DOLLARAMA INC. MONTREAL, Sept. 7, 2017 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported increases in sales, net earnings and earnings per common share for the second quarter ended July 30, 2017. Diluted net earnings per common share rose 30.7% to $1.15.
Financial and Operating Highlights
All comparative figures that follow are for the second quarter ended July 30, 2017 compared to the second quarter ended July 31, 2016. 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 2017" are to the Corporation's fiscal year ended January 29, 2017, and to "Fiscal 2018" are to the Corporation's fiscal year ending January 28, 2018.
Compared to the second quarter of Fiscal 2017:
-- Sales increased by 11.5% to $812.5 million;
-- Comparable store sales((1)) grew 6.1%, over and above a 5.7% growth the
previous year;
-- Gross margin((1)) was 39.6% of sales, compared to 38.4% of sales;
-- EBITDA((1)) grew 24.1% to $209.2 million, or 25.7% of sales, compared to
23.1% of sales;
-- Operating income grew 24.1% to $191.9 million, or 23.6% of sales,
compared to 21.2% of sales; and
-- Diluted net earnings per common share increased by 30.7%, from $0.88 to
$1.15.
_________________________________
(1) We refer the reader to the notes in the section entitled "Selected
Consolidated Financial Information" of this press release for the
definition of these items and, when applicable, their reconciliation
with the most directly comparable GAAP measure.
During the second quarter of Fiscal 2018, the Corporation opened 17 net new stores, compared to 13 net new stores during the corresponding period of the previous fiscal year.
"We are very pleased with our financial and operational performance in the first half of Fiscal 2018, with notably strong sales and operating margins in the second quarter," stated Dollarama's President and Chief Executive Officer Neil Rossy. "The sustained growth in comparable store sales demonstrates that consumers appreciate the compelling value we offer through our broad range of products at low, fixed price points. We continue our efforts to enhance the Dollarama shopping experience for our customers while reaching new consumers through store openings in underserved markets."
Financial Results
Sales for the second quarter of Fiscal 2018 increased by 11.5% to $812.5 million, compared to $729.0 million in the corresponding period of the prior fiscal year. The increase in sales was driven by continued organic sales growth fuelled by comparable store sales growth of 6.1%, over and above comparable store sales growth of 5.7% in the second quarter of Fiscal 2017, and the growth in the total number of stores over the past twelve months, from 1,051 stores on July 31, 2016 to 1,125 stores on July 30, 2017.
Comparable store sales growth for the second quarter of Fiscal 2018 consisted of a 5.9% increase in the average transaction size, over and above a 4.6% increase in the corresponding quarter of Fiscal 2017, and a 0.2% increase in the number of transactions.
Gross margin was 39.6% of sales in the second quarter of Fiscal 2018, compared to 38.4% of sales in the second quarter of Fiscal 2017. The increase in the gross margin is mainly attributable to higher product margins, the positive scaling impact of strong comparable store sales as well as lower logistics and occupancy costs as a percentage of sales. Gross margin includes sales made by the Corporation to Dollarcity, as principal, which represent approximately 1% of the Corporation's total sales, and a nominal markup margin.
General, administrative and store operating expenses ("SG&A") for the second quarter of Fiscal 2018 was $112.8 million, a 1.7% increase over $110.9 million for the second quarter of Fiscal 2017. The increase is primarily related to the continued growth in the total number of stores. SG&A for the second quarter of Fiscal 2018 represented 13.9% of sales, compared to 15.2% of sales for the second quarter of Fiscal 2017. The improvement of 1.3% in SG&A as a percentage of sales is mainly the result of labour productivity improvements and cost reduction initiatives at store level as well as the positive scaling impact of strong comparable store sales.
Financing costs increased by $2.9 million, from $7.3 million for the second quarter of Fiscal 2017 to $10.2 million for the second quarter of Fiscal 2018. The increase is due to increased borrowings on long-term debt.
Net earnings increased to $131.8 million, or $1.15 per diluted common share, in the second quarter of Fiscal 2018, compared to $106.4 million, or $0.88 per diluted common share, in the second quarter of Fiscal 2017. The increase in net earnings is mainly the result of a 11.5% increase in sales, a stronger gross margin and lower SG&A as a percentage of sales. Earnings per share were also positively impacted by the repurchase of shares through the Corporation's normal course issuer bid.
Dividend
On September 7, 2017, the Corporation announced that the Board of Directors had approved a quarterly cash dividend for holders of common shares of $0.11 per common share. The Corporation's quarterly dividend will be paid on November 1, 2017 to shareholders of record at the close of business on October 6, 2017 and is designated as an "eligible dividend" for Canadian tax purposes.
Normal Course Issuer Bid
On June 7, 2017, the Corporation announced that the Board of Directors had approved the renewal of the normal course issuer bid and that the Corporation had received the approval from the Toronto Stock Exchange to purchase for cancellation up to 5,680,390 common shares, representing 5.0% of the 113,607,809 common shares issued and outstanding as at the close of markets on June 6, 2017, during the 12-month period from June 19, 2017 to June 18, 2018 (the "2017-2018 NCIB").
During the second quarter of Fiscal 2018, a total of 1,303,900 common shares were repurchased for cancellation under the 2017-2018 NCIB, at a weighted average price of $122.86 per common share, for a total cash consideration of $160.2 million.
Outlook
(as a percentage of
sales except net Fiscal 2018
new store openings
in units and
capital
expenditures in
millions of
dollars)
----------------
June 2017 Enhanced
Guidance
Guidance
--------
Net new stores
openings 60 to 70 60 to 70
Gross margin 37.5% to 38.5% 38.0% to 39.0%(i)
SG&A 15.0% to 15.5% 15.0% to 15.5%
EBITDA margin 22.0% to 23.5% 22.5% to 24.0%(ii)
Capital
expenditures(iv) $90.0 to $100.0 $100.0 to $110.0(iii)
(i) Gross margin was revised
upward for Fiscal 2018 as a
result of stronger than
expected product margins and
the sales mix, as well as
lower logistics and occupancy
costs as a percentage of
sales.
(ii) EBITDA margin was revised
upward for Fiscal 2018 as a
result of the enhanced
guidance on gross margin.
(iii) Capital expenditures were
revised upward as a result of
certain projects in stores
originally scheduled for
rollout next year being pushed
forward in Fiscal 2018.
(iv) Includes additions to
property, plant and equipment
as well as computer hardware
and software.
These guidance ranges are based on a number of assumptions for Fiscal 2018, including the following:
-- the number of signed offers to lease and store pipeline for the next six
months;
-- comparable store sales growth for Fiscal 2018 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 (since the recently announced minimum wage increase
in Ontario will only become effective on January 1, 2018, assuming the
bill is passed into law as contemplated);
-- 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 2018 for new store openings, maintenance
capital expenditures, and transformational capital expenditures (the
latter being mainly related to information technology projects),
excluding for greater certainty any potential capital expenditures
relating to future distribution capacity expansion;
-- the successful execution of our business strategy;
-- the absence of a 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 (including increases in statutory minimum wage), 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, inability to renew store, warehouse, distribution center and head office leases on favourable terms, 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 2017 (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 7, 2017 and 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 1,125 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.
Selected Consolidated Financial Information
13-Week Periods Ended 26-Week Periods Ended
--------------------- ---------------------
(dollars and
shares in
thousands, except
per share
amounts) July 30, July 31, July 30, July 31,
2016 2017 2016
2017
$ $ $ $
=== === === ===
Earnings Data
Sales 812,487 728,968 1,517,432 1,369,980
Cost of sales 490,490 449,391 930,113 853,540
------- ------- ------- -------
Gross profit 321,997 279,577 587,319 516,440
------- ------- ------- -------
SG&A 112,783 110,942 222,257 213,888
Depreciation and
amortization 17,301 14,006 33,846 27,533
------ ------ ------ ------
Operating income 191,913 154,629 331,216 275,019
Financing costs 10,225 7,289 19,467 13,923
------ ----- ------ ------
Earnings before
income taxes 181,688 147,340 311,749 261,096
Income taxes 49,888 40,988 85,259 71,592
------ ------ ------ ------
Net earnings 131,800 106,352 226,490 189,504
======= ======= ======= =======
Basic net earnings
per common share $1.16 $0.89 $1.99 $1.57
Diluted net
earnings per
common share $1.15 $0.88 $1.97 $1.55
Weighted average
number of common
shares
outstanding
during the
period:
Basic 113,347 119,431 113,859 120,706
Diluted 114,705 120,662 115,196 121,910
Other Data
Year-over-year
sales growth 11.5% 11.6% 10.8% 12.4%
Comparable store
sales growth (2) 6.1% 5.7% 5.4% 6.1%
Gross margin (3) 39.6% 38.4% 38.7% 37.7%
SG&A as a % of
sales (3) 13.9% 15.2% 14.6% 15.6%
EBITDA (1) 209,214 168,635 365,062 302,552
Operating margin
(3) 23.6% 21.2% 21.8% 20.1%
Capital
expenditures 29,367 36,904 49,077 86,056
Number of stores
(4) 1,125 1,051 1,125 1,051
Average store size
(gross square
feet) (4) 10,076 9,968 10,076 9,968
Declared dividends
per common share $0.11 $0.10 $0.22 $0.20
As at
-----
July 30, Jan. 29,
2017 2017
$ $
=== ===
Statement of
Financial
Position Data
Cash and cash
equivalents 79,226 62,015
Merchandise
inventories 472,263 465,715
Property, plant
and equipment 450,815 437,089
Total assets 1,891,416 1,863,451
Total non-current
liabilities 1,669,586 1,249,765
Total debt (1) 1,479,635 1,333,643
Net debt (1) 1,400,409 1,271,628
Shareholders'
equity (deficit) (59,388) 100,284
(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
of operating and financial
performance 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 30, July 31, July 30, July 31,
2017 2016 2017 2016
$ $ $ $
=== === === ===
A reconciliation of operating income to EBITDA
is included below:
Operating income 191,913 154,629 331,216 275,019
Add: Depreciation
and amortization 17,301 14,006 33,846 27,533
------ ------ ------ ------
EBITDA 209,214 168,635 365,062 302,552
======= ======= ======= =======
EBITDA margin (3) 25.7% 23.1% 24.1% 22.1%
A reconciliation of long-term debt to total debt is included below:
As at
-----
(dollars in thousands) July 30, Jan. 29,
2017 2017
$ $
=== ===
Senior unsecured notes bearing interest at:
Fixed annual rate of 2.203%
payable in equal semi-annual
instalments, maturing November
10, 2022 250,000 -
Fixed annual rate of 2.337%
payable in equal semi-annual
instalments, maturing July 22,
2021 525,000 525,000
Fixed annual rate of 3.095%
payable in equal semi-annual
instalments, maturing November 5,
2018 400,000 400,000
Variable rate equal to 3?month
bankers' acceptance rate plus 59
basis points payable quarterly,
maturing March 16, 2020 300,000 -
Variable rate equal to 3?month
bankers' acceptance rate plus 54
basis points payable quarterly,
matured May 16, 2017 - 274,834
Unsecured revolving credit facility maturing December 14, 2021 - 130,000
Accrued interest on senior unsecured notes 4,635 3,809
----- -----
Total debt 1,479,635 1,333,643
========= =========
As at
-----
(dollars in thousands) July 30, Jan. 29,
2017 2017
$ $
=== ===
A reconciliation of total debt to net debt is included below:
Total debt 1,479,635 1,333,643
Cash and cash equivalents (79,226) (62,015)
------- -------
Net debt 1,400,409 1,271,628
--------- ---------
(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.
