that people are staying home a lot more, sticking around locally. And therefore, things like gardening and barbecue and cleaning up the backyard and redoing the living room have all been impactful for Dollarama and successful for Dollarama, and they're all some of our better margin import department. By the same token, there's also been an increase in disposable consumable things particularly related, unfortunately, to COVID, such as masks and hand sanitizer, which are much lower margin items typically. And then to balance that, you have the reduction in the things that people would normally do, which is have parties and family over, and so the party department and some other things that would normally get boosted in the summer have been reduced. Going forward, we think the same thing will reproduce itself throughout the balance of the other seasons until there is a vaccine. We continue to be hopeful that people will engage at Halloween and at Christmas. But obviously, we believe that Halloween will be reduced from its normal door-to-door outing. So we will have our full offering out there, and we will see whether people adapt their normal Halloween partying to still be able to party but maybe more locally and with people that are part of their bubble as opposed to door to door possibly. So we also keep an eye on the other retailers to see if they see or present things that we haven't possibly thought of because, of course, that happens. And that's it, I think.
Okay. So a couple of follow-up questions, if I might. Would you be able to tell us, I guess, how much of -- how important is Halloween to Q3? I mean, we've heard numbers in the past, while 1 day or 2 days it's 100 basis points, kind of like how much it is? And anything that you can tell us around maybe can rank the relative importance of the different categories, like decor or costumes, just so we can kind of think about how that might all shake out.
Irene, yes, so for Halloween, obviously, for Q3 without disclosing the specific weight, it has a strong weight. And at this time in the quarter, we're not in a position to appreciate whether costumes, candies, decorative items, will -- what impact we will -- we can project. And so -- and we don't want to speculate, and that's part of the reason we're not giving any guidance. So we believe that, as Neil said, that it will have a negative impact, but to what extent, we don't know. And the same for Q4 with Christmas, but we'll give you more information at the end of Q3. But for the time being, I think it's safe to assume that Halloween will be down. And it won't only impact the top line, but these are part of our highest margin items, the seasonal items. And so we -- depending on the results that might impact margin, bigger, greater or slower. So unfortunately, we can't give you more color at this time.
Okay. Fair enough. Just one other question, if I might. Certainly, we've seen inflation creeping into the system, whether it's in the form of lower promotional intensity or whatever it is and everyone across the supply chain is dealing with higher costs. So kind of wondering about your thoughts at this point around directionally what we might see and what you're seeing in the marketplace at this point in terms of pricing activity.
Yes. I think if I look at it from a margin standpoint, because, as you know, we factor that when we do a refresh and so on. It's consistent with what we told you in Q1, and that it's stable-ish. So -- and you see, Q1 was down, obviously, right in the peak of the pandemic; Q2 has rallied. We've picked up some of the summer sales, that we couldn't make in Q1, in Q2. And if you look at our year-to-date gross margin, excluding the COVID costs, we're flattish. And I think anyways, for the next quarter, it's safe to assume that, that would continue to be the case.
Okay. And just to confirm, about 2/3 of the COVID-related costs you identified in SG&A are going to continue for the balance of the year?
Yes, absolutely. And just a little -- Q4 is the biggest seasonal -- biggest season with Christmas and depending on traffic, that number can fluctuate up and down in line with the traffic.I'll add 1 thing, Irene, which is yesterday, I bought a good amount of spectacular Christmas decorated KN95 masks. So hopefully, those masks will encourage people to get close and hug their families while still protecting themselves.
Okay. I'll keep my eyes open to those.
The next question is from Mark Petrie with CIBC.
I just wanted to follow-up on a couple of things, I guess, just to clarify. Could you just recap in a little bit more detail and maybe even give some commentary with regards to Q3 thus far in terms of how same-store sales growth, traffic and basket size evolved as the quarter progressed?
Well, right now, Mark, we're early. We're just at the beginning. And we don't want to go into any form of detail because the biggest part of the quarter is coming up. And again, Halloween having a good weight here. And depending on how this whole situation evolves, as you know, we're back to -- back-to-school has started, and everyone is anxious to see the impact that, that will have. So we've had a good Q2. Things don't change from one day to the other because you're entering another quarter. But I think the biggest impact is in front of us.
Okay. Fair enough. And I mean, just to clarify, again, you touched on it with Halloween in Q3 and then Christmas in Q4. But I mean it's fair to say that the seasonal goods in Q4 are much more oriented around sort of gatherings and parties as opposed to Q2, which were more sort of toward the home and outdoor activities. Is that fair?
Yes.
Okay. And then you touched or you gave some great commentary with regards to capital priorities. But just wondering if you have any specific comments with regards to your expectations on restarting the NCIB.
So Q3, again, depending on results and cash flow from operations, i.e., Halloween, we already have 2 large payments to do: the $100 million on the deferred tax installments which are due in September; and the $70 million, which will be due shortly, also restrict that. And as we've always said and we'll continue to maintain, our comfort zone is around 3x adjusted debt-to-EBITDA. And I think just with those 2 payments, that would prevent us from doing any share buyback anyway. So we don't anticipate doing any share buyback in Q3. I think that's the answer; and Q4, we'll revisit that.
The next question is from Peter Sklar with BMO Capital Markets.
Just given the uncertainty regarding Halloween and Christmas, I'm just wondering, like how do you -- what's your strategy in terms of stocking the stores? Do you give a full inventory and hope for the best and if it doesn't sale for the reasons you've been discussing this morning, you'd just pack it up and give it away -- pack it up, I mean, for next year and bring it back for next year?
Exactly right, which is -- because it's such an unknown and because it's -- we are a destination for it because we do a fairly strong job, and it's something we've prioritized over the years. We made the commitment to have our full offering, try to make the shop as normal as it historically would be. And since we don't know whether people will compensate by simply wearing masks and being more careful but still engaging in those seasons, which we're hopeful they will, to try to maintain normalcy as much as possible, we figured that, that was the safest bet.
Okay. And then just 1 last question. Michael, you said one of the COVID costs was $1.9 million or 32 basis points, was that the gross margin impact?
Yes, $1.9 million and it's 20 basis points. So already with the COVID costs, we're 20 basis points better than last year. So if you add that 20, we're in actually 40 basis points better than last year. With the gross margin, the same once you adjusted for G&A, we would be -- if you exclude the COVID costs, we'd be 40 basis points ahead of last year. And EBITDA, 100 basis points, if you add the 20 basis points related to Dollarcity.
The next question is from Vishal Shreedhar with National Bank.
On a labor and ongoing concerns about COVID-19, maybe you could chat about how you're finding Dollarama's ability to attract labor into the stores and if there's any pressure there?
So it's been very positive. I actually had a discussion about that with Johanne, our COO yesterday. She said that the morale in the field is excellent and the hiring status is excellent. So we're very happy with that situation, and our employees seem to be very, very comfortable at ease with how we've handled the situation to date. So all good. I'm very happy to report.
Okay. That's nice to hear. And on eventual higher price point introductions, is it fair to assume we would need COVID-19 issues to stabilize before management investigates that? Or are there other factors to consider? And is your ability to travel to China to preview the new potential price point merchandise, is that a factor as well?
So you said the eventual introduction of higher price points, which I think is excellent because it allows me to say, it's eventual and it's not present. So we will one day get there. And the question of studying it, we're always studying it, to be quite honest. We've been studying it for years, and we will continue to stay on top of it, whether we buy the goods or not. But there are no planned introductions for higher price points in our bricks-and-mortar operations at this point in time. Travel to China from the U.S. and Canada is, in fact, illegal at this point in time. So no one is traveling to China unless they have some special visa for some special reason. So everybody is in the same boat, so to speak. We're not on the boat. And we continue to do the best we can to work with conference calls and video conferencing and all those other mix shift ways to keep going in life. But it's certainly not as efficient and certainly not as pleasant, but it is what it is. And we're making do. I guess the only thing I can tell you is that everybody has got the same challenges. So we're all on a level playing field.
The next question is from Karen Short with Barclays.
I had just a couple. With respect to the higher price points, I'm just wondering, have you kind of identified at this point how many SKUs you might look to introduce when and if you do? And I mean, I guess, is it contingent on the ability to travel to China? Or is that really not a factor?
No. Higher price point SKUs is an entirely different discussion from travel. Travel is as required for any price point, low or high. And as far as introducing a higher price point, the way we introduce higher price points when it's made sense over the course of time is that when we commit to it, and we have to have an excellent reason to do so. Then anything that can provide excellent value in relative terms to the market in any category that exists in our stores is up for purchasing. And so we don't set a number, we don't set a budget, we go all out when we commit to a new price point and get as many fantastic values as we can. Sometimes that can happen quickly. Other times, it takes more time to develop. And truthfully, it's an iterative process.
Okay. And then within your comp -- and I just had 2 questions, 2 more questions. Within your comp, obviously, you gave us the store hour -- overall reduction in store hours. So presumably, you don't get 10% of sales in the hours that we do. So it's a slightly lower number in terms of the impact of the comp. But within the mall stores, I would assume mall stores are down double -- easily like double digits in the 20s in terms of comp. Is that fair in terms of how to think about what the 22% of the store base would have done to negatively impact your comp?
Yes. So one, in terms of mall traffic, it's definitely lower. Even though they're reopened, we haven't reached the levels -- the normal standard levels. I won't comment on the exact percentage, but it's significant enough to say that it is lower. And as time moves on and as the situation if and it improves, while, obviously, traffic will go back up. But it does have an impact for sure.
Okay. And then just last question. I just want to play devil's advocate on Halloween and holiday in general. And I mean I ask this for any retailer, but if consumers are so board and so tired of monotony and they're not traveling and they're not going anywhere, like is there a chance you maybe underestimated what sales could look like for holiday because no one has anything else to do. So wouldn't it kind of stand the reason that actually people may spend even more than they historically have because there's nothing else to do. I'm just curious on your views on that.
So from your mouth to God's ears. I mean, I don't -- I mean, it's -- we're all guessing. And so this is a debate about whether society is fearful or aggressive to have fun at this point in time, and none of us have the answer to that. But I can promise you that 2 months from today, we'll both be a lot smarter about what it is going forward. But we bought, like we have for the past. And I'll be very honest, if we can do what we've done in the past, I'll be ecstatic. So if your scenario comes to be, which is possible, of course, then we'll sell-out of all of our goods, and we'll have a great Halloween and I'll be ecstatic. And let's hope you're right.
Yes, hopefully.
The next question is from Chris Li with Desjardin Securities.
Congrats on the strong result. Just a few questions from me. First is, is back-to-school an important season? I'm just trying to understand whether it was a positive or negative for you guys in August?
Yes. We -- I mean, it is a season. It's definitely not as heavy as Halloween and that's information we're not disclosing, Chris. So -- but Neil?
Yes. I'll add a little color, Chris, which is our business model is to offer every day great pricing. And in our stationery line, which I happen to be the buyer of, so I can speak to it with confidence, our everyday pricing on our entire office and stationery line is very strong. At back-to-school, where other retailers use marketing techniques, like giving things away to get people in their stores, that's just not something we do. So where their sales spike because they're giving away a bunch of goods to get people in their stores, our stores don't have that same thing. So we get a spike because a lot of people realize that our everyday pricing is incredibly competitive. But we don't have that typical retail spike because we're not in the loss leader business.
Great. No, that's very helpful. And then on the supply chain side, are you still seeing some shortages in things like paper towels or cleaning products or sanitizers or has your in-stock position improved quite a bit since 3 months ago?
Our in-stock position is -- was quite solid a few months ago and really had a few items that were really hard to come by. I would tell you without making the people at Reckitt Benckiser or the Lysol brand owners feel too good about themselves that the only commodity on the planet that's impossible to buy as much as we'd like is Lysol wipes. And so we'll have production of other antibacterial or germ and virus killing wipes coming that won't be of that particular brand. And so we've sourced alternately, and those goods are arriving actually imminently. But other than antibacterial wipes, every other item that we sell in some form or fashion is in stock.
That's great to know. And then Neil, I know online is a very small part of your business, but can you share with us how online performed during the quarter? And I also noticed that you have started to sell higher price points on your online platform in certain product areas. So wanted to kind of share your thoughts on that, please.
Sure. So the online business, as always mentioned, had a specific purpose, which was to service our customers that were looking to buy bigger quantities and had to go store to store, and it was highly inconvenient, and it actually was negatively impacting our replenishment because they throw off our typical replenishment by buying things out of the normal cycles. And so it's done a good job of serving that customer. Our customers seem very happy with the site itself, it's user-friendly, it's getting a ton of hits a day. We're very happy with the traffic. We did some dabbling during COVID of higher priced COVID items to help service our customers. So for sure, you'll see some dabbling into higher priced goods. For example, we were bringing in some digital thermometers for use internally, Health Canada-approved digital thermometers. So I said, let's buy some extra and put them on e-comm, if they can be helpful to our customer or to other small businesses in the middle of the pandemic, we're happy to help. And so we did that, and we had a very nice traction on that. And so we'll continue to dabble in different opportunities at higher price points on e-comm only. Since it does not affect our bricks-and-mortar business, it's an entirely different business model. And if it can service our customers, then that's what we're here to do. As far as the uptick in e-comm during the last few months, yes, we have seen a multiple, multiple fold increase in what is a small business, it's still a small business, but it's gone up severalfold over the last few months. So we're happy about that.
That's very helpful. And Michael, you mentioned there were some labor efficiencies during the quarter because there's less traffic to the store, but offset by a much bigger basket. And so in this environment, if that remains the norm, do you see an opportunity where you can realize further labor efficiency because the traffic will remain depressed in the foreseeable future?
Yes. Well, we'll see. I mean -- but you're right. Through labor scheduling initiatives, tight labor scheduling, control and management, we're able to to reduce -- to match activities at store with the cost as much as possible, and we'll continue doing that in the next quarters for sure.
That's great. And my last question is, if you can share with us, again, the gross margin, the tailwinds and headwinds in the second half of the year, you kind of alluded to in the beginning about the seasonal potential impact there, but other big factors that we should be aware of for the second half of the year?
No, I don't think so. I think, again, these are -- the seasonal impacts are material in Q3 and Q4, but they would be specifically related to the COVID situation. This is not a -- there's no structural change in our competitive environment. It's strictly related to the COVID situation. And given the weight of these seasons, Halloween and even bigger Christmas, it's hard to predict, and that's why we don't give guidance as these 2 seasons have an impact on margin -- top line and margin.
Best of luck in the second half of the year.
The next question is from Brian Morrison with TD Securities.
Michael, I want to switch gears and ask a couple of questions on Dollarcity because it's a material growth engine for you guys. And the purchase price, it was revised down materially in early June. And obviously, you put it back to where it was prior to the Q1 revision. So I really want to understand 3 things here. What's really the increase back to the prior level? And then number two, can we get some color on what the EBITDA margin is at the measurement date? And then three, how can we expect that margin to progress in terms of benefits and timing from the Colombia warehouse investment that you just made?
Okay. So one, the adjustment -- the part of the initial adjustment in Q1 bringing it down as we anticipated EBITDA for the June to June period, which is a reference period for calculating the cost, we had anticipated that the COVID would have impacted that EBITDA more significantly. But -- and happy for us and our partner, the situation finally was better than anticipated. So that had an impact on the EBITDA. And as you know, the formula is 5x the EBITDA. And related to that, they all mingle. It impacts the debt level and impacts the working cap. So all of that, with the better results than anticipated, set the price back to USD 92.7 million.
It seems like a big adjustment just based upon a Q2 performance at June ending that would have been impacted by the pandemic. So is it more working cap than anything else?
No. It's truly EBITDA.
Okay. And the EBITDA margin, are you able to provide us some color, so we can get some look at what the sales might be there?
Yes. So we don't disclose any margins. We did disclose it at the outset on August 14th when we exercised the call, which was around 16% to 17% at that time. And for the reasons we told you since that we're not disclosing information, we -- that amount we're not ready to disclose at this point in time. The elements you alluded to Colombia and logistics, absolutely, those are projects that we're working on to -- because, as you know, all the initial logistics were set around El Savador and Guatemala, then we moved into Colombia. And now we're working on that to improve the efficiency and therefore, hopefully, the overall EBITDA.
Sorry, just to be clear. Is it fair to say at the measurement date that we can use the inaugural EBITDA margin as a benchmark? And in terms of the benefit you might get from the Colombian warehouse, any sort of timing or magnitude?
No. If I -- it will take a few years before we settle in, you have to build, to initiate and grow. So that will take a few years to happen. Meanwhile, we're growing more and more stores in Colombia, therefore, pulling down the margin a bit. And as we kind of fix logistics in that part of the world, the margins should be coming back in.
Congratulations on a good quarter.
Thank you. There are no further questions registered at this time. This will conclude today's conference call. Please disconnect your lines at this time, and we thank you all for your participation.