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Good morning, and welcome to the Dollarama Fiscal 2021 Third 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'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 and 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 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 December 9, 2020, available on SEDAR. Forward-looking statements represent management's expectations as at December 9, 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 very pleased with our strong performance in the third quarter of fiscal 2021, with a double-digit increase in sales, strong same-store sales growth and earnings per share as well as an industry-leading gross margin. Our solid results reflect the enduring strength and relevance of our business model and the important role we continue to play as a provider of essential goods during the pandemic. Our affordable everyday product offering, coupled with the proximity and convenience we offer Canadian consumers, continue to resonate. Our performance also reflects our team's disciplined execution in maintaining well-stocked stores and offering a safe and efficient in-store shopping experience. Strong sales in the third quarter were boosted by higher demand for seasonal products as well as certain all-year categories, including household and cleaning products. Despite stay-at-home directions, social distancing measures and in-store capacity limits in various provinces, we saw a lot of customers looking to safely celebrate Halloween this year, even if that meant staying within their household bubbles to do so. We also picked up a lot of summer sales in the quarter further contributing to our strong results. The popularity of seasonal festive items in the third quarter is a positive trend as we enter the seasonally important fourth quarter. SSS growth was very strong and continues to be shaped by evolving shopping patterns. This quarter, we saw a strong basket balanced with further improvement in traffic compared to Q2, when a number of our stores were temporarily closed or still operating with reduced hours. Store hours are currently back to normal with the exception of some mall stores, which continue to experience much lower traffic than the rest of the chain. In Q4, to date, basket size remains large compared to pre-pandemic levels and traffic continues to pick up compared to Q3, but a lot can happen in the very crucial next 2 weeks of holiday shopping. Coming back to Q3, higher sales of seasonal merchandise also resulted in a favorable sales mix in terms of gross margin. We continue to invest in COVID-19 measures to maintain safe operations for our employees and a safe in-store shopping experience for our customers. Since March, we have invested over $60 million in direct incremental COVID-19 costs. In Q3, these amounted to $10.9 million in SG&A costs for additional in-store hours for the execution of sanitizing and cleaning tasks. We also continue to support and recognize our employees who play the most important role in our continued success and in our ability to provide Canadian families with access to affordable everyday goods throughout the pandemic. In this context, we were pleased to announce today a bonus payment for all store employees to show them our gratitude and to thank them for their continued hard work and dedication. Full-time employees will receive a $300 bonus and part-time employees will receive a $200 bonus. All active store employees, as of today's date, will receive this one-time gratitude bonus. Thank you all for your incredible work. While store teams delivered strong merchandising and sales execution in the quarter, our real estate team also pressed ahead, opening 19 net new stores during the quarter. This brings the total number of stores opened in the last 9 months to 42. Based on where we stand today, we are on track to open 60 to 65 net new stores by year-end. But as you know, many factors are outside of our control due to COVID-19 and the situation can change quickly. The important thing to note is that if we do not hit the 60 to 65 net new store mark by fiscal year-end, it will be due to timing and not lost opportunity. In the quarter, we also conducted one of our periodic customer surveys to keep a pulse on the market and to ensure that we are continuously delivering on what matters most to Canadian consumers. The findings of this fall survey reinforced the confidence we have in the core tenets of our business model, offering a wide range of affordable everyday products, providing outstanding convenience through our 1,300-plus locations and delivering compelling value that appeals to Canadians from all walks of life. While many customers have adapted their shopping patterns during the pandemic, our customers remain highly loyal to Dollarama, and we have continued to expand our appeal to new customers. Turning now to our activities in Latin America. We saw a strong equity contribution of $4.3 million from Dollarcity for the quarter stemming from their third quarter ended September 30. As of this date, all Dollarcity stores are open and only 15 are operating with reduced hours. Most COVID-19-related restrictions have been lifted in our countries of operation, namely Colombia, El Salvador and Guatemala, resulting in increased customer traffic. While the situation there has improved dramatically during the spring -- since the spring, we continue to monitor it carefully. After pressing pause on new store openings due to COVID-19, 8 net new Dollarcity stores were opened in their last quarter, primarily in Colombia, bringing the total count to 240. This is a step in the right direction as we resume our growth. We are also pleased to confirm that we will be entering the Peruvian market. Peru being 1 of the 9 countries covered by our agreement with Dollarcity. As mentioned in the past, Peru has identified early in the process as our next country of entry, given the favorable trends there in terms of consumer profile, market dynamics, competitive landscape and appetite for our value-oriented retail model. We expect to open our first stores there as early as the first calendar quarter of 2021, barring factors outside of our control. As with everything we do, we will proceed prudently as we test our concept in this new country. Near-term growth will continue to be driven primarily by Colombia, and we will only revisit our long-term growth target of 600 stores by 2029 once we have established a firm foothold in this new country of operations. But certainly, we're excited by the additional growth potential this market can bring. Finally, Dollarcity also started to roll out items at price points equivalent to USD 03.50 and USD 4.00 in Colombia only in November, which we expect will be well received by customers. There are no immediate plans to roll out these additional price points in the other Dollarcity countries of operation for the time being, but this will be reassessed at a later date. Overall, we are extremely pleased with Dollarcity's progress. The business showed great resilience during the pandemic, increasing brand awareness and winning over new customers as a result of its recognition as an essential business in all 3 countries of operations. And the team continues to build up the operational capacity to support Dollarcity's long-term profitable growth. With that, I'll hand it over to Michael for a closer look at our financial results before providing some concluding remarks. Michael, over to you.
Thank you, Neil, and good morning, everyone. So sales for Q3 increased by 12.3% to $1.06 billion, driven by a higher overall store count and 7.1% same-store sales growth. Same-store sales results were comprised of a 26.3% increase in the average ticket and a 15.2% decrease in the number of transactions. Neil provided some color in this regard, but the key takeaway here is that we are seeing some positive trends in traffic from quarter-to-quarter, while the basket remains very strong. Looking at outlined sales, while they remain nonmaterial -- online sales, sorry, while they remain nonmaterial to the -- our overall sales, these also continue to see a strong increase, and we are pleased with the progression. Gross margin was 44% of sales in Q3 this year, up from 43.7% last year as a result of increased sales of higher margin seasonal products and positive effect of scaling due to higher sales. G&A was 15.1% of sales compared to 15% in fiscal 2020. This variance reflects incremental costs of $10.9 million related to additional hours for in-store cleaning and sanitizing measures. These costs had a 100% -- 100 basis point impact on the quarter. G&A was positively impacted by higher labor productivity in stores due to the processing of a lower volume of transactions by higher baskets, less packaway of seasonal inventory as a result of strong sales, lower travel cost as well as scaling. EBITDA was $312.1 million, representing 29.3% of sales. Net earnings were $161.9 million and diluted earnings per share was $0.52, 18.2% increase compared to Q3 last year. Cash flows from operating activities totaled $201 million compared to $203 million in Q3 last year. Cash flows from higher earnings were partially offset by tax installment payments deferred early in the year as permitted by CRA in the context of the pandemic. Inventory levels decreased in the quarter as a result of strong sales and the timing in receiving merchandise. The -- to compensate, we've been accelerating our replenishment cycles and drawing down on safety stocks, reflecting the strength and flexibility of our supply chain and procurement operations. Also, keep in mind that due to timing, inventory levels were on the high side in Q3 of last year. Despite inventories being on the lean side, stores are well stocked with all year and seasonal items, and we expect to meet anticipated customer demand in the upcoming quarters. Looking at transformation projects, we also continue to roll out self-checkouts in certain high-traffic locations. We are on track to have self-checkouts in about 200 stores by fiscal year-end, with about 175 stores with self-checkouts at quarter end. Wherever we offer health checkouts, it's always in combination with traditional checkouts. And this additional convenience is achieved -- is achieving our top line objective, which is to help accelerate the queue line in high-traffic stores. In terms of capital allocation, the Board approved a 6.8% increase in the quarterly dividend from $0.044 to $0.047 per share. We did not repurchase any shares during the third quarter, again, in order to preserve liquidity. And at quarter end, our leverage ratio stood at 2.7x adjusted net debt to EBITDA. This is 24 basis points below our 2.94x leverage ratio at the end of fiscal 2020, which provides us with a lot of flexibility as we look to resume our buyback activities before the end of the fiscal year. Barring factors outside of our control due to COVID-19, it is our intention to actively resume such activities during the fourth quarter while maintaining our leverage ratio in our comfort zone of between 2.75x and 3x adjusted net debt to EBITDA. Looking at our debt structure, we closed a new bond financing in Q3, with $300 million, 7-year fixed rate note at a rate of 1.505% to take advantage of favorable market conditions ahead of the upcoming maturity of a $300 million floating rate note in February 2021 and further solidify our capital structure. So I'll now hand it over to Neil for the concluding remarks.
Thank you, Michael. Our strong Q3 results reflected the strength and relevance of our business model and strong value proposition to Canadian consumers who are looking for affordability, proximity and convenience as the pandemic persists. Historically, Q4 is our most important sales quarter and December is our most important sales month. We entered the final quarter of the fiscal year with a good tailwind from Q3, momentum on the seasonal product sales front and 1,333 stores ready to safely serve customers from coast to coast. Of course, the next 2 weeks are hugely important to our fourth quarter sales historically, and communities across the country are grappling with the pandemic's second wave. Since November, provincial governments have been ramping up measures and increasing restrictions to address rising caseloads as we bide time until the availability of an effective vaccine. This includes restrictions on the sale of nonessential items in the province of Manitoba since November 20, where we have just under 40 stores. Such restrictions impact sales, but they also bring their fair share of execution challenges. We are also seeing a tightening of in-store capacity limits in many other jurisdictions, an approach we endorse and have used proactively across the network. But that also continues to negatively impact customer traffic, especially during a historically busy holiday shopping season. As a provider of essential goods, our stores remain open from coast-to-coast to serve Canadian families, but the restrictions in place and the potential for additional ones could further impact shopping pattern and our financial performance for the remainder of the quarter. Our focus is on serving our customers safely and keeping our stores well stocked with the essential products consumers need. We will continue to monitor the situation closely and will adjust as needed as we have shown we can since the beginning of the pandemic. We will continue to execute our plan and deliver on what matters most to Canadian consumers. As validated by our most recent survey, we also remain confident that our value proposition will remain a winning one once the pandemic is behind us and that we are very well positioned for the months and years ahead. That concludes our formal remarks. I will now turn it over to the operator for questions from financial analysts. Thank you.
[Operator Instructions] The first question is from Irene Nattel of RBC Capital Markets.
Neil, just following on that last comment of yours about the perception study. Can you provide us just with a little bit of color around how -- sort of the results of this one might have compared to the prior one in terms of product offering, relevance, price points and value, please?
Sure. It's essentially found the same things as it did last time, which is that our customers appreciate the continued relative value that we offer compared to our competitors that the low range of price points continues to be important to them, and they recognize how we are a discount retailer. And convenience, of course, is more and more important as time goes on. The fact that we are adding stores and bringing our offering closer to each customer across the country continues to be something very much appreciated by our consumer.
And is there any change? Because I remember in prior surveys, it was a 1:2 relationship, has there been any change in that, Neil, in terms of price perception?
We don't disclose that level of detail and -- I'm sorry, Irene. I always follow my CFO's lead.
No. No, really, you don't have to, Neil. I mean he's leaving and everything, come on and that's for you, Mike.
I'm not.
Sorry, just another question, if I might. With almost 74% of your sales in the quarter at price points above $1.25, can you update us on your thoughts around higher price points possibly?
Sure. So my thoughts are that we remain steadfast in our original philosophy, which was higher price points, namely $4.50 and $5 or other price points that might be considered in the future are still exactly that their considerations for the future. We're convinced that our customers would be happy to receive those price points, but we're not ready to add any price points for the time being.
Okay. And just one final one, please. Q4, certainly, what we've heard from other retailers is that Christmas shopping has started earlier. When you look at the cadence of sell-through this year versus last, would you agree with that statement as it applies to Dollarama?
Irene, so it's me. I'm still here. I'll answer that. So what we're seeing essentially in Q4, we see the same momentum we have as of Q3 for sales and margins. So in November -- so we just finished November, entering December. So the momentum was very good. And you're right, in Q3, we did see some buying -- advanced buying of Christmas items. However, just to bring the proper tone to Q4, as you all know, this past week, the provincial governments across the country have imposed more restrictions on store capacity. Traffic was improved over from Q3 to -- from Q2 to Q3 and continued to improve in November in Q4, but these recent restrictions are impacting traffic a bit. So this is evolving on a daily basis. Alberta yesterday -- just yesterday announced was reducing further its capacity in store. So this is having some impact. We still have 2 weeks to go to Christmas, so we'll see. But for the time being, we're happy with what we see for Q4.
The next question is from Mark Petrie of CIBC.
I just wanted to follow-up on that last topic, Michael. And specifically, with regards to the comment around basket size, you said that it remains elevated and strong. But we typically are seeing an inverse relationship between traffic and basket. So is it reasonable to assume that as traffic continues to recover, basket has subsided or has basket sort of remained at a level somewhat consistent to Q3 even as traffic has improved?
No, you're absolutely right. There's a relationship between both. So as traffic increases, basket decreases and vice versa. So that's what we've noticed. So up till the end of November, that's -- like I said, exactly what happened. So you're traffic improved and basket decrease was offset a bit. Now for the past week, here we know traffic is impacted. I don't know how basket is going to react, but we know that it's very recent that traffic is impacted by the imposed constraints.
Yes, understood. Okay. And I just wanted to ask sort of more broadly. I mean, obviously, the entire concept of Dollarama fits very well with the consumer focused on value and looking for savings. But just wondering if you can view our or approaching your assortment differently at all in terms of the distribution of goods across price points. And then, I guess -- well, yes, I'll leave it at that and then I have a follow-up.
Actually, what we've always tried to do philosophically is to offer any given range of goods in a variety of price points. So for example, I'll take hand sanitizers. We'll try to have hand sanitizers and formats that fit the $1, $1.25 price point range, the $2 range, the $3 range and the $4 range, and we'll apply that same concept across as many categories across the store as possible just so that we can address different customer needs. Sometimes that's just a format change. Sometimes it's a size change or a quantity change, but we do believe that there are consumers that rely on us for things at the very lowest end of our price point range and others who rely on us for things at the higher price point range. And then obviously, the nature of the goods dictates, in some cases, whether those goods will be at one end or the other.
I guess, just to follow-up on that. So -- but you're not seeing anything in terms of consumer demand across that sort of spectrum of good, better, best or however you want to describe it. I guess it's not really that, it's just sort of across price points. But you're not seeing any sort of evolution in the demand across those price points that would cause you to skew your typical balance or the balance that you've had through fiscal '21 so far?
No. Nothing that would be consumer driven. Those changes, at times, are driven by costs, of course. And so I'd love to have everything in the store at $1 still, but that's just not the world we live in now. And so sometimes those price points are a reflection of the reality of costs that all retailers have to face. And therefore, all consumers have to face as well. But no, the answer to your question, specifically is no.
Okay. And then just sort of last one, I guess, related. I think I know the answer again, but just to follow-up. In the past, you've had sort of shifts in assortments, I guess, specifically towards consumables. I think the last time we talked about it, you guys were pretty happy with the mix across categories. Is that still the case or are you adjusting sort of mix across categories at all?
No. We're happy with the mix. I mean, obviously, right now, there's a focus on the essential goods and making sure that we're doing as good a job as possible for our consumers to have the greatest selection that we can in terms of sanitizers, in terms of cleaning, in terms of personal care. But other than that COVID-related focus right now to ensure that we're doing our jobs from an essential service point of view, the balance of our assortment is pretty stable.
The next question is from Chris Li of Desjardins.
Neil, first of all, just going back to the perception survey, I think you mentioned in your opening remarks that you've also found that you guys are expanding your appeal to new customers. Just wondering, what is the typical profile of these new customers that you're attracting?
There's no specificity to that appeal. We're attracting new customers from all ranges of life, age and socioeconomically. So there's not been a specific target group nor a group that happens to have been more representative than the others. It's a general appeal equally across categories.
Okay. That's helpful. And maybe related to that, obviously, the Dollarama's -- the product assortment and compelling price points are driving more consumers to consolidated shopping trips, and then that's benefiting your sales. I guess my question is just based on your survey in your conversation with customers, do you think this is -- this will continue for a while even after the pandemic is under control? Like would the consumer continue to consolidate their shopping trips even when we return to a more normalized environment?
I wish I could tell you, I was that smart to know the answer to your question. But I'll be honest, I would be guessing, and I don't want to guess.
Okay. No problem. And maybe just another one, just on the -- what we're seeing in some of the other retail channels? Is there's a migration to consumers buying larger pack sizes just because of the nature of the times here? Is there an opportunity for you guys to maybe offer larger pack sizes, perhaps at a higher price points, that would be sort of your way of introducing higher price point at some point in the future?
I think our way to address your question is with our e-com proposal. So the reason we built our e-comm platform was to address consumers who wanted to buy larger quantities of our current assortment. And since, in our stores, we can't sell goods in a different price range than the one we've chosen to be focused on, if those consumers want to buy a larger amount of those goods in a simple fashion, that's basically why we built our e-comm platform.
Okay. That's helpful. And maybe just a couple of quick ones for Michael. Michael, do you think you guys will be in a position to start providing guidance again next quarter?
Well, for the time being, just predicting this quarter is a challenge again. So I don't know, we'll have to see. And historically, we've been as transparent as we could, and that's still the intention. And so we don't want to pretend we know stuff that we don't, so we'll see for next year. But what I can tell you today is that there's nothing going on structurally around us that would have us change our business model. It's all about relative value. We continue monitoring costs, the activities. We've demonstrated our agility. Our ability to manage the margins, look at this year, at the opening of the year, we gave you a bit of color, less than the prior years, but at least -- and we held to that color we gave you in terms of margins and things like that. So we'll see in next Q4. And we have the ability to manage our margins through the refresh, that hasn't changed through markup processes. That hasn't changed. So that's what we can confirm to you today. But for next year, I think we just will have to wait.
Okay. That's very helpful. And just maybe a quick one on the margins. The Canadian dollar has been quite strong lately in the -- if that strength persist into next year, like just overall, would that be a tailwind for your margins for next year?
Yes. So that's one component. And you've got inflation from shipping and from buying. So I mean there's a lot of movements, and there are many factors involved. So I just don't want to comment and say -- and misguide you, but you're absolutely right. From a currency standpoint, the currency -- the Canadian currency is reinforcing, that's definitely helping the margin.
Great. And then my last question, just on the SG&A line. The corporate cost of $11 million were a little bit lower than I think what you were sort of guiding next last quarter, anything going on there? And is the $11 million this quarter, a good run rate for -- in the near future?
No, it continues to be -- the costs are more or less the same a bit lower and -- but essentially, it's the same quality of protection that we're looking for. So we're definitely -- and even, I would say, those protocols are accentuated with the traffic that increases. So I would say that will definitely -- that continues in Q4, should be in the similar range. And over and above that, we have announced, as you know, Neil went through that a gratitude remuneration. And so that will be added over and above the normal COVID cost that you've seen in Q3 should the similar-ish in Q4.
Have a great and joyful holidays and all the best next year. And Michael, congrats on your well-deserved retirement.
Thank you. Thank you very much.
The next question is from Peter Sklar of BMO Capital Markets.
Michael, you've talked in the past how -- like you look at other retailers that you consider to be your competitors, and you won't take price unless they're taking price because you want to maintain your competitive position. So over the last number of quarters, that's been one of the topics that Dollarama has not been taking in-store price increases. Has that situation changed at all or is it the same? Are you able to put through some price?
Yes. But like we said at the beginning of the year and through the quarters, it's more and less in line with what we had last year. So -- in other words, not that much. But we are definitely, and this is done by the buying team on an ongoing basis, and that's what we do at Dollarama is compare and make sure that we're competitive. So -- but in terms of markups, it's similar -- very similar to last year i.e. not that many.
And who do you consider to be your competitive backdrop? Is it still Walmart [ drugstores ]? Is that the universe you look at?
We look at all universes, to be honest. We consider everybody to be our competition. And so we'll shop the entire market from the smallest stores to the largest stores and everyone in between. And truthfully, I think that all retailers, whether they say it or not, do the same thing. But we really do think that when we talk about being the best relative value in the market, we want to be the best relative value in the entire market. And we understand that sometimes on any given day or any given item that might not be the case, but we'd like to try to make it the case every day on every item.
Okay, and Neil, like I believe that your buyers traditionally go to China, that's where you source the majority of your products. So how does that work in COVID? Are your buyers still able to go or do they just buy off of catalogs from Canada? How has COVID impacted your ability to procure?
It's very difficult, not just for us but for any importer anywhere in the world. And no, nobody is going to China right now. You require special permits to get into the country. And in any area that you go to, you'd have to quarantine in each area for 2 weeks, and it's just entirely impractical. And the truth is that because of COVID being a global challenge, the amount of creativity and new malls and new ideas being generated in China for the balance of the world is also at a low, so to speak. So even if we could go, the environment is entirely different right now. The entire planet is focused on staying healthy, the essentials plus, of course, some everyday goods, but relative to when the world is booming, the amount of new things being created and people's mindset being put on new and exciting items is entirely different than it is now, as you can imagine. So there wouldn't be the same experience if one could go shopping around the world right now for everyday goods. That being said, the show goes on. And so it's our job to make sure that we have open lines of communication with all of our vendors around the world, including China, but also in Europe and also in the States and in Mexico and on and on. And we are doing a lot of video conferencing, which is not nearly as efficient, of course, as being somewhere in person. And so much more time is being spent doing what can be done more efficiently in person, but it is what it is. And everybody has to contend with the same challenges. And at the end of the day, as you well know, we live in a market where everybody has to deal with the same situation. And so the question is just who's working the hardest and the most focused on providing what it is that they're trying to do for their customers. And so our job is to remain ultimately focused on great value at the best possible quality in the price ranges that we sell, and we're using every means and method that we can to find those goods for our customer at this point in time. But there's no question that it is far more challenging than it would historically. By the same token, what's really everyone's focus right now is more on the essential good.
Okay. And then just one final question. When you talked about the consumer survey. I believe the point you are making is that consumers are increasingly value convenience. I assume that means convenience of store location, how close the stores to them and does have parking access, that kind of thing. So I'm just wondering, in that context, what -- has that changed your thinking at all about your aspirational targets for the number of stores Dollarama could have in Canada, I believe, officially, based on some consultants you use, you're at 1,700 store count as your aspiration in Canada. But I'm just wondering, Neil, if your feelings have changed about that.
No. I think it's totally in line with our historical philosophy that we'd like to keep putting as many stores as we can over the course of time in a thoughtful manner that's cost effective. And so every year, you've seen that, that very steady rollout of 60 to 65 stores over the course of time, every one of them, taking into account the cost of the leases, the locations, cannibalization and all the other opportunities. But no, our goal has been and remains what it has truthfully for 20-plus years, which is to have over the course of time as many stores as possible that makes sense economically for our customers to have a store as close to them as possible.
Okay. And just to maybe add to that, so we -- normally, we update you with the amounts that the 10-year forecast. We are supposed to do that this year. We put it on pause because of the COVID situation. So post-COVID, once all of this is behind us, we will communicate that to you, and we hope that things track like they are tracking right now.
The next question is from Vishal Shreedhar of National Bank.
I was hoping to give this question aside in terms of perspective on mall performance and non-mall performance or maybe even traffic that you're able to provide any color on that?
Yes. So mall stores continue to be impacted by lower traffic. So it has improved slightly over the time, but it's still a concern. And so that's been the case throughout the year up to date.
Okay. Are there any numbers you can provide? Are the mall stores positive in terms of comp or...
No, we're not disclosing any specifics on that information. And sometimes, traffic is lower in certain malls, but picked up by other stores that are in strips or around those. So there's a lot -- too much noise in there to start trying to communicate that.
Okay. And in terms of momentum through the quarter, obviously, the traffic trends improved. Should we also read that to suggest that the overall same-store improved through the quarter?
That's the overall, what? I'm sorry. I missed that, Vishal.
Sorry, same-store sales growth, did that improve as well through the quarter?
Well, no, I'm not going to go there. But all I said was that we had very -- same good momentum we had in Q3 in November, first month of the quarter. And traffic continuing to improve. But as we said, the trends are usually when traffic improves, basket ticket reduces, but overall -- and as well as for the margin. So things -- we're happy with what we see, and that's as far as I'll go.
Okay. And with respect to the elevated seasonal sales and the benefit on gross margin rates, obviously, next year, Dollarama will lap, hopefully, this unusual COVID situation at this time. And I was hoping to if -- maybe get a little perspective on to what degree the gross margin rates were elevated by -- elevated seasonal sales, is that something that you can shed some light on?
No, that would be too much detailed information. But I mean, you're right to say that Halloween went well. Christmas, we've yet -- the 2 biggest weeks are in front of us. So we'll see. Summer season was very strong. Easter was very poor, souvenir was very poor. And so there's, again, a lot of things that are moving around. And so once we get to next year, we'll clarify all of that.
Okay. And maybe another tough one here. In terms -- a similar question on SG&A, less packaway, less labor-related to transactions, some of these items appear to be perhaps a bit transient. Is there any way -- any color you can give us to help identify that kind of transient impact on SG&A and make the benefit there?
No. Well, again, you -- we explained why we see some improvements in labor, obviously, the great sales one. But also -- and you mentioned that traffic. There's less traffic. So we need less hours to at-store level slightly. And if in the future, traffic comes back higher, which is positive, we'll need to put more hours to address that. So there are communicating links here. But for the time being, we are where we are right now.
The next question is from Brian Morrison of TD Securities.
Michael, I hear you with respect to the limited price markups that you say you're taking, but I just want to follow-up and ask, what are you seeing from your competitors? Are they taking price, especially as we see increases with respect to higher price of commodities and higher price of food? And does the potential for price inflation impact the timing or importance of bringing on a new price point?
Yes. So for the food part, we're not -- our mix of products is very low. So that's one part. But for the rest, like I say, if we see some lower markups, it's following the market competitive environment. We're a price follower, not a price setter. And so if we do see opportunities, if they do start passing on costs, then we will evaluate the opportunity to do the same. That's -- it's -- again, nothing changed. It's always been like that. And for now, the intention is to keep it that way.
I guess to ask it another way, are you seeing competition starting to take price at a more aggressive rate than you would have said 3 to 6 months ago?
No. I would say the answer is no. By the same token, I think that we are starting to see some price pressures on raw materials and certainly on freight and other things that will be coming into effect. And I believe that you will start seeing the market have cost pressures and, therefore, markups. And to be clear, they're not markups for more margin, they are markups to keep margin. So it's a different philosophy, when the cost of goods are going up, it's more about maintaining than it is about growing your margin. But when I look at what's happening to raw materials around the world and to freight rates, particularly from Asia when it comes to freight rates, there's no question that there will be cost pressures going forward and that -- as those cost pressures get addressed by the market, we will adjust accordingly.
I understand it doesn't necessarily impact your margin, but it does give you greater pricing flexibility on a going-forward basis. You'd agree with that, correct?
If it was market-wide and raw material-wide, yes.
Okay. And then, Michael, just to be clear, your NCIB, you plan on starting that actively next week, is that the message?
Yes. We are.
The next question is from Karen Short of Barclays.
Just a question for you with respect to the $4.50, $5 price points. Neil, you commented on the fact that new ideas being generated were much lower than normal. So I guess I'm wondering, when does that make that $4.50 to $5 harder to introduce just given maybe a lack of newness? But two, from the time line that you internally decide to go with the next level, what is the time line typically from decision, yes, like a go decision to actually seeing it in store? And would that get pushed out a little more in the current environment? And then I had one other question.
It wouldn't get pushed out. It would still be 3 to 9 months post the decision to do it with regards to seeing the goods in the stores from an import perspective. If the goods were domestic, it could be a week, to be honest. But the decision, again, is very much a consequence of both the cost of goods as well as the opportunities. And so if the cost of goods for everybody goes up dramatically, then that decision to add price points may be one simply of being able to maintain our offering. If the cost of goods don't go up and the world goes back to normal, let's say, then it will be more on the side of possibly introducing new items. So it's very much dependent on the situation. And since we all live on the same planet, we all have that same challenge. And again, thankfully, we're in the business of relative value, and so whatever we do, we're playing the same game as everybody else.
Okay. And then just on that actual cost of goods or overall inflation. So what are you -- what did you see in the quarter from an inflation perspective? And what are you -- how are you thinking about inflation for 4Q and 2021? And I guess maybe a freight as well as actual products?
Right. So again, we -- going into the Q4 quarter, same momentum as you've seen in Q3, okay. So we had a margin improvement in Q3. So we're saying we're having some -- and that includes, like I said earlier, very little markup. So that talks to the rest of the factors. For next year, we don't know yet, like Neil said, we -- and as I said earlier too, there -- we expect cost pressures from our suppliers. We expect cost pressures from shipping. We expect a tailwind from the currency, and we've got our refresh that we do every year and mark-up opportunities. So all of that will allow us to continue doing what we've done well historically and to manage the margin. And in Q3 and Q4, Karen, we will have a bit more information, obviously, closer to the year -- in the year and hopefully give you more information.
Congratulations and on your retirement.
Thank you.
People really seem to want to see you go, Michael.
I'm not going yet.
The next question is from Patricia Baker of Scotiabank.
Michael, I want to follow-up with your discussion on the self checkouts. You said that at the end of Q3, you have 175 stores by year-end, you'll have them in 200 stores. And I'm just curious if you could provide us with some sort of indication with that group of 200 stores, what the average revenue gap is between them and your -- the average revenue of the fleet, just some degree of magnitude? And then secondly, with respect to the remaining stores in the network, I'm presuming that there are other stores that also are high-traffic stores and do large revenue that will benefit maybe in the future from having self-checkouts and will be able to see operating efficiencies in those particular stores and also look like they will provide a good payback, is that fair?
Yes. Okay. So first question is for -- so yes, we're expecting 200 this year. We will give you more information next year in Q4 as to what we propose for next year, but there are definitely more stores next year that we're going to be introducing self-checkouts. You're right, self-checkouts are a top line savings generator. It's to reduce the queue line, that's the purpose of the self-checkout. And we've seen that working very well during this COVID period. And so we do see efficiencies. We don't -- so in other words, there are added efficiencies of having introduced the self-checkout and a good portion of that was top line generated. And we will have more next year. We're not going to go into -- we can't -- we're not disclosing the details, but I'll just say that we're definitely going ahead and pushing more self-checkouts in stores next year.
Okay. Fair enough. And I'm just going to ask the first part in a -- slightly different way. I am right in assuming that those 200 stores actually do higher revenues than the average revenue per store of the entire fleet?
They do [indiscernible] (00:41:44). They're -- I'm not sure, it's -- you're right that it's for those stores that the higher traffic or the space, the -- they show definitely a better trend after, but I wouldn't talk about it.
I would tell you that it's not representative of our 200 strongest stores.
Okay. Excellent, okay, perfect, sorry, I could have asked it better.
No. It's okay, Patricia. It's time that I leave now. I can't even understand the questions anymore.
And the last question is from Edward Kelly of Wells Fargo.
Just a couple of questions. First is sort of a follow-up on I think where Karen was going to be going on $4.50, $5. As you think about moving up into a higher price point, does the merchandising opportunity change, meaning that you'd have the ability to maybe sell new items that you haven't been able to in the past that may even be more incremental to the store offering than what you've historically been able to do as you go up in price?
So to answer your question, conceptually yes. But again, it depends on whether -- when one goes to a higher price point, they're doing it as a result of global cost pressures in order to maintain the same assortment as we currently have or whether it's a matter of new available items purely and no cost pressures and that decision can be taken for an entirely different reason. So far, we haven't taken it for either of those reasons. And for the moment, until further notice, we have no intention of taking that decision for the time being. But should it present itself and should we make the announcement that we're going to do it, it would be for one of those two reasons.
And maybe just to add to that and to corroborate what Neil is saying, August 2012, when we introduced $2.50, $3 was to bring in new items or the -- even in February 2019. In August 2016, we've just gone through 30% inflation on the currency over 18 months, and that accelerated for us, the introduction of the $3.50, $4 price point because our top price point at that time was pressured by a steep increase in the inflation. So those are your 2 examples right there.
Understood. That's helpful. And just a follow-up for you. So as we think about digital, if you look at some of your peers in the U.S., they have started to move down the road of a broader digital offering, particularly around sort of like buy online, pick-up in store? Any changes as to how you're thinking about that, particularly given what's sort of happened with the pandemic and adoption around things like that?
Right. So in our case, buy online, pick-up in-store is very dependent on the situation -- let's say, the pandemic situation and how it's being handled store-by-store, province-by-province, region-by-region. We don't think, for the moment, that there's much upside to have people do the shop of dollar items piece by piece and then have a store prepare that per customer ready to pick up. We don't believe that, that is an economically viable business plan. So if it's a piece-by-piece business, we're going to keep the customers coming back to pick up the pieces themselves, so to speak. And if it's something that they need to access or want to access those goods by the case, then that's what our current platform is for. But in the $1 to $4 range, we don't believe that having people handle and shop, so to speak, for a single customer piece-by-piece at $1 to $4 will ever be an economically viable plan for the time being, who knows what the future holds.
Thank you. This concludes the question-and-answer session and also concludes today's conference call. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.