Dollarama Q2 2027 Earnings Report

Dollarama EPS Results

• Actual EPS: C$1.29
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dollarama Revenue Results

• Actual Revenue: $2.03 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dollarama Announcement Details

• Quarter: Q2 2027
• Date: 9/16/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, September 16, 2026
• Conference Call Time: 10:30AM ET

Dollarama (TSE:DOL) Inc is a Canada-based company principally engaged in operating discount retail stores. The company provides a broad range of everyday consumer products, general merchandise, and seasonal items, with merchandise at low fixed price points. General merchandise and consumer products jointly account for the majority of the company's product offerings. The company's stores are throughout Canada, generally located in convenient locations, such as metropolitan areas, midsize cities, and small towns. All the stores are owned and operated by the company.

Dollarama Q2 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong second-quarter performance: Consolidated sales rose 17.6% to more than CAD 2 billion, EBITDA increased 11% to CAD 653 million, and diluted EPS grew 11.2% to CAD 1.29.
• Positive Sentiment: Canadian momentum exceeded expectations, with same-store sales up 5.4% and traffic up 3.7%; Dollarama raised its fiscal 2027 same-store sales guidance to 4%-4.5% and its net-new-store outlook to 65-75 locations.
• Positive Sentiment: Dollarcity continued to deliver strong growth, including a 30.3% increase in Dollarama’s share of net earnings, while Mexico’s network expanded to 21 stores and customer reception remained encouraging.
• Negative Sentiment: Australia’s transformation remains a near-term drag, with the lower-priced merchandise transition expected to weigh more heavily on second-half sales and integration costs expected to increase; the segment recorded approximately CAD 25 million in losses at midyear.
• Negative Sentiment: Higher oil prices, freight and supply-chain costs are expected to pressure Canadian margins from the third quarter onward, although management maintained its full-year gross-margin guidance of 45.0%-45.5% and said it would prioritize operational mitigation before pricing changes.

Presentation

[Operator]

Good morning, and welcome to Dollarama's second quarter fiscal 2027 results conference call. On today's call are Neil Rossy, President and CEO, and Patrick Bui, CFO. They will begin with brief remarks followed by a Q&A with financial analysts. Before we begin, please note that today's remarks may contain forward-looking statements about Dollarama's current and future plans, expectations, intentions, results, or any other future events or developments. Forward-looking statements are based on information currently available to management and on reasonable estimates and assumptions made by management. Many factors could cause actual results, future events, or developments to differ materially from those expressed or implied. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements represent management's expectations as at September 16, 2026.

[Operator]

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. You are invited to consult the cautionary statement on forward-looking statements in Dollarama's Management's Discussion and Analysis dated September 16, 2026. All forward-looking statements on today's call are expressly qualified by this cautionary statement. In addition, Dollarama may refer to certain non-GAAP and other financial measures during the call. Please consult the non-GAAP and other financial measures section of Dollarama's MD&A, dated September 16, 2026, for definitions, reconciliations with appropriate GAAP measures and other information. The disclosure documents related to this call are available in the investor relations section of dollarama.com and on SEDAR+. I will now turn the call over to Neil Rossy.

[Neil Rossy, President and CEO at Dollarama]

Thank you, Shannon. Good morning, everyone, and thank you for joining us. We delivered a strong second quarter and first half of fiscal 2027. Two things stand out, the continued strength of our value proposition and the execution of our teams across markets. At a time when consumers are making careful spending decisions, customers are counting on Dollarama for dependable value. Our brand promise continues to resonate across a broad customer base, reinforcing our relevance as a destination for everyday and seasonal goods. We are also moving our strategic priorities forward with discipline. We are driving profitable growth in Canada and in Central and South America, thoughtfully building our presence in Mexico and gaining momentum on our transformation roadmap in Australia. In Canada, despite a cautious consumer and continued pressure on household budgets, customers turned to Dollarama for their everyday needs during the second quarter.

[Neil Rossy, President and CEO at Dollarama]

Same-store sales were strong, supported by an increase in customer traffic and basket growth, bringing our SSS year-to-date above our expectations for the first half of the year. Demand for consumables and general merchandise was sustained, while demand for seasonal products remained stable year-over-year. This performance reflects the strength of our merchandising approach. We continue to carefully manage our assortment across our established product categories and fixed price points to deliver compelling relative value. It also speaks to the proximity and convenience we provide through our growing national network of well-located stores. We opened 15 net new stores across Canada during the quarter. This brought year-to-date net new openings to 43 and our total Canadian store count to 1,734 stores.

[Neil Rossy, President and CEO at Dollarama]

Given our strong pace of openings through the first half and our pipeline for the balance of the year, we have increased our fiscal 2027 guidance to between 65 and 75 net new stores, up from the previous range of 60 to 70. Construction of our future logistics hub in Western Canada also progressed on plan. The hub is expected to be fully operational by the end of calendar 2027, enabling us to move to a two-node distribution model in Canada in the near term. Turning to Latin America, Dollarcity delivered another solid performance in the second quarter and first half, generating strong same-store sales and store network growth. During its second quarter, Dollarcity opened 19 net new stores across our four Central and South American markets. This brought total store count in the region to 760 locations.

[Neil Rossy, President and CEO at Dollarama]

In mid-August, subsequent to quarter end, the earthquake in Colombia temporarily affected a limited number of Dollarcity stores. I want to recognize the Dollarcity team for responding with care and urgency to support colleagues while restoring affected locations. Operations have since largely returned to normal, and the financial impact is expected to be minimal. Turning to Mexico, we opened 10 stores during the second quarter, bringing the total count in the country to 21 by quarter end. The ramp-up of operations and network growth in Mexico remains on plan as the team continues to build density in the Guadalajara region. We also continue to be pleased with the initial customer response to our value and convenience proposition. In Australia, our multi-year transformation roadmap gained momentum during the quarter, supported by the team's continued execution of our fiscal 2027 initiatives.

[Neil Rossy, President and CEO at Dollarama]

We renovated 25 stores during the quarter, up from 13 in Q1, improving store layout and navigation while allowing for greater SKU density. We also opened four net new stores on top of the eight net new stores opened in the first quarter. We remain on track to renovate between 60 and 80 stores and open between 15 and 25 net new stores in fiscal 2027. Halfway through the year, we now have 60 stores operating with the Dollarama layout and fixtures, up from 28 at the end of Q1, out of a total of 414 locations nationally. It is encouraging to see the store transformations gradually taking shape as we work diligently in parallel to introduce Dollarama-sourced products. On that front, the first Dollarama-sourced import products started to reach shelves across the store network during the second quarter, and we expect that rollout to continue.

[Neil Rossy, President and CEO at Dollarama]

While the number of new products currently available is too limited to provide a meaningful read on customer response, we are confident that our import assortment will be highly attractive once we have greater density. As a reminder, the product transition will remain gradual and disciplined. The team is working SKU by SKU to introduce more compelling value while aligning the required logistics support. We aim to have about half of our import products transitioned by fiscal year-end. This work will continue into fiscal 2028. Looking more broadly, we continue to operate in an uncertain environment. In Canada, economic conditions remain challenging, continued trade tensions and elevated living costs are pressing consumers and weighing on the economic outlook. In this context, we expect consumers to remain thoughtful about their spending while continuing to seek value.

[Neil Rossy, President and CEO at Dollarama]

For our business, the direct tariff impact comes from Canadian counter-tariffs on a portion of the goods we purchase from the U.S. As discussed during the last round of counter-tariffs over a year ago, we have the agility to navigate these measures, and their financial impact remains manageable. Geopolitical conflict also continues to create cost pressures across global supply chains. The adaptability of our business model has enabled us to mitigate these in Q2, and we are actively working to manage the potential impacts through the second half of the year. In this evolving environment, we will continue to make disciplined choices across sourcing, merchandising, and operations. We will also stay true to our price follower philosophy to protect relative value for consumers through our product offering and within our fixed price points.

[Neil Rossy, President and CEO at Dollarama]

Across our markets, our teams remain focused on earning every customer visit with strong value, convenient locations, compelling assortment, and a consistent shopping experience. With that, I'll pass it over to Patrick.

[Patrick Bui, CFO at Dollarama]

Thank you, Neil, and good morning, everyone. We delivered strong financial and operating results in the second quarter, supported by sustained customer demand in Canada and Latin America and disciplined execution in Australia. We also continue to advance our growth ambitions while returning excess cash to shareholders. Starting with consolidated results, let me first highlight one point of comparability. Q2 of fiscal 2027 includes three full months of Australian results, compared with only 13 days in the corresponding period of the prior fiscal year. In that context, consolidated sales for the second quarter of fiscal 2027 increased by 17.6% to more than CAD 2 billion. The increase reflects network and same-store sales growth in Canada, as well as the sales contribution from Australia. EBITDA increased 11%, coming in at CAD 653 million for Q2, representing an EBITDA margin of 32.2%. Net earnings totaled CAD 349.3 million, while diluted EPS increased 11.2%, reaching CAD 1.29.

[Patrick Bui, CFO at Dollarama]

This is compared to diluted EPS of CAD 1.16 last year. Turning to our Canadian segment, same-store sales increased by 5.4%, over and above 4.9% growth last year. While consumer confidence remained weak, customers continued to turn to Dollarama for everyday value. Based on our first-half performance and current outlook, we are increasing our fiscal 2027 same-store sales guidance range to between 4% and 4.5%, up from our previous range of 3%-4%. Our updated guidance reflects a prudent view of the balance of the year. While our performance demonstrates the enduring relevance of our value proposition, we remain mindful that sustained pressure on household budgets and the uncertainty created by the current trade environment can affect consumer sentiment and overall spending. Still in Canada, gross margin came in at 45.7% of sales, compared to 45.6% in the second quarter of fiscal 2026.

[Patrick Bui, CFO at Dollarama]

The year-over-year increase primarily reflects the positive impact of scaling. Supply chain pressures, including the impact of higher oil prices on raw material and transportation costs, were effectively managed in Q2. However, given the lag before these costs flow through our P&L, we expect their impact to become more pronounced as of Q3. We are confident we can mitigate a significant portion of these pressures through the second half of the year by leveraging the tools at our disposal while protecting relative value for customers. As a result, and supported by our strong first-half performance, we are maintaining our full-year Canadian segment gross margin guidance of 45.0%-45.5%, despite anticipating higher costs for the balance of the year. SG&A for the Canadian segment was 13.8% of sales in Q2, in line with the prior year. Accordingly, our full-year SG&A guidance remains unchanged at between 14.1% and 14.6% of sales.

[Patrick Bui, CFO at Dollarama]

Scaling is expected to continue providing some leverage to help offset the higher store labor and operating costs. Turning to Dollarcity, our share of their net earnings increased by 30.3% to CAD 49.9 million for Q2. This reflects a 39.7% year-over-year increase in our 60% share of net earnings from Dollarcity's Central and South American operations, partially offset by a CAD 5.7 million loss, representing our 80% share of the net loss related to the Mexico ramp-up. These losses remain in line with our expectations. Subsequent to quarter end, Dollarcity declared a cash dividend of US$125 million, its second dividend this fiscal year. Our share amounts to US$75.1 million. Once again, a portion of these proceeds is being used to fund our US$38 million share of the next capital contribution towards expansion activities in Mexico.

[Patrick Bui, CFO at Dollarama]

Both the dividend and the capital injection will be recorded in the third quarter of fiscal 2027. Turning to Australia, the transformation initiatives outlined by Neil are progressing according to plan. Our full-year expectations for both transformation-related costs and segment earnings performance remain unchanged. As previously discussed, the ongoing transition to lower-priced merchandise is expected to continue weighing on sales in fiscal 2027, with the impact expected to be more pronounced through the second half of the year as the pace increases. We view this as a rebasing of sales. Resetting the merchandising mix and price point structure, which are key elements of our proven value retail model, will create near-term pressure. However, this transition is necessary to strengthen the value proposition and position the business for improved performance over time and for the long term.

[Patrick Bui, CFO at Dollarama]

Turning to capital allocation, we continue to return excess cash to shareholders through share repurchases and a quarterly dividend. During the quarter, we repurchased more than 1.5 million common shares for cancellation under our normal course issuer bid, which was renewed in July, for total consideration of CAD 300.4 million. We also announced today that the board approved a quarterly cash dividend of CAD 0.12 per share. As we enter the second half of the fiscal year, our priorities remain unchanged, and our plans are all on track. Our teams are focused on execution across each of our markets, serving customers with value and convenience, and allocating capital in support of long-term value creation. We also recognize that the environment remains challenging for consumers and that trade tensions and geopolitical uncertainty persist.

[Patrick Bui, CFO at Dollarama]

Against this backdrop, our value proposition remains highly relevant, while our business model provides flexibility and tools to help manage some of the external pressures. We are proud that Dollarama is a trusted destination for consumers seeking compelling value, convenience, and a broad assortment of everyday products. Our focus is continuing to deliver on that brand promise. With that, I'll now turn the call back to the operator for the Q&A.

[Operator]

Thank you. To ensure we hear from as many participants as possible, we ask that you please limit yourself to one question. To ask a question, press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question is from Irene Nattel with RBC Capital Markets. Your line is now open.

[Irene Nattel, Analyst at RBC Capital Markets]

Thanks, and morning, everyone. A great quarter and stable momentum, which brings me to my question, which is, if we look at the full-year guide on same-store sales, it implies a quite reasonable deceleration in the back half of the year. It takes you below 4% on same-store sales, and particularly considering last year's Q4. Wondering what you're actually seeing at a more granular consumer demand level, and is there really that much more caution in what you're seeing? Thank you.

[Patrick Bui, CFO at Dollarama]

Yeah. Thanks for your question, Irene. Just with respect to same-store sales, I think first of all, we're pleased with the strong SSS of 5.4% in the quarter. We saw consistent strength throughout the quarter, including as we exited Q2, with clearly traffic remaining strong. When it comes to guidance, I would say on the one hand, our strong performance in the first half supports the positive revision to the full-year outlook. But on the other hand, I think it's important to remain prudent for the balance of the year given the ongoing uncertainties in the macro environment we all know about, whether that's higher oil prices and/or trade headlines. But overall, I think we're encouraged by the continued momentum reflected in our Q2 results.

[Operator]

Thank you. Our next question comes from the line of Brian Morrison with TD Cowen. Your line is now open.

[Brian Morrison, Analyst at TD Cowen]

Thank you. Neil and or Patrick, I get a lot of questions on inflation recently, and I wonder where this most benefits you. Is it accelerating trade down? Where it most impacts you, is it higher fuel prices? How this nets out positive and negative, and whether this moves forward your view of the potential for a higher price point, seeing it's been about five years since the introduction of a CAD 5 price point.

[Neil Rossy, President and CEO at Dollarama]

Morning, Brian. Thank you for the question. During difficult times, the consumer has less money to spend. It's that simple. By the same token, during difficult times, the consumer trades down and that can benefit Dollarama. It's very hard to tell how much trading down there is, how much consumer reduction in non-core spending there is. At the end of the day, the true and only facts we have are our results. I think it's our job to continue to stay focused on being the best relative value that we can be in our category of goods, and to make the shopping experience as pleasant as possible, and to have as many convenient locations as we can across each of our markets, and that's our job.

[Neil Rossy, President and CEO at Dollarama]

With respect to the CAD 6 price point, as a reminder, our fixed price point strategy is a core element of our business model, and we would only introduce a higher price point if warranted. The key trigger would be cost inflation, reaching a level where we can no longer sustainably support the current CAD 5 max price point. However, based on what we're seeing today, we don't believe that an additional price point is necessary, and as the business continues to perform at a high level under our current pricing strategy, we will do what we've always done, which is to push off any additional price points as long as we can.

[Operator]

Thank you. Our next question is from Chris Li with Desjardins. Your line is now open.

[Chris Li, Analyst at Desjardins]

Hi, good morning, Neil and Patrick. Just wondering, what are you seeing on spending on products that are more discretionary in nature at Dollarama? I think you mentioned seasonal was stable. I am not sure if that is related to consumer being a bit more cautious or was it weather. Just overall, just spending on more discretionary products. Thank you.

[Patrick Bui, CFO at Dollarama]

Yeah. Thanks for the question, Chris. I think what we have seen this quarter is really nothing more than a continuation of the trends that we have seen in the past few quarters. I think we have commented that consumables has been performing well. We are seeing incremental strength in the general merchandise category. When it comes to seasonal products, if you look at the past few quarters, it is anywhere between slightly negative, flat, slightly positive year-over-year. This quarter, summer seasonal sales performed well in positive territory. That is an indication a little bit more to the discretionary side, but it is the same trend that we have been seeing, I would say, exiting the pandemic and in the past few quarters.

[Operator]

Thank you. Our next question is from Tamy Chen with BMO. Your line is now open.

[Tamy Chen, Analyst at BMO]

Hi. Good morning. Thanks for the question. I wanted to ask on Australia, the operating expenses or SG&A this quarter, similar to Q1, how do we think about those incremental integration costs? Should they be rolling through now, and thus we should expect an uptick in the SG&A there? Patrick, how do you guys think about overall the trajectory of the operating losses at Australia? What is the key gating factor to flip to profit? Is it just continuing to get those packaging product approvals, and then you will just have this wave of Dollarama products building that density in the shelves? Thanks.

[Patrick Bui, CFO at Dollarama]

Yeah. Thanks, Tamy. When it comes to the integration cost, the way to think about it is that they will be more heavily weighted through the second half. The reason for that is there is an acceleration from the first half of introduction of products into the stores. Think notably of the seasons that are coming. There will be quite a bit of transition in the merchandise. We are ramping up and following the plan, but more cost to be expected in the second half. When you think about the overall operating losses for the year, you would notice that at mid-year point, we are about at a loss of CAD 25 million. That would imply a certain acceleration in the third quarter.

[Patrick Bui, CFO at Dollarama]

Recall that the third quarter is a seasonally weak period in Australia, so keep that in mind as you model the remainder of the year, and generally the fourth quarter, seasonally as well, is a stronger period. To your question about whether factors turning to profitability, it comes back to executing on our plan on three points, right? It is on the merchandising front of transitioning to dollar SKUs. It is about converting the stores, which we made great progress during the quarter. It is densifying the store count, making sure that we have great density and great product in the stores. It is working on the second and third levers on everything that is systems, logistics, back office, and making sure that the real estate front follows the growth.

[Patrick Bui, CFO at Dollarama]

It is a combination of all those factors that we have laid out on page 25 that will lead the business to a better financial outlook.

[Operator]

Thank you. Our next question is from Vishal Shreedhar with National Bank. Your line is now open.

[Vishal Shreedhar, Analyst at National Bank]

Thank you for taking my questions. Can you give us perspective on Mexico, a big acceleration there, and how you feel about the reception? Maybe you can also give us a thought process, if you can, as to why you feel so confident about Australia and if you are seeing any similarities between when you ramped up the other countries in LatAm or in Mexico that is giving you confidence in Australia that it will ultimately become a profitable, strong business.

[Patrick Bui, CFO at Dollarama]

It is a two-pronged question. If I start with Mexico, look, I would say we are pleased with the ramp-up that we are seeing in Mexico. You are correct to point out that we went from 11 stores to 21 in the space of one quarter, and we are continuing to ramp that up. The reception of the Mexican consumer, it is the same comments as last quarter. We are pleased with what we are seeing, and it gives us the confidence that we should be ramping up the store network, and we are doing exactly that. We are accelerating the pace. Now, how do we get comfortable with that is, we have opened, this is arguably the fifth country that we are opening, so we have a pretty good pattern and roadmap of how things play out.

[Patrick Bui, CFO at Dollarama]

As long as the rollout in Mexico is consistent with what the team has done four times in a row, it gives us comfort that we are on the right path. Look, when it comes to Australia, nothing more to add than, we have analyzed the market very well, and we think there is an opportunity there. There is a place for a Dollarama, for a value retailer, a convenient retailer. Nothing has changed since we have acquired the business. It has been a year as we have rolled out our integration plan. None of that vision has changed. The ultimate goal remains the same, which is building the leading value retailer in the Australian market.

[Operator]

Thank you. Our next question is from Mark Carden of UBS. Your line is now open.

[Mark Carden, Analyst at UBS]

Morning. Thanks so much for taking the question. To start, you talked about anticipating higher freight costs for the balance of the year. Just wanted to clarify there, is that purely related to the lag? Does it also build in oil prices remaining higher for an extended period of time versus a near-term resolution? Just how should we think about how changes in that front could impact your guidance? Thank you.

[Patrick Bui, CFO at Dollarama]

Yes. I think you're referring specifically to Canada. We are anticipating higher costs or impacts in the second half. These things take time for it to funnel through our P&L. Our guide, if I look at gross margins as an indicator of profitability, it has not changed. It's the same 45.0% to 45.5% that we've had since the beginning of the year. I would just say the slight nuance this quarter is that we're saying that we can maintain this guide despite assuming that there will be elevated oil prices for the remainder of the year. That is a little bit different than last quarter, where we said our guide remains as long as prices normalize.

[Patrick Bui, CFO at Dollarama]

I think on the back of a strong first and second half, we've qualitatively updated that guidance to embed an assumption that costs will remain elevated in the second half. That being said, obviously, if costs increase from here and everything gets elevated, in that context, you wouldn't be surprised that we would need to revise the outlook in that situation. If things stay as we see today, we think we feel comfortable with that guide because as Neil mentioned, we have an adaptable business model, and we've worked through a bunch of different items that makes us comfortable that we can maintain that gross profit for the full year.

[Operator]

Thank you. Our next question is from Martin Landry of Stifel. Your line is now open.

[Martin Landry, Analyst at Stifel]

Hi, good morning. I would like to touch on your traffic in Canada. It was up 3.7%, the best performance of the last three quarters, and certainly notable given the slowing population growth. I was wondering if you can discuss a little bit, this traffic growth. Is it coming from your existing customer base or from new customers? I know it's tough for you to answer that question, but any color would be super helpful. Thank you.

[Patrick Bui, CFO at Dollarama]

Yeah. You hit it on the mark. It's very difficult to tell. At the end of the day, what we track is overall SSS. We're very pleased with the 5.4. Yes, we also track traffic and share it with you. 3.7 is a good result, but it's a continued momentum of what we've seen in Q1. Q1 we had 3.5, slightly higher in Q2, 3.7, but for us it's just a reflection of the continued momentum and perhaps the great value that people find in our stores and the pleasant experience that they have, and they return to our stores. But to disaggregate it between repeat and new, it's not something that we track or have. But we're very pleased with the momentum that we've built.

[Operator]

Thank you. Our next question is from Robert Oms of Bank of America. Your line is now open.

[Robert Ohmes, Analyst at Bank of America]

Oh, hey. Good morning, Neil and Patrick. Thanks for taking my question. Just actually two quick follow-ups. The first, just maybe a follow-up on Chris Li's question on category commentary. Can you give a little more beyond seasonal, like in the U.S., things like toys are doing a lot better for the Dollar General and Five Below of the world. Any categories that might give us insight what's going on with your customer, like home improvement, kitchen, anything else to tell us?

[Neil Rossy, President and CEO at Dollarama]

Sure. So you nailed it on the head again, which is to say, toys was an outlier, performed much better than it has historically. The balance of the categories are within the norm of what we've been seeing over the last few quarters, but toys was extra strong this quarter. The reason for it, I'm not smart enough to tell you.

[Operator]

Thank you. Our next question is from Zihan Ma of Bernstein. Your line is now open.

[Zhihan Ma, Analyst at Bernstein]

Great. Thank you for taking my question. I wanted to ask about the pace of store opening in Canada, which this seems to be the second year where you're growing above the historical 60 to 70 range, based on the updated guide. Is this kind of the new run rate from here, and could you share a bit more about what you're seeing on the new store productivity and economics side? Thank you.

[Neil Rossy, President and CEO at Dollarama]

Thank you for the question. 60 to 70 remains the guidance generally. Last year it was an exceptional year, and we raised that guidance and opened 10 more stores. This year, again, I've just changed the guidance exceptionally. The reasons for that are really very much what we've described in the past as the reasons to change the guidance, which are, if we get more opportunity than the pace we've had historically, and the team is able to execute those leases within a timeframe that happens to fall within one fiscal year as opposed to the next, we're not going to leave stores with the lights off and pay rent. We will adapt our guidance based on the realities of our execution and the execution, quite honestly, by our partners, our landlords. That is the reason for the change in guidance.

[Neil Rossy, President and CEO at Dollarama]

It's not a commitment to a change in guidance in the future. It will go back to the 60 to 70 unless, again, we see that there's an exceptional reason to change it, at which point we will tell you right away, and you will have visibility.

[Operator]

Thank you. Our next question is from George Doumat with Ventum Financial Corp. Your line's now open.

[George Doumet, Analyst at Ventum Financial]

Hi, good morning. The Canadian SG&A held at 13.8% of sales on a 5.4% comp, and I think standard store base. Just wondering, maybe what does it take to leverage that SG&A today? Are there maybe, perhaps any line items that we need to anniversary before we start to see that leverage on SG&A? Any commentary would be appreciated. Thanks.

[Patrick Bui, CFO at Dollarama]

I would think about leverage, not just from an SG&A perspective, but other line items in the P&L. This quarter specifically, you would see leverage in the gross margin percentage. There are fixed costs embedded in gross margins as well, and so taken together with cost of goods sold, you would've seen some leverage. Obviously, we continue to optimize the business model. I repeat that the bigger projects and the step changes with respect to scaling the business are done. Business does have variable costs when you think about product costs and store labor. We do think that there's still some scaling opportunity just by increasing the size. I would also caution that when you think about SG&A, there's other line items that are growing faster than inflation. I think about funding recycling programs.

[Patrick Bui, CFO at Dollarama]

For us to maintain SG&A as a percentage of sales and slightly increase it, and looking also at your cost of goods sold, is positive and remains our objective.

[Operator]

Thank you. Our next question is from Edward Kelly of Wells Fargo. Your line is open

[John Parke, Analyst at Wells Fargo]

Hey, good morning. This is John Park on for Ed. Thanks for taking my question. I guess just on Dollarcity, seemed like another good quarter of both comp growth and margin expansion. Can you just talk a little bit about your expectations for the second half there?

[Patrick Bui, CFO at Dollarama]

Yeah, you're right to point out that there's strong momentum in Dollarcity. It's a continuation of what we've seen in the prior quarters. 40% year-over-year bottom-line growth in the four Central and South American countries is a great result. During this quarter, just like in last quarter, you have the same dynamics when you think about going top-down. The pace of store openings on a smaller base leads to higher percentage growth. The business from a SSS perspective, just as in Canada, is at a good level. What they also benefit from, they have a much smaller store base, is natural scaling, and you see that in their gross margin in SG&A. I do mention often that it's not reasonable to assume that the business could grow 40%, 50% year after year just by simple math.

[Patrick Bui, CFO at Dollarama]

At some point, this does come down, but it does reflect our view that the business is getting better, but it is strong, and that is our expectation in the near future.

[Operator]

Thank you. Our next question is from Luke Hannan of Canaccord Genuity. Your line is now open.

[Luke Hannan, Analyst at Canaccord Genuity]

Thanks. Good morning. I wanted to go back to the conversation around the higher fuel dynamics. You've mentioned several times now that you have mitigating factors in place for the balance of the year in order to be able to offset that, and also the scale benefits within the Canadian business should provide offsets there as well. I'm just curious to know what specifically, or can you shed some light on what those mitigating measures are? Should we get a resolution to the conflict and by extension, we get lower energy prices, is it going to be relatively easy to unwind, we'll say, those mitigating measures as well? Thanks.

[Patrick Bui, CFO at Dollarama]

Yeah. When it comes to levers, you need to think about levers in a broad sense, right? It's not necessarily levers pushing back on fuel surcharges. Those are facts, and oil prices are higher, and those are sticky. But when we refer to levers, we doubled down on our commitment to making sure that we operate in the leanest way such that we offset costs that are growing higher, such as fuel surcharges in our network. There's always a continuous evaluation of the effectiveness of our operations, whether in logistics, in store operations. There's review of the merchandising team in terms of the appropriate mix. Think of levers as more holistically and things that we try to improve to really offset when it comes down to higher fuel costs.

[Patrick Bui, CFO at Dollarama]

At last resort is making pricing adjustments, but that is really the last resort once we've reviewed our operations.

[Operator]

Thank you. This concludes the question and answer session. Thank you all for your participation. This does conclude today's call. You may now disconnect.

Participants

Executives

• Neil Rossy, President and CEO
• Patrick Bui, CFO

Analysts

• Irene Nattel, Analyst at RBC Capital Markets
• Brian Morrison, Analyst at TD Cowen
• Chris Li, Analyst at Desjardins
• Tamy Chen, Analyst at BMO
• Vishal Shreedhar, Analyst at National Bank
• Mark Carden, Analyst at UBS
• Martin Landry, Analyst at Stifel
• Robert Ohmes, Analyst at Bank of America
• Zhihan Ma, Analyst at Bernstein
• George Doumet, Analyst at Ventum Financial
• John Parke, Analyst at Wells Fargo
• Luke Hannan, Analyst at Canaccord Genuity