Dollarama reports strong sales and earnings growth to close fiscal year 2010

MONTREAL, April 8 /CNW Telbec/ - Dollarama Inc. ("Dollarama" or the "Corporation") (TSX: DOL) reported significant increases in sales and net earnings today for the quarter and fiscal year periods ended January 31, 2010.

Financial and Operating Highlights

(All comparative figures below and in the "Financial Results" section that follows, are for the 13-week and 52-week periods ended January 31, 2010 compared to the 13-week and 52-week periods ended February 1, 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 and charges related to the Corporation's initial public offering ("IPO") in October 2009. 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.)

    
    - Sales increased 15.4% in the fourth quarter and 15.1% in the fiscal
      year
    - Comparable store sales grew 9.3% in the fourth quarter and 7.9% in the
      fiscal year
    - Gross margin increased to 35.3% of sales in the fiscal year from 33.5%
      of sales
    - Normalized EBITDA(1) for the fiscal year grew 25.2% to $191.9 million
      from $153.3 million
    - Diluted net earnings per share for the fourth quarter increased to
      $0.45 from $0.15
    - Diluted Normalized net earnings(1) per share increased to $1.81 in the
      fiscal year from a Normalized net loss(1) of $(0.32)
    - Net debt(4) declined to $424.3 million as of January 31, 2010
    

"We are extremely pleased with our strong fourth quarter results and the performance of the business in our first year of offering merchandise at select price points over one dollar," said Larry Rossy, chief executive officer of Dollarama "Consumers continue to discover great values in our new assortment, and we are equally as excited to continue to expand our offering in this area. It is a strategy that has created significant value for our shareholders. I would like to commend our entire team for its efforts over the past year to ensure a seamless transition to our multiple price-point strategy and for enhancing the shopping experience of our loyal customers."

Financial Results

Sales for the 13-week period ended January 31, 2010 increased 15.4% to $364.1 million from $315.5 million in the corresponding period in 2009. For the fiscal year ended January 31, 2010, sales grew 15.1% to $1,253.7 million from $1,089.0 million in the prior fiscal year.

Fourth quarter sales growth was driven by the opening of 39 net new stores during the fiscal year as well as a 9.3% increase in comparable store sales over the fourth quarter of last year. Comparable store sales growth consisted of a 3.3% increase in the number of transactions and a 5.8% increase in the average transaction size. During the fourth quarter, approximately 30% of sales were accounted for by merchandise offered at price points greater than $1.00, compared to 27% during the third quarter of fiscal year 2010.

Gross margin increased to 39.1% of sales in the fourth quarter compared to 33.8% of sales in the same period last year, due primarily to improved product margins, reduced shrink provision, and improved efficiencies in distribution and transportation costs. For fiscal year 2010, gross margin increased to 35.3% of sales as compared to 33.5% of sales for the prior fiscal year, driven by improved product margins associated with the conversion to our multiple price-point strategy and net productivity improvements in distribution and logistics costs. Gross margins for the quarter and for all prior periods have been recalculated following the reclassification of certain expenses between general, administrative and store operating expenses ("SG&A") and cost of sales.

SG&A expenses in fiscal year 2010 increased to $264.8 million from $214.6 million for the prior fiscal year due to the opening of 39 net new stores and the incurrence of approximately $13.6 million of non-recurring and IPO-related charges in the current fiscal year. Excluding these non-recurring and IPO-related charges, Normalized SG&A(1) expenses increased to 20.0% of sales in fiscal year 2010 from 19.4% of sales in the prior fiscal year due primarily to increases in store wage rates and the full-year impact of central infrastructure costs added during the prior fiscal year.

Operating income for fiscal year 2010 increased to $153.4 million from $128.4 million for the prior fiscal year. Adjusted for the non-recurring and IPO-related SG&A expenses referenced above, Normalized earnings before interest and taxes ("EBIT")(1), a non-GAAP measure of operating performance used by the Corporation, increased 27.0% to $167.0 million in fiscal year 2010 from $131.4 million in the prior fiscal year. Normalized EBIT(1) margin increased to 13.3% of sales in the current fiscal year from 12.1% of sales for the prior fiscal year driven by the increase in gross margin over the same period.

Interest expense on long-term debt decreased $7.8 million to $7.3 million in the fourth quarter of fiscal year 2010 from $15.1 million during the fourth quarter of the prior year due to the redemption of debt with cash on hand and the IPO proceeds raised in the third quarter of fiscal year 2010.

The Corporation recorded a foreign exchange loss on derivative financial instruments and long term debt of $5.5 million in the fourth quarter of fiscal year 2010 due primarily to the loss realized on foreign exchange contracts used to redeem a portion of the Corporation's previously outstanding 8.875% senior subordinated notes and those used to make a cash interest payment on our U.S. dollar-denominated senior floating deferred interest notes. This $5.5 million foreign exchange loss compares to a foreign exchange loss on derivative financial instruments and long-term debt of $5.0 million recorded during the fourth quarter of fiscal year 2009 driven by the impact of the strengthening of the U.S. dollar relative to the Canadian dollar on our U.S. dollar-denominated senior floating deferred interest notes which were not hedged during that period.

For the fourth quarter of fiscal year 2010, Dollarama reported net earnings of $34.0 million or $0.45 per diluted share compared to $6.5 million or $0.15 per diluted share for the fourth quarter last year. Excluding the tax-adjusted non-recurring charges incurred in the fourth quarter of the previous fiscal year, Dollarama generated Normalized net earnings(1) of $7.0 million or $0.16 per diluted share for the fourth quarter last year whereas there were no non-recurring charges recorded in the fourth quarter of fiscal year 2010.

About Dollarama Inc.

In 1992, the Dollarama business was founded by our CEO, Larry Rossy, a third generation retailer. We are the leading dollar store operator in Canada with 603 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 senior secured credit facility and our senior floating rate 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 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 April 8, 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

    
    (dollars in thousands,   13-Week Period Ended      52-Week Period Ended
     except per share     ------------------------ --------------------------
     amounts and number    January 31,  February 1,  January 31,  February 1,
     of shares)                  2010         2009         2010         2009
                          ----------- ------------ ------------ -------------
    Earnings Data
    Sales                 $   364,100  $   315,546  $ 1,253,706  $ 1,089,011
    Cost of sales             221,652      208,940      810,624      724,157
                          ----------- ------------ ------------ -------------
    Gross profit              142,448      106,606      443,082      364,854
    Expenses:
    General,
     administrative and
     store operating
     expenses                  74,902       60,471      264,784      214,596
    Amortization                6,576        5,980       24,919       21,818
                          ----------- ------------ ------------ -------------
    Total expenses             81,478       66,451      289,703      236,414
                          ----------- ------------ ------------ -------------
    Operating income           60,970       40,155      153,379      128,440
    Interest expense on
     long-term debt             7,277       15,090       62,343       61,192
    Interest expense on
     amounts due to
     shareholders                   -        6,769       19,866       25,709
    Foreign exchange
     loss (gain) on
     derivative
     financial
     instruments and
     long-term debt             5,511        5,007      (31,108)      44,793
                          ----------- ------------ ------------ -------------
    Earnings (loss)
     before income taxes       48,182       13,289      102,278       (3,254)
    Provision for income
     taxes                     14,172        6,761       29,415       12,250
                          ----------- ------------ ------------ -------------
    Net earnings (loss)   $    34,010  $     6,528  $    72,863  $   (15,504)
                          ----------- ------------ ------------ -------------
                          ----------- ------------ ------------ -------------

    Basic net earnings
     (loss) per common
     share                $      0.47  $      0.15  $      1.41  $     (0.36)
    Diluted net earnings
     (loss) per common
     share                $      0.45  $      0.15  $      1.37  $     (0.36)

    Weighted average
     number of basic
     common shares
     outstanding during
     the period (in
     thousands)                72,692       42,576       51,511       42,576
    Weighted average
     number of diluted
     common shares
     outstanding during
     the period (in
     thousands)                75,191       43,201       53,049       42,576

    Balance Sheet Data(2)
    Cash and cash
     equivalents          $    93,057  $    66,218
    Merchandise
     inventories              234,684      249,644
    Property and
     equipment                138,214      129,878
    Total assets            1,322,237    1,363,038
    Total debt(3)             517,399      804,988
    Net debt(4)               424,342      738,770

    Other Data
    Year-over-year sales
     growth                      15.4%        12.1%        15.1%        12.0%
    Comparable store
     sales growth(5)              9.3%         4.8%         7.9%         3.4%
    Gross margin(6)              39.1%        33.8%        35.3%        33.5%
    Normalized SG&A as
     a % of sales(1)(7)          20.6%        18.9%        20.0%        19.4%
    Normalized EBITDA(1)  $    67,546  $    46,885  $   191,883  $   153,258
    Normalized EBIT(1)    $    60,970  $    40,905  $   166,964  $   131,440
    Normalized EBIT
     margin(1)(7)                16.7%        13.0%        13.3%        12.1%
    Normalized net
     earnings (loss)(1)   $    34,010  $     7,040  $    95,903  $   (13,457)
    Capital expenditures  $     9,844  $    14,557  $    33,772  $    40,502
    Number of stores(2)           603          564          603          564
    Average store size
     (gross square
     feet)(2)                   9,806        9,760        9,806        9,760

    ----------------------
    (1) "In this document, we refer to Normalized EBIT, Normalized EBITDA,
        Normalized SG&A and Normalized net earnings (loss), collectively
        referred to as the "Non-GAAP measures". Normalized EBIT represents
        operating income, in accordance with Canadian GAAP, adjusted for
        non-recurring and IPO-related charges. Normalized EBITDA represents
        Normalized EBIT plus amortization. Normalized SG&A represents
        General, administrative and store operating expenses ("SG&A"), in
        accordance with Canadian GAAP, adjusted for non-recurring and IPO-
        related charges. Normalized net earnings (loss) represents net
        earnings (loss), in accordance with Canadian GAAP, adjusted for non-
        recurring and IPO-related 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, as well as our ability to pay dividends
        on our capital stock. 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      52-Week Period Ended
                          ------------------------ --------------------------
    (dollars in            January 31,  February 1,  January 31,  February 1,
     thousands)                  2010         2009         2010         2009
                          ----------- ------------ ------------ -------------

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

    Operating income      $    60,970  $    40,155  $   153,379  $   128,440
    Add: non-recurring
     and IPO-related
     charges:
      Management
       fees(a)(b)                   -          750        2,250        3,000
      Fee paid in
       connection with
       the termination of
       the management
       agreement(b)                 -            -        5,000            -
      IPO related stock
       compensation
       expense(c)                   -            -        4,852            -
      Severance(d)                  -            -        1,483            -
                          ----------- ------------ ------------ -------------

      Non-recurring and
       IPO-related charges          -          750       13,585        3,000
                          ----------- ------------ ------------ -------------

    Normalized EBIT       $    60,970  $    40,905  $   166,964  $   131,440
                          ----------- ------------ ------------ -------------
                          ----------- ------------ ------------ -------------
      Normalized EBIT
       margin                    16.7%        13.0%        13.3%        12.1%

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

    Normalized EBIT        $   60,970  $    40,905  $   166,964  $   131,440
    Add: Amortization           6,576        5,980       24,919       21,818
                          ----------- ------------ ------------ -------------

    Normalized EBITDA      $   67,546  $    46,885  $   191,883  $   153,258
                          ----------- ------------ ------------ -------------
                          ----------- ------------ ------------ -------------


                             13-Week Period Ended      52-Week Period Ended
    (dollars in thousands,---------------------------------------------------
     except per share      January 31,  February 1,  January 31,  February 1,
     amounts)                    2010         2009         2010         2009
                          ----------- ------------ ------------ -------------

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

    SG&A                  $    74,902  $    60,471  $   264,784  $   214,596
    Deduct: non-recurring
     and IPO-related
     charges(a)(b)(c)(d)            -         (750)     (13,585)      (3,000)
                          ----------- ------------ ------------ -------------

    Normalized SG&A       $    74,902  $    59,721  $   251,199  $   211,596
                          ----------- ------------ ------------ -------------
                          ----------- ------------ ------------ -------------
      Normalized SG&A as
       a % of sales              20.6%        18.9%        20.0%        19.4%

    A reconciliation of
     net earnings (loss)
     to Normalized net
     earnings (loss) is
     included below:

    Net earnings (loss)   $    34,010  $     6,528  $    72,863  $   (15,504)
      Diluted net earnings
       (loss) per common
       share              $      0.45  $      0.15  $      1.37  $     (0.36)

    Add/(deduct) pre-tax:
      Management fees(a)            -          750        2,250        3,000
      Fee paid in
       connection with the
       termination of the
       management
       agreement(b)                 -            -        5,000            -
      Stock-comp expense
       triggered by the
       IPO(c)                       -            -        4,852            -
      Severance(d)                  -            -        1,483            -
      Write-off of
       debt issue
       costs(e)                     -            -        3,814            -
      Debt repayment
       premium and
       expenses(f)                  -            -       10,006            -

    Tax impact                      -         (238)      (4,365)        (953)
                          ----------- ------------ ------------ -------------

    Normalized net
     earnings (loss)      $    34,010  $     7,040  $    95,903  $   (13,457)
                          ----------- ------------ ------------ -------------
                          ----------- ------------ ------------ -------------
      Diluted Normalized
       net earnings (loss)
       per common share   $      0.45  $      0.16  $      1.81  $     (0.32)

    ---------------------
        (a) Reflects the management fees incurred and paid or payable to Bain
            Capital, excluding out of pocket expenses.
        (b) The management agreement was terminated concurrent with the IPO.
        (c) Reflects the stock compensation expense related to performance
            vesting clauses that were triggered by our IPO.
        (d) Represents the elimination of severance.
        (e) Write-off of debt issue costs associated with the debt redeemed
            with our IPO proceeds.
        (f) Call premium, prepayment expenses and other fees associated with
            the redemption of our 8.875% senior subordinated notes in
            November 2009.

    (2) At the end of the period
    (3) 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.
    (4) Net debt is defined as total debt (see note 3) minus cash and cash
        equivalents.
    (5) 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.
    (6) Gross margin represents gross profit as a % of sales.
    (7) 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.
    

SOURCE Dollarama Inc.

For further information: For further information: Investors: Nicholas Nomicos, Interim Chief Financial Officer, (514) 737-1006 x1237, Laki.Nomicos@dollarama.com, www.dollarama.com; Media: Paul de la Plante, NATIONAL Public Relations, (514) 843-2332


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