Dollarama reports continued strong sales and earnings growth for its first
quarter ended May 2, 2010

MONTREAL, June 10 /CNW Telbec/ - Dollarama Inc. ("Dollarama" or the "Corporation") (TSX: DOL) reported significant increases in sales and net earnings today for the first quarter ended May 2, 2010.

Financial and Operating Highlights

(All comparative figures below and in the "Financial Results" section that follows, are for the 13-week period ended May 2 , 2010 compared to the 13-week period ended May 3, 2009. Throughout this news release, the term "Normalized" has been used to refer to financial results that have been adjusted to exclude certain non-recurring items. For a full explanation of the Corporation's use of the Non-GAAP measures, please refer to Note 1 of the Selected Consolidated Financial Information section of this news release.)

    
    - First quarter sales increased 14.1%
    - First quarter comparable store sales increased 8.6%
    - Gross margin increased to 34.3% from 33.4%
    - Normalized EBITDA(1) up 28.6% ending at $45.2 million
    - Normalized EBIT(1) up 32.2% ending at $38.5 million
    - Diluted net earnings per share for the quarter increased to $0.30 from
      $0.26
    - Net debt(7) declined to $397.4 million as of May 2, 2010
    

"We are pleased to report our first quarter results and strong store performance" said Larry Rossy, chief executive officer of Dollarama. "We continue to offer high quality goods and to renew our assortment of products at all price levels in an effort to satisfy our customers' needs and deliver outstanding value. We are equally committed to managing our operating costs to maintain our margins and increase shareholder value."

Financial Results

For the quarter ended May 2, 2010, we recorded sales of $311.9 million, a 14.1% increase over the quarter ended May 3, 2009. Sales growth was driven mainly by the net addition of 34 stores since the end of the first quarter ended May 3, 2009 and by comparable store sales growth of 8.6%, resulting from a 1.9% increase in number of transactions and a 6.6% increase in average transaction size.

Our gross margin increased to 34.3% of sales as compared to 33.4% of sales for the quarter ended May 3, 2009, driven mainly by reduced transportation costs, improved logistics cost efficiencies and reduced shrink provision.

General, administrative and store operating expenses ("SG&A") increased $5.0 million, or 8.9%, from $56.8 million for the quarter ended May 3, 2009, to $61.8 million for the quarter ended May 2, 2010 due mainly to the net addition of 34 new stores since May 3, 2009 and to increased store wage rates. As a percentage of sales, SG&A expenses declined to 19.8% of sales for the quarter ended May 2, 2010 as compared to 20.8% of sales for the quarter ended May 3, 2009 when we incurred store labour inefficiencies associated with the introduction of our multiple price point format.

Interest expense decreased $15.9 million, from $22.3 million for the quarter ended May 3, 2009, to $6.4 million for the quarter ended May 2, 2010 due primarily to the repayment of debt following our initial public offering completed on October 16, 2009.

Foreign exchange loss on derivative financial instruments and long-term debt was $0.1 million for the quarter ended May 2, 2010 as compared to a $7.5 million foreign exchange gain on derivative financial instruments and long-term debt for the quarter ended May 3, 2009. This $7.5 million gain was due primarily to the impact of the strengthening of the Canadian dollar relative to the U.S. dollar on our Deferred Interest Notes which were not hedged during that quarter, whereas in the quarter ended May 2, 2010, all of our U.S. dollar-denominated debt was hedged and the resulting foreign exchange impacts on derivative financial instruments and long-term debt was less volatile.

Net earnings increased $11.3 million, from $11.1 million for the quarter ended May 3, 2009 to $22.5 million for the quarter ended May 2, 2010. The increase in net earnings was driven primarily by sales and margin growth, and reduced interest expense.

About Dollarama

In 1992, the Dollarama business was founded by our Chief Executive Officer, Larry Rossy, a third generation retailer. We are the leading dollar store operator in Canada with 611 locations across the country. Our stores provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. All stores are corporate-owned and provide customers with a consistent shopping experience. Each store offers a broad assortment of everyday consumer products, general merchandise and seasonal items. Products are sold in individual or multiple units at select fixed price points between $1.00 and $2.00, with the exception of select candy offered at $0.69.

Forward Looking Statements

Certain statements in this news release may contain forward-looking statements. Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business and its corporate structure. 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, without limitation, the following factors: future increases in operating and merchandise costs, inability to refresh our merchandise as often as in the past, increase in the cost or a disruption in the flow of imported goods, disruption of distribution infrastructure, current adverse economic conditions, high level of indebtedness, inability to generate sufficient cash to service all the Corporation's indebtedness, ability of the Corporation to incur additional indebtedness, significant operating restrictions imposed by our Credit Facility and our Deferred Interest Notes indenture, interest rate risk associated with variable rate indebtedness, no guarantee that our strategy to introduce products between $1.00 and $2.00 will be successfully sustained, market acceptance of our private brands, inability to increase our warehouse and distribution center capacity in a timely manner, weather conditions or seasonal fluctuations, competition in the retail industry, dependence on ability to obtain competitive pricing and other terms from our suppliers, inability to renew store, warehouse and distribution center leases or find other locations on favourable terms, disruption in information technology systems, unsuccessful execution of our growth strategy, inability to achieve the anticipated growth in sales and operating income, inventory shrinkage, compliance with environmental regulations, failure to attract and retain qualified employees, departure of senior executives, fluctuation in the value of the Canadian dollar in relation to the U.S. dollar, litigation, product liability claims and product recalls, unexpected costs associated with our current insurance program, protection of trademarks and other proprietary rights, natural disasters, risks associated with the protection of customers' credit and debit card data, holding company structure, influence by existing shareholders, volatile market price for the common shares of the Corporation (the "Common Shares"), no current plans to pay cash dividends and future sales of Common Shares by our existing shareholders. The forward-looking statements contained in this discussion represent the Corporation's expectations as of June 10, 2010, and are subject to change after such date. However, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

Selected Consolidated Financial Information

    
                                                      13-Week Period Ended
                                                   --------------------------
    (dollars in thousands, except per share              May 2,        May 3,
     amounts and number of shares)                        2010          2009
                                                   ------------  ------------

    Earnings Data
    Sales......................................... $   311,930   $   273,409
    Cost of sales.................................     204,914       182,227
                                                   ------------  ------------
    Gross profit..................................     107,016        91,182
    Expenses:
    General, administrative and store operating
     expenses.....................................      61,792        56,768
    Amortization..................................       6,714         6,041
                                                   ------------  ------------
    Total expenses................................      68,506        62,809
                                                   ------------  ------------
    Operating income..............................      38,510        28,373
    Interest expense on long-term debt............       6,422        15,424
    Interest expense on amounts due to
     shareholders.................................           -         6,909
    Foreign exchange loss (gain) on derivative
     financial instruments and long-term debt.....         127        (7,505)
                                                   ------------  ------------
    Earnings before income taxes..................      31,961        13,545
    Provision for income taxes....................       9,489         2,415
                                                   ------------  ------------
    Net earnings.................................. $    22,472   $    11,130
                                                   ------------  ------------
                                                   ------------  ------------

    Basic net earnings per common share........... $      0.31   $      0.26
    Diluted net earnings per common share......... $      0.30   $      0.26

    Weighted average number of common shares
     outstanding during the period:
      Basic (in thousands)........................      72,945        42,576
      Diluted (in thousands)......................      75,288        43,201

    Other Data
    Year-over-year sales growth...................        14.1%         15.5%
    Comparable store sales growth(2)..............         8.6%          7.5%
    Gross margin(3)...............................        34.3%         33.4%
    Normalized SG&A as a % of sales(1)(4).........        19.8%         20.5%
    Normalized EBITDA(1).......................... $    45,224   $    35,164
    Normalized EBIT(1)............................ $    38,510   $    29,123
    Normalized EBIT margin(1)(4)..................        12.3%         10.7%
    Normalized net earnings(1).................... $    22,472   $    11,639
    Capital expenditures.......................... $     6,405   $     8,108
    Number of stores(5)...........................         611           577
    Average store size (gross square feet)(5).....       9,816         9,768

                                                             As of
                                                   --------------------------
                                                         May 2,      Jan. 31,
    (dollars in thousands)                                2010          2010
                                                   ------------  ------------

    Balance Sheet Data
    Cash and cash equivalents..................... $   115,687   $    93,057
    Merchandise inventories.......................     226,049       234,684
    Property and equipment........................     137,798       138,214
    Total assets..................................   1,331,140     1,322,237
    Total debt(6).................................     513,047       517,399
    Net debt(7)...................................     397,360       424,342

    --------------------
    (1) In this news release, we refer to Normalized EBIT, Normalized EBITDA,
        Normalized SG&A and Normalized net earnings, collectively referred to
        as the "Non-GAAP measures". Normalized EBIT represents operating
        income, in accordance with Canadian GAAP, adjusted for non-recurring
        charges. Normalized EBITDA represents Normalized EBIT plus
        amortization. Normalized SG&A represents SG&A, in accordance with
        Canadian GAAP, adjusted for non-recurring charges. Normalized net
        earnings represents net earnings, in accordance with Canadian GAAP,
        adjusted for non-recurring charges, net of tax impacts.

        We have included Non-GAAP measures to provide investors with
        supplemental measures of our operating and financial performance. We
        believe 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 Canadian 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. Non-GAAP measures are not presentations
        made in accordance with Canadian GAAP. For example, certain or all of
        the Non-GAAP measures do not reflect: (a) our cash expenditures, or
        future requirements for capital expenditures or contractual
        commitments; (b) changes in, or cash requirements for, our working
        capital needs; (c) the significant interest expense, or the cash
        requirements necessary to service interest or principal payments on
        our debt; and (d) income tax payments that represent a reduction in
        cash available to us. Although we consider the items excluded in the
        calculation of Non-GAAP measures to be non-recurring and less
        relevant to evaluate our performance, some of these items may
        continue to take place and accordingly may reduce the cash available
        to us.

        We believe that the presentation of the Non-GAAP measures described
        above is appropriate. However, these Non-GAAP measures have important
        limitations as analytical tools, and you should not consider them in
        isolation, or as substitutes for analysis of our results as reported
        under Canadian GAAP. Because of these limitations, we primarily rely
        on our results as reported in accordance with Canadian GAAP and use
        the Non-GAAP measures only as a supplement. In addition, because
        other companies may calculate Non-GAAP measures differently than we
        do, they may not be comparable to similarly-titled measures reported
        by other companies.

                                                      13-Week Period Ended
                                                   --------------------------
                                                         May 2,        May 3,
    (dollars in thousands)                                2010          2009
                                                   ------------  ------------

    A reconciliation of operating income to
     Normalized EBIT is included below:

    Operating income.............................. $    38,510   $    28,373
    Add: non-recurring charges:
      Management fees(a)(b).......................           -           750
                                                   ------------  ------------

    Normalized EBIT............................... $    38,510   $    29,123
                                                   ------------  ------------
                                                   ------------  ------------
      Normalized EBIT margin......................        12.3%         10.7%

    A reconciliation of Normalized EBIT to
     Normalized EBITDA is included below:

    Normalized EBIT............................... $    38,510   $    29,123
    Add: Amortization.............................       6,714         6,041
                                                   ------------  ------------

    Normalized EBITDA............................. $    45,224   $    35,164
                                                   ------------  ------------
                                                   ------------  ------------
      Normalized EBITDA margin....................        14.5%         12.9%


                                                      13-Week Period Ended
                                                   --------------------------
    (dollars in thousands, except per share              May 2,        May 3,
     amounts)                                             2010          2009
                                                   ------------  ------------

    A reconciliation of SG&A to Normalized SG&A is
     included below:

    SG&A.......................................... $    61,792   $    56,768
    Deduct: non-recurring charges(a)(b)...........           -          (750)
                                                   ------------  ------------

    Normalized SG&A............................... $    61,792   $    56,018
                                                   ------------  ------------
                                                   ------------  ------------
      Normalized SG&A as a % of sales.............        19.8%         20.5%

    A reconciliation of net earnings to Normalized
     net earnings is included below:

    Net earnings.................................. $    22,472   $    11,130
      Diluted net earnings per common share....... $      0.30   $      0.26

    Add/(deduct) pre-tax:
      Management fees(a)(b).......................           -           750

    Tax impact....................................           -          (242)
                                                   ------------  ------------

    Normalized net earnings....................... $    22,472   $    11,639
                                                   ------------  ------------
                                                   ------------  ------------
      Diluted Normalized net earnings per common
       share...................................... $      0.30   $      0.27

      --------------------
      (a) Reflects the management fees incurred and paid or payable to Bain
          Capital, excluding out of pocket expenses.
      (b) The management agreement was terminated in conjunction with the
          consummation of the Corporation's IPO.

    (2) Comparable store means a store open for at least 13 complete months
        relative to the same period in the prior year, including relocated
        stores and expanded stores.
    (3) Gross margin represents gross profit as a % of sales.
    (4) Normalized EBIT margin represents Normalized EBIT (see note 1)
        divided by sales. Normalized SG&A as a % of sales represents
        Normalized SG&A (see note 1) divided by sales.
    (5) At the end of the period.
    (6) Total debt is comprised of current portion of long-term debt, long-
        term debt before debt issue costs and discounts, and derivative
        financial instruments related to long-term debt.
    (7) Net debt is defined as total debt (see note 6) minus cash and cash
        equivalents.
    

SOURCE Dollarama Inc.

For further information: For further information: Investors: Michael Ross, Chief Financial Officer and Secretary, (514) 737-1006 x1237, michael.ross@dollarama.com; Media: Roch Landriault, NATIONAL Public Relations, (514) 843-2345; www.dollarama.com


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