Dollarama Inc investors getting bang for their buck as company beats profit expectations, opens eight new stores
June 8, 2016
Damon van der Linde, Financial Post
Dollarama Inc’s upbeat earnings could further boost its share price which has risen nearly 30 per cent in the past year.
Montreal — Dollarama Inc. is proving that just a loonie or two can add up over time.
The Montreal-based company’s stock reached an all-time high on Wednesday after it reported better-than-expected results for the first quarter, with company management saying there’s still room for more growth ahead.
Dollarama, Canada’s largest owner and operator of dollar stores, reported $641 million in sales for the first quarter of fiscal 2017, 13.2 per cent higher than the same period last year, with a 6.6 per cent increase in same-store sales. The company said profit in the period was $83.2 million, an increase of 28.4 per cent.
Net earnings per share increased by 36 per cent, from 58 cents to 68 cents.
Dollarama opened eight new stores in the quarter, though it is on track to open a total of between 60 and 70 by the end of the fiscal year.
And though Dollarama is moving ahead with its plans to add higher-priced items of up to $4 while also pushing store technology like credit card scanners and wifi, for the most part, CEO Neil Rossy says he plans to continue with the same formula that has worked so well up to now.
“I have no intention to change this business model, nor our operation strategies, which consist of growing our store network while leveraging our direct-sourcing platform to offer compelling products to our customers,” said the CEO at the company’s annual shareholder meeting.
Rossy officially took the company helm from his father Larry on May 1.
During the question-and-asnwer period, one shareholder, André C. Gauthier, asked why the company had only one woman on its eight-member board of directors. Rossy replied that there were women in the senior management : corporate secretary Josée Kouri and chief operating officer Johanne Choinière.
Following the meeting, Gauthier said that, although he is happy as a shareholder who bought into the company in 2011, he was less satisfied with the response.
“This is 2016,” he said. “I think we should see more women on the board of directors.”
In a news conference, Rossy said that he agreed that women need more representation at the highest levels of management and on the board of directors.
“The next time there’s a board opening, a woman will be considered most definitely as highly as a man, if not more because we do desire to have that balance going forward,” he said. “We all think it’s the right thing to do.”
Dollarama’s stock closed up 1.94 per cent at $94.39 on Wednesday, just off its record peak of $94.65 earlier in the day. Shares have risen nearly 30 per cent in the past 12 months.
The company has also raised its EBITDA margin forecast for fiscal 2017 to 21.0-22.5 per cent from 20.5-22.0 per cent.
Dollarama’s CFO Michael Ross that the company has about six years of runway ahead of it to expand within Canada, but it is also exploring foreign retail opportunities.
“We’re planting seeds and doing homework internationally and if we see opportunities to sustain the type of growth you see today in the future, that would be fantastic,” he said.
For the past three years Dollarama has been working on a servicing and licensing agreement with Dollar City, Ross said, which currently owns and operates stores in El Salvador and Guatemala, with other potential opportunities in Colombia.
Ross says Dollarama has a call option to buy control of the company in February 2020.
“There’s still a lot of due diligence to do and we’d rather do it all before we spend a penny,” he said. “Canada is the priority and beyond six years, your guess is as good as ours.”