DOLLARAMA INC. MONTREAL, Sept. 1, 2016 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported increases in sales and net earnings for the second quarter ended July 31, 2016. Diluted net earnings per share rose 18.9% to $0.88.
Financial and Operating Highlights
All comparative figures that follow are for the second quarter ended July 31, 2016 compared to the second quarter ended August 2, 2015. All financial information presented in this press release has been prepared in accordance with generally accepted accounting principles in Canada ("GAAP") as set out in the CPA Canada Handbook - Accounting under Part I which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Throughout this press release, EBITDA, EBITDA margin, total debt and net debt, which are referred to as "non-GAAP measures", are used to provide a better understanding of the Corporation's financial results. For a full explanation of the Corporation's use of non-GAAP measures, please refer to footnote 1 of the "Selected Consolidated Financial Information" section of this press release.
Throughout this press release, all references to "Fiscal 2016" are to the Corporation's fiscal year ended January 31, 2016 and to "Fiscal 2017" are to the Corporation's fiscal year ending January 29, 2017.
Compared to the second quarter of Fiscal 2016:
-- Sales increased by 11.6% to $729.0 million;
-- Comparable store sales((2) )grew 5.7%, over and above a 7.9% growth the
previous year;
-- Gross margin((3)) was 38.4% of sales, the same as the prior year;
-- EBITDA((1)) grew 14.8% to $168.6 million, or 23.1% of sales, compared to
22.5% of sales;
-- Operating income grew 14.5% to $154.6 million, or 21.2% of sales,
compared to 20.7% of sales; and
-- Diluted net earnings per common share increased by 18.9%, from $0.74 to
$0.88.
In addition, 13 net new stores were opened during the second quarter of Fiscal 2017 compared to 17 net new stores opened during the corresponding period of the previous fiscal year.
"Comparable store sales and operating margins have remained strong throughout the first two quarters, resulting in an exceptional performance in the first half of Fiscal 2017. The careful execution of our merchandising strategy and the implementation of operational improvements have made us stronger as we grow. We also continue to reach new customers in an efficient manner, while providing a consistent shopping experience across our network of stores. Our plan remains to open 60 to 70 net new stores by fiscal year end," stated Neil Rossy, President and Chief Executive Officer of Dollarama.
Financial Results
Sales for the second quarter of Fiscal 2017 increased by 11.6% to $729.0 million, compared to $653.3 million in the corresponding period of the prior fiscal year. The increase in sales was driven by (i) continued organic sales growth fuelled by comparable store sales growth of 5.7%, over and above comparable store sales growth of 7.9% in the second quarter of Fiscal 2016, and (ii) the growth in the number of stores over the past twelve months, from 989 stores on August 2, 2015 to 1,051 stores on July 31, 2016.
Comparable store sales growth for the second quarter of Fiscal 2017 consisted of a 4.6% increase in the average transaction size and a 1.0% increase in the number of transactions.
The gross margin was 38.4% of sales in the second quarter of Fiscal 2017, the same as in the corresponding quarter of the prior year.
General, administrative and store operating expenses ("SG&A") for the second quarter of Fiscal 2017 was $110.9 million, a 7.0% increase over $103.7 million for the second quarter of Fiscal 2016. The increase is primarily related to the continued growth in the total number of stores. SG&A for the second quarter of Fiscal 2017 represented 15.2% of sales compared to 15.9% of sales for the second quarter of Fiscal 2016. The 0.7% improvement in SG&A as a percentage of sales is mainly the result of store labour productivity improvements and the positive scaling impact of strong comparable store sales.
Financing costs increased by $2.9 million, from $4.4 million for the second quarter of Fiscal 2016 to $7.3 million for the second quarter of Fiscal 2017. The increase is mainly due to increased borrowings on long-term debt.
Net earnings increased to $106.4 million, or $0.88 per diluted common share, in the second quarter of Fiscal 2017, compared to $95.5 million, or $0.74 per diluted common share, in the second quarter of Fiscal 2016. The increase in net earnings is mainly the result of an 11.6% increase in sales and lower SG&A as a percentage of sales.
Dividend
On September 1, 2016, the Corporation announced that its board of directors approved a quarterly cash dividend for holders of common shares of $0.10 per common share. The Corporation's quarterly cash dividend will be paid on November 2, 2016 to shareholders of record at the close of business on September 30, 2016 and is designated as an "eligible dividend" for Canadian tax purposes.
Normal Course Issuer Bid
On June 8, 2016, the Corporation announced that the Board of Directors approved the renewal of its normal course issuer bid expiring on June 16, 2016 (the "2015-2016 NCIB"), and that the Corporation had received approval from the Toronto Stock Exchange to purchase for cancellation up to 5,975,854 common shares (representing 5.0% of the common shares issued and outstanding as at the close of markets on June 7, 2016) during the 12-month period from June 17, 2016 to June 16, 2017 (the "2016-2017 NCIB").
The total number of common shares repurchased for cancellation under the 2015-2016 NCIB and the 2016-2017 NCIB during the 13-week period ended July 31, 2016 amounted to 2,027,080 common shares, for a total cash consideration of $184.2 million.
Outlook
(as a percentage of sales except net new stores in units and
capital expenditures in millions of dollars)
Fiscal 2017 Guidance
--------------------
Net new stores 60 to 70
Gross margin 37.0% to 38.0%
SG&A margin 15.5% to 16.0%
EBITDA margin(i) 21.0% to 22.5%
Capital expenditures $160.0 to $170.0
(i) EBITDA margin is a non-GAAP measure. Refer to the
section of this press release entitled "Selected
Consolidated Financial Information" for a reconciliation of
the non-GAAP measures used and presented by the
Corporation to the most comparable GAAP measures.
These guidance ranges are based on a number of assumptions, including the following:
-- the number of signed offers to lease and the store pipeline for the next
six months;
-- comparable store sales growth for Fiscal 2017 in the range of 4.0% to
5.0%;
-- positive customer response to our product offering, value proposition
and in-store merchandising;
-- the active management of our product margins, including by refreshing
between 25% to 30% of our offering on an annual basis;
-- the absence of significant increases in occupancy costs, wages and
transportation costs;
-- the entering into of foreign exchange forward contracts to hedge the
majority of forecasted purchases of merchandise in U.S. dollars against
fluctuations of the Canadian dollar against the U.S. dollar;
-- the continued execution of in-store productivity initiatives, including
without limitation the efficient use of advanced scheduling, and the
realization of cost savings and benefits aimed at improving operating
expenses;
-- ongoing cost monitoring;
-- the capital budget for Fiscal 2017 for: new store openings; a new
warehouse in Montreal, Quebec; maintenance capital expenditures; and
transformational capital expenditures (the latter being mainly related
to information technology projects);
-- the successful execution of our business strategy;
-- the absence of significant shift in economic conditions or material
changes in the retail competitive environment; and
-- the absence of unusually adverse weather, especially in peak seasons
around major holidays and celebrations.
Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, risks related to: future increases in operating and merchandise costs, inability to sustain assortment and replenishment of merchandise, increase in the cost or a disruption in the flow of imported goods, failure to maintain brand image and reputation, disruption of distribution infrastructure, inventory shrinkage, seasonality, market acceptance of private brands, foreign exchange rate fluctuations, competition in the retail industry, current economic conditions, failure to attract and retain quality employees, disruption in information technology systems, unsuccessful execution of the growth strategy, adverse weather, product liability claims and product recalls, litigation and regulatory compliance.
This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the cautionary statement on forward-looking statements.
Forward-Looking Statements
Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements.
Forward-looking statements are based on information currently available to us and on estimates and assumptions made by us regarding, among other things, general economic conditions and the competitive environment within the retail industry in Canada, in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, the factors discussed in the "Risks and Uncertainties" section of the Corporation's management's discussion and analysis for Fiscal 2016 (available on SEDAR at www.sedar.com).
These factors are not intended to represent a complete list of the factors that could affect us; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as at September 1, 2016 we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
About Dollarama
Dollarama is a Canadian dollar store operator offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Our 1,051 locations across the country provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Our quality merchandise is sold in individual or multiple units at select, fixed price points up to $4.00.
www.dollarama.com
Selected Consolidated Financial Information
13-Week Periods Ended 26-Week Periods Ended
--------------------- ---------------------
(dollars and
shares in
thousands,
except per share
amounts) July 31, August 2, July 31, August 2,
2016 2015 2016 2015
$ $ $ $
=== === === ===
Earnings Data
Sales 728,968 653,290 1,369,980 1,219,360
Cost of sales 449,391 402,708 853,540 764,988
------- ------- ------- -------
Gross profit 279,577 250,582 516,440 454,372
------- ------- ------- -------
SG&A 110,942 103,722 213,888 201,593
Depreciation and
amortization 14,006 11,775 27,533 22,926
------ ------ ------ ------
Operating income 154,629 135,085 275,019 229,853
Financing costs 7,289 4,429 13,923 9,991
----- ----- ------ -----
Earnings before
income taxes 147,340 130,656 261,096 219,862
Income taxes 40,988 35,186 71,592 59,612
------ ------ ------ ------
Net earnings 106,352 95,470 189,504 160,250
======= ====== ======= =======
Basic net
earnings per
common share $0.89 $0.74 $1.57 $1.24
Diluted net
earnings per
common share $0.88 $0.74 $1.55 $1.23
Weighted average
number of common
shares
outstanding
during the
period:
Basic 119,431 128,433 120,706 129,001
Diluted 120,662 129,538 121,910 130,056
Other Data
Year-over-year
sales growth 11.6% 14.1% 12.4% 13.6%
Comparable store
sales growth (2) 5.7% 7.9% 6.1% 7.4%
Gross margin (3) 38.4% 38.4% 37.7% 37.3%
SG&A as a % of
sales (3) 15.2% 15.9% 15.6% 16.5%
EBITDA (1) 168,635 146,860 302,552 252,779
Operating margin
(3) 21.2% 20.7% 20.1% 18.9%
Capital
expenditures 36,904 21,715 86,056 41,739
Number of stores
(4) 1,051 989 1,051 989
Average store
size (gross
square feet) (4) 9,968 9,945 9,968 9,945
Declared
dividends per
common share $0.10 $0.09 $0.20 $0.18
(
)
As at
-----
(dollars in thousands) July 31, January 31,
2016 2016
==== ====
$ $
Statement of Financial Position
Data
Cash and cash equivalents 107,930 59,178
Merchandise inventories 436,331 470,195
Property and equipment 389,253 332,225
Total assets 1,828,644 1,813,874
Total non-current liabilities 1,105,481 1,119,996
Total debt (1) 1,203,411 928,376
Net debt (1) 1,095,481 869,198
(1) In this press release, EBITDA,
EBITDA margin, total debt and net
debt are referred to as "non-
GAAP measures". Non-GAAP
measures are not generally
accepted measures under GAAP and
do not have a standardized
meaning under GAAP. EBITDA,
EBITDA margin, total debt and net
debt are reconciled below. The
non-GAAP measures, as calculated
by the Corporation, may not be
comparable to those of other
issuers and should be considered
as a supplement to, not a
substitute for, or superior to,
the comparable measures
calculated in accordance with
GAAP.
We have included non-GAAP
measures to provide investors
with supplemental measures of our
operating and financial
performance. We believe that non-
GAAP measures are important
supplemental metrics because they
eliminate items that have less
bearing on our operating and
financial performance and thus
highlight trends in our core
business that may not otherwise
be apparent when relying solely
on GAAP measures. We also believe
that securities analysts,
investors and other interested
parties frequently use non-GAAP
measures in the evaluation of
issuers, many of which present
non-GAAP measures when reporting
their results. Our management
also uses non-GAAP measures in
order to facilitate operating and
financial performance comparisons
from period to period, to prepare
annual budgets, and to assess our
ability to meet our future debt
service, capital expenditure and
working capital requirements.
13-Week Periods Ended 26-Week Periods Ended
--------------------- ---------------------
(dollars in thousands) July 31, August 2, July 31, August 2,
2016 2015 2016 2015
$ $ $ $
=== === === ===
A reconciliation of
operating income to
EBITDA is included
below:
Operating income 154,629 135,085 275,019 229,853
Add: Depreciation and
amortization 14,006 11,775 27,533 22,926
------ ------ ------ ------
EBITDA 168,635 146,860 302,552 252,779
======= ======= ======= =======
EBITDA margin (3) 23.1% 22.5% 22.1% 20.7%
As at
-----
(dollars in
thousands) July 31, 2016 Jan. 31, 2016
$ $
=== ===
A reconciliation of
long-term debt to
total debt is
included below:
Senior unsecured
notes bearing
interest at a fixed
annual rate of
2.337% payable in
equal semi-annual
instalments,
maturing July 22,
2021 525,000 -
Senior unsecured
notes bearing
interest at a fixed
annual rate of
3.095% payable in
equal semi-annual
instalments,
maturing November 5,
2018 400,000 400,000
Senior unsecured
notes bearing
interest at a
variable rate equal
to 3-month bankers'
acceptance rate
(CDOR) plus 54 basis
points payable
quarterly, maturing
May 16, 2017 274,834 274,834
Unsecured revolving
credit facility
maturing December
14, 2020 - 250,000
Accrued interest on
long-term debt 3,577 3,542
----- -----
Total debt 1,203,411 928,376
========= =======
A reconciliation of
total debt to net
debt is included
below:
Total debt 1,203,411 928,376
Cash and cash
equivalents (107,930) (59,178)
-------- -------
Net debt 1,095,481 869,198
========= =======
(2) Comparable store sales growth
is a measure of the
percentage increase or
decrease, as applicable, of
the sales of stores,
including relocated and
expanded stores, open for at
least 13 complete fiscal
months relative to the same
period in the prior fiscal
year.
(3) Gross margin represents gross
profit divided by sales. SG&A
as a % of sales represents
SG&A divided by sales.
Operating margin represents
operating income divided by
sales. EBITDA margin
represents EBITDA divided by
sales.
(4) At the end of the period.
SOURCE Dollarama Inc.
