Dollarama Inc.
Buck-ing up: DOL Q4/F24 results/F25 guidance support constructive view
TSX: DOL | CAD 100.36 | Outperform | Price Target CAD 118.00
Sentiment: Positive
First impression: Modest positive. EPS $1.15 +27% Y/Y, 8.5% above forecast/updated consensus $1.06 (+17% Y/Y),
DOL Q4 results and F25 Guidance continue to support our constructive view and investment thesis, and DOL premium valuation.
Q4 saw DOL deliver another quarter of exceptionally strong SSS, +8.7%, +24.6% on a 2-year stacked basis, as expected moderating a still-sector leading level from prior Q's +11.1%/+15.5%/+17.1% but at full year +12.8% DOL remains a stand-out in Canadian retail. Results reflect DOL's strong value positioning for consumers, particularly sought after in the current high inflation environment, and overall financial results reinforce management focus on productivity and efficiency.
F2025 Guidance in line with expectations, points to another solid year of performance:
• SSS: 3.5%-4.5%, RBCe last published 4.0%.
• New unit growth: 60-70, consistent with LT objectives.
• Gross margin: Range 44%-45% RBCe last published 44.9%.
• SG&A as % of sales: 14.5%-15.0%, RBCe last published 14.6%.
• Implied EBITDA margin range (ex-Dollar City): 29%-30.5%, RBC last published 30.3%.
Highlights of Q4/F24 results (full details on the following page):
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Revenue/SSS strong and better than expected, total revenue +11.3%, SSS +8.7% vs RBC +8.5%/+4.5%.
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Basket/traffic trends reflect strong demand for all product categories with consumables demand remaining above historical levels: Basket -2.2%, traffic +11.2% as DOL's deep value positioning and everyday household needs/seasonal/celebration offering resonates with cash-strapped Canadians.
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Gross margins up Y/Y and in line with forecast, opex $$ and % lower than forecast, likely in part on scaling.
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EBITDA including Dollarcity +19.5% Y/Y, +4.7%/+6.5% above forecast/consensus.
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Dollarcity contribution $32.8 MM, a tick above forecast.
Expect focus of 10:30 AM conference call to be: i) assumptions/thought process underpinning F25 SSS guidance; ii) consumer demand trends, notably mix/price points and consumer holiday/seasonal sell-through FQ4/Q1 to date; iii) any notable slowing in demand with broader weakness in non-essential spending and trade-down in essentials; iv) puts and takes underpinning gross margin and opex guidance; v) performance at Dollarcity, realistic expectations for annual contribution as store base tips more in favour of mature, existing stores vs new stores.
Conference call 10:30 AM, webcast link on the Investor Relations tab under "events": https://edge.media-server.com/mmc/p/ u2rh8opu