Dollarama Reports Strong First Quarter Results and Renews Normal Course Issuer Bid

MONTREAL, June 10, 2015 /CNW Telbec/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported an increase in sales, net earnings and earnings per share for the first quarter ended May 3, 2015. Diluted net earnings per share rose 28.2% to $0.50.

Financial and Operating Highlights

All comparative figures below and in the "Financial Results" section that follows are for the first quarter ended May 3, 2015 compared to the first quarter ended May 4, 2014.  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"). The information on numbers of common shares and net earnings per share for the 13‑week period ended May 4, 2014 presented in this press release has been retrospectively restated to reflect the two‑for‑one share split effected by way of share dividend declared on September 10, 2014 and paid at the close of business on November 17, 2014 (the "Share Split"). Refer to Note 8 of the Corporation's unaudited condensed interim consolidated financial statements for the period ended May 3, 2015 for additional information. 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 Quarterly Consolidated Financial Information" section of this press release.

Throughout this press release, all references to "Fiscal 2015" are to the Corporation's fiscal year ended February 1, 2015 and to "Fiscal 2016" are to the Corporation's fiscal year ending January 31, 2016.

Compared to the First Quarter of Fiscal 2015

  • Sales increased by 13.0% to $566.1 million;
  • Comparable store sales(2) grew 6.9%, over and above 3.3% the previous year;
  • Gross margin(3) was 36.0% of sales compared to 35.4% of sales;
  • EBITDA(1) grew 22.9% to $105.9 million, or 18.7% of sales, compared to 17.2% of sales;
  • Operating income grew 22.4% to $94.8 million, or 16.7% of sales, compared to 15.4% of sales; and
  • Diluted net earnings per common share increased by 28.2%, from $0.39 to $0.50.

In addition, 17 net new stores were opened during the first quarter of Fiscal 2016 compared to 25 net new stores opened during the corresponding period of the previous fiscal year.

"Fiscal 2016 is off to a strong start as reflected across our key performance metrics. I am particularly pleased with the continued increase in sales, which is not only based on our growing store network but just as importantly, driven by strong comparable store sales. We will continue to work diligently in order to offer attractive merchandise and compelling value to maintain our status as a preferred shopping destination for Canadian consumers," stated Larry Rossy, Chairman and Chief Executive Officer of Dollarama.

Financial Results

Sales for the first quarter of Fiscal 2016 increased by 13.0% to $566.1 million, compared to $501.1 million in the corresponding period of the previous fiscal year. The increase in sales was driven by: (i) the growth in the number of stores over the past twelve months, from 899 stores on May 4, 2014 to 972 stores on May 3, 2015; and (ii) continued organic sales growth driven by comparable store sales growth of 6.9% in the first quarter of Fiscal 2016, over and above comparable store sales growth of 3.3% in the first quarter of Fiscal 2015.

Comparable store sales growth for the first quarter of Fiscal 2016 consisted of a 5.9% increase in the average transaction size and a 1.0% increase in the number of transactions.

In this quarter, 73.2% of our sales originated from products priced higher than $1.00 compared to 62.3% in the corresponding quarter last year. Debit card penetration also increased, as 46% of sales were paid with debit cards compared to 42% in the corresponding period of the previous fiscal year.

The gross margin was 36.0% of sales in the first quarter of Fiscal 2016, compared to 35.4% of sales in the first quarter of Fiscal 2015. This increase is mainly attributable to slightly higher product margins, the positive scaling impact of strong comparable store sales as well as lower logistics costs as a percentage of sales as a result of operational improvements. Overall, gross margin remains in line with management's expectations as the Corporation continues to strive to maintain a compelling product offering for its customers. The Corporation continually reinvests in the value proposition offered to its customers and management is targeting a margin in the range of 36% to 37% for Fiscal 2016 in order to stimulate continued sales growth.

General, administrative and store operating expenses ("SG&A") for the first quarter of Fiscal 2016 was $97.9 million, a 7.2% increase over $91.3 million for the first quarter of Fiscal 2015. This increase is primarily related to the continued growth in the total number of stores.

SG&A for the first quarter of Fiscal 2016 represented 17.3% of sales, an improvement of 0.9% compared to 18.2% of sales for the first quarter of Fiscal 2015. The reduction 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. Management expects the SG&A margin for Fiscal 2016 to be in the range of 16.5% to 17.0% of sales.

Net financing costs increased by $1.1 million, from $4.5 million for the first quarter of Fiscal 2015 to $5.6 million for the first quarter of Fiscal 2016 as a result of increased borrowings on long-term debt.

Net earnings increased to $64.8 million, or $0.50 per diluted common share, in the first quarter of Fiscal 2016, compared to $53.2 million, or $0.39 per diluted common share (retrospectively restated to reflect the Share Split), in the first quarter of Fiscal 2015. The increase in net earnings is mainly the result of a 13.0% increase in sales, a gross margin improvement and lower SG&A as a percentage of sales.

Dividend

On June 10, 2015, the Corporation announced that its Board of Directors had approved a quarterly cash dividend for holders of the Corporation's common shares of $0.09 per common share. The Corporation's quarterly cash dividend will be paid on August 5, 2015 to shareholders of record at the close of business on July 6, 2015 and is designated as an "eligible dividend" for Canadian tax purposes.

Normal Course Issuer Bid

2014-2015 NCIB

The total number of common shares repurchased for cancellation under the Corporation's 2014-2015 normal course issuer bid (the "2014-2015 NCIB") during the first quarter ended May 3, 2015 amounted to 537,222 common shares, at a weighted average price of $66.10 per common share, for a total cash consideration of $35.5 million. In total, the Corporation's share capital was reduced by $1.9 million, and the remaining $33.6 million was accounted for as a reduction of retained earnings.

The total number of common shares repurchased for cancellation under the 2014‑2015 NCIB since its inception in June 2014 up to May 3, 2015 amounted to 3,921,354 common shares, at a weighted average price of $54.08 per common share, for a total cash consideration of $212.1 million.

2015-2016 NCIB

On June 10, 2015, the Corporation announced that its Board of Directors had approved the renewal of the normal course issuer bid and that the Corporation had received approval from the Toronto Stock Exchange ("TSX") to purchase for cancellation up to 4,500,765 common shares, representing 3.5% of the 128,593,309 common shares issued and outstanding as at the close of markets on June 9, 2015 (the "2015‑2016 NCIB"). Purchases may commence on June 17, 2015 and will terminate no later than June 16, 2016.

The Corporation also announced that it had entered into an automatic purchase plan agreement with a broker to allow for the purchase of its common shares under the 2015‑2016 NCIB at times when the Corporation ordinarily would not be active in the market due to self-imposed trading blackout periods. Outside of these pre-determined blackout periods, common shares will be purchased based on management's discretion, in compliance with TSX rules and applicable securities laws. The Board of Directors believes that the purchase by the Corporation of its common shares represents an appropriate and desirable use of its available cash to increase shareholder value.

About Dollarama

Dollarama is Canada's leading dollar store operator with 972 locations across the country. Our stores provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Dollarama aims to provide customers with a consistent shopping experience, offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Our quality merchandise is sold in individual or multiple units at select fixed price points up to $3.00.

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 following factors, which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's management's discussion and analysis for Fiscal 2015 (available on SEDAR at www.sedar.com): 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, inability to renew store, warehouse, distribution center and head office leases on favourable terms, inability to increase warehouse and distribution center capacity in a timely manner, seasonality, market acceptance of private brands, failure to protect trademarks and other proprietary rights, foreign exchange rate fluctuations, potential losses associated with using derivative financial instruments, level of indebtedness and inability to generate sufficient cash to service debt, changes in creditworthiness and credit rating and the potential increase in the cost of capital, interest rate risk associated with variable rate indebtedness, competition in the retail industry, current economic conditions, departure of senior executives, failure to attract and retain quality employees, disruption in information technology systems, inability to protect systems against cyber attacks, unsuccessful execution of the growth strategy, holding company structure, adverse weather, natural disasters and geo-political events, unexpected costs associated with current insurance programs, product liability claims and product recalls, litigation and regulatory and environmental compliance.

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 June 10, 2015 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.

 


Selected Quarterly Consolidated Financial Information




13-Week Periods Ended

(dollars and shares in thousands, except per share amounts)

May 3, 2015

$


May 4, 2014

$





Earnings Data




Sales

566,070


501,141

Cost of sales

362,280


323,646

Gross profit

203,790


177,495

SG&A

97,871


91,295

Depreciation and amortization

11,151


8,785

Operating income

94,768


77,415

Net financing costs

5,562


4,485

Earnings before income taxes

89,206


72,930

Provision for income taxes

24,426


19,706

Net earnings

64,780


53,224





Basic net earnings per common share (4)

$0.50


$0.39

Diluted net earnings per common share (4)

$0.50


$0.39





Weighted average number of common shares outstanding during the period (4):





Basic

129,569


136,720


Diluted

130,581


137,224





Other Data




Year-over-year sales growth

13.0%


11.8%

Comparable store sales growth (2)

6.9%


3.3%

Gross margin (3)

36.0%


35.4%

SG&A as a % of sales (3)

17.3%


18.2%

EBITDA (1)

105,919


86,200

Operating margin (3)

16.7%


15.4%

Capital expenditures

20,024


19,321

Number of stores (5)

972


899

Average store size (gross square feet) (5)

9,910


9,934

Declared dividends per common share (4)

$0.09


$0.08






As at


May 3, 2015
$


Feb. 1, 2015
$

Statement of Financial Position Data




Cash and cash equivalents

64,010


40,203

Merchandise inventories

449,714


408,919

Property and equipment

299,191


290,632

Total assets

1,752,930


1,700,838

Total non-current liabilities

858,196


744,866

Total debt (1)

687,151


568,846

Net debt (1)

623,141


528,643

 

(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

(dollars in thousands)

May 3, 2015


May 4, 2014


$


$

A reconciliation of operating income to EBITDA is included below:








Operating income

94,768


77,415

Add: Depreciation and amortization

11,151


8,785

EBITDA

105,919


86,200


EBITDA margin (3)

18.7%


17.2%

 


As at

(dollars in thousands)

May 3, 2015


Feb. 1, 2015


$


$

A reconciliation of long-term debt to total debt is included below:




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


150,000

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

Unsecured revolving credit facility maturing December 13, 2019

5,000


15,000

Accrued interest as current portion of long-term debt

7,317


3,846

Total debt

687,151


568,846





A reconciliation of total debt to net debt is included below:








Total debt

687,151


568,846

Cash and cash equivalents

(64,010)


(40,203)

Net debt

623,141


528,643

 

(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) Per share amounts as at May 4, 2014 and numbers of outstanding common shares during the 13‑week period ended May 4, 2014 reflect the retrospective application of the Share Split. Refer to Note 8 of the Corporation's unaudited condensed interim consolidated financial statements for the period ended May 3, 2015 for additional information.

(5) At the end of the period.

 

SOURCE Dollarama Inc.

For further information: Investors: Michael Ross, FCPA, FCA, Chief Financial Officer, (514) 737-1006 x1237, michael.ross@dollarama.com; Media, Lyla Radmanovich, NATIONAL Public Relations, (514) 843-2336; www.dollarama.com

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