Dollarama reports fourth quarter and fiscal year 2018 results

• Diluted net earnings per share increased by 17% during the fourth quarter
• Quarterly cash dividend increased to $0.12 per common share
• Existing Montreal-area distribution centre to be expanded by approximately 50%
• Three-for-one share split proposed, subject to shareholder approval and regulatory requirements
• Changes to Dollarama Board of Directors announced

MONTREAL, March 29, 2018 /CNW Telbec/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported an increase in sales, net earnings and earnings per share for the fourth quarter and fiscal year ended January 28, 2018.

Dollarama also announced changes to its Board of Directors. Please consult the separate press release for more details.

Financial and Operating Highlights

All comparative figures that follow are for the fourth quarter and fiscal year ended January 28, 2018 compared to the fourth quarter and fiscal year ended January 29, 2017. 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, to "Fiscal 2018" are to the Corporation's fiscal year ended January 28, 2018, and to "Fiscal 2019" are to the Corporation's fiscal year ending February 3, 2019. The Corporation's fiscal year ends on the Sunday closest to January 31 of each year and usually has 52 weeks. However, as is traditional with the retail calendar, every five to six years, a week is added to the fiscal year. Fiscal 2017 and Fiscal 2018 were comprised of 52 weeks whereas Fiscal 2019 will be comprised of 53 weeks.

Compared to the fourth quarter of Fiscal 2017:

• Sales increased by 9.8% to $938.1 million;
• Comparable store sales⁽¹⁾ grew 5.5%, over and above a 5.8% growth the previous year;
• Gross margin⁽¹⁾ was unchanged at 41.4% of sales;
• EBITDA⁽¹⁾ grew 12.2% to $253.8 million, or 27.1% of sales, compared to 26.5% of sales;
• Operating income grew 11.6% to $235.1 million, or 25.1% of sales, compared to 24.7% of sales; and
• Diluted net earnings per common share increased by 16.9%, to $1.45 from $1.24.

During the fourth quarter of Fiscal 2018, the Corporation opened 25 net new stores, compared to 26 net new stores during the corresponding period of the previous fiscal year.

Compared to Fiscal 2017:

• Sales increased by 10.2% to $3,266.1 million;
• Comparable store sales⁽¹⁾ grew 5.2%, over and above 5.8% growth the previous year;
• Gross margin⁽¹⁾ was 39.8% of sales, compared to 39.2% of sales;
• EBITDA⁽¹⁾ grew 17.5% to $826.1 million, or 25.3% of sales, compared to 23.7% of sales;
• Operating income grew 17.0% to $755.6 million, or 23.1% of sales, compared to 21.8% of sales; and
• Diluted net earnings per common share increased by 22.6%, to $4.55 from $3.71.

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⁽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 Fiscal 2018, the Corporation opened 65 net new stores, which is consistent with the guidance range confirmed by management in December 2017, compared to 65 net new stores opened during Fiscal 2017.

"Strong growth in comparable store sales in Fiscal 2018 and the success of new stores opened during the year reflect positive customer response to our product offering and compelling value proposition,'' said Dollarama's President and Chief Executive Officer, Neil Rossy. "Our focus for Fiscal 2019 is on continued sales growth in existing stores, the opening of 60 to 70 net new locations across Canada, and the expansion of our existing distribution centre to support the Corporation's long-term growth."

Distribution Capacity Expansion

Following a careful evaluation of available options, Dollarama has opted to increase the size of its distribution centre located in the Town of Mount Royal, Quebec, by approximately 50%, to 500,000 square feet, thereby leveraging its centralized warehousing, distribution and logistics operations. The Corporation believes that this expansion will provide the infrastructure to support the long-term growth of its store network to the previously stated target of up to 1,700 stores by 2027. The expansion is scheduled for completion by the end of Fiscal 2020. Management expects that the existing distribution centre will continue normal operations throughout the construction phase.

As part of this expansion, the Corporation has incurred costs to date of $23.2 million in Fiscal 2018 for the purchase of two adjacent properties and $39.4 million in Fiscal 2019 for the purchase of its existing distribution centre, which was previously leased from an entity controlled by the Rossy family. As a result, Dollarama will own its expanded distribution operations in their entirety. No external financing was required to complete these transactions.

Capital expenditures guidance for Fiscal 2019 has been revised to a range of $150.0 million to $160.0 million (up from $110.0 million to $120.0 million) to reflect the purchase by Dollarama of the existing distribution centre. Capital expenditures will be revised again once construction and related costs for the distribution centre expansion are finalized. The Corporation expects the majority of construction and related costs to be incurred in Fiscal 2019, with the balance to follow in Fiscal 2020.

Fourth Quarter Financial Results

Sales for the fourth quarter of Fiscal 2018 increased by 9.8% to $938.1 million, compared to $854.5 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 5.5%, over and above comparable store sales growth of 5.8% in the fourth quarter of Fiscal 2017, and the growth in the total number of stores over the past twelve months, from 1,095 stores on January 29, 2017 to 1,160 stores on January 28, 2018.

Comparable store sales growth for the fourth quarter of Fiscal 2018 consisted of a 4.6% increase in the average transaction size, over and above a 7.8% increase in the corresponding quarter of Fiscal 2017, and a 0.8% increase in the number of transactions.

Gross margin remained unchanged at 41.4% of sales in the fourth quarter of Fiscal 2018, compared to the fourth quarter of Fiscal 2017.

General, administrative and store operating expenses ("SG&A") was $134.9 million, a 6.1% increase over $127.2 million for the fourth quarter of Fiscal 2017. The increase is primarily related to the continued growth in the total number of stores. SG&A for the fourth quarter of Fiscal 2018 represented 14.4% of sales, compared to 14.9% of sales for the fourth quarter of Fiscal 2017. The improvement of 0.5% in SG&A as a percentage of sales is mainly the result of labour productivity improvements as well as the positive scaling impact of strong comparable store sales.

Financing costs decreased by $0.3 million, from $10.6 million for the fourth quarter of Fiscal 2017 to $10.3 million for the fourth quarter of Fiscal 2018. The decrease relates mainly to the timing of a one-time charge in Fiscal 2017, partially offset by an increase in borrowings on long-term debt.

Net earnings increased to $162.8 million, or $1.45 per diluted common share, in the fourth quarter of Fiscal 2018, compared to $146.1 million, or $1.24 per diluted common share, in the fourth quarter of Fiscal 2017. The increase in net earnings is mainly the result of a 9.8% increase in sales 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.

Fiscal 2018 Financial Results

Sales for Fiscal 2018 increased by 10.2% to $3,266.1 million, compared to $2,963.2 million in Fiscal 2017. The increase in sales was driven by continued organic sales growth fuelled by comparable store sales growth of 5.2%, over and above comparable store sales growth of 5.8% in Fiscal 2017, and the growth in the total number of stores over the past twelve months, from 1,095 stores on January 29, 2017 to 1,160 stores on January 28, 2018.

Comparable store sales growth for Fiscal 2018 consisted of a 5.2% increase in the average transaction size, over and above a 5.5% increase in Fiscal 2017. The number of transactions remained unchanged year over year.

In Fiscal 2018, 67.1% of sales originated from products priced higher than $1.25, compared to 63.4% in Fiscal 2017.

Gross margin was 39.8% of sales in Fiscal 2018, compared to 39.2% of sales in Fiscal 2017. This increase 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 was slightly above the higher end of the updated guidance range provided by management in December 2017.

SG&A for Fiscal 2018 was $474.8 million, a 3.7% increase over $458.0 million for Fiscal 2017. The increase is primarily related to the continued growth in the total number of stores. SG&A for Fiscal 2018 represented 14.5% of sales, consistent with the guidance provided by management in December 2017, compared to 15.5% of sales for Fiscal 2017. The improvement of 1.0% 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 $6.8 million, from $33.1 million for Fiscal 2017 to $39.9 million for Fiscal 2018. The increase is due to increased borrowings on long-term debt.

Net earnings increased to $519.4 million, or $4.55 per diluted common share, for Fiscal 2018, compared to $445.6 million, or $3.71 per diluted common share, for Fiscal 2017. The increase in net earnings is mainly the result of a 10.2% 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 March 29, 2018, the Corporation announced that the Board of Directors had approved a 9% increase of the quarterly dividend for holders of common shares, from $0.11 per common share to $0.12 per common share. This increased quarterly dividend will be paid on May 2, 2018 to shareholders of record at the close of business on April 20, 2018 and is designated as an "eligible dividend" for Canadian tax purposes.

Proposed Three-for-One Share Split

On March 29, 2018, the Corporation announced that the Board of Directors had approved a proposed split of its common shares on a three-for-one basis (the "Share Split"). The Share Split remains subject to the approval of shareholders at the Annual and Special Meeting of Shareholders of the Corporation to be held on June 7, 2018 and to the requirements of the Toronto Stock Exchange ("TSX"). Assuming the Share Split is approved by shareholders and pre-cleared by the TSX, shareholders of record at the close of business on June 14, 2018 will be entitled to receive, on or about June 19, 2018, two additional common shares for each common share held.

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 TSX to purchase for cancellation up to 5,680,390 common shares, representing 5.0% of the 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").

The total number of common shares repurchased for cancellation under the 2017-2018 and the previous normal course issuer bid in effect during Fiscal 2018 amounted to 6,104,540 common shares, at a weighted average price of $133.12 per common share, for a total cash consideration of $812.7 million.

 

 

The guidance ranges for Fiscal 2019 are based on a number of assumptions, including the following:

• the number of signed offers to lease and store pipeline for the next 12 months;
• comparable store sales growth 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 visibility of approximately three months on open orders and product margins;
• announced minimum wage increases in Ontario, Alberta, British Columbia and Quebec, and the assumption that competitors will absorb this increase for the most part instead of offsetting it by a corresponding increase in the retail price of products;
• 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 2019 for new store openings, maintenance capital expenditures, and transformational capital expenditures (the latter being mainly related to information technology projects) as well as the acquisition of the existing distribution centre (but excluding construction and related costs associated with the expansion of distribution capacity, which have not been finalized yet);
• 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, 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 2018 (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 March 29, 2018 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 recognized Canadian value retailer offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Our 1,160 locations across Canada 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

 

 

 

SOURCE Dollarama Inc.