Bullboard - Stock Discussion Forum Dollarama Inc T.DOL

Alternate Symbol(s): DLMAF

Dollarama Inc. is a Canada-based company, which offers various assortment of general merchandise, consumable products, and seasonal items both in-store and online. The Company conducts its business through its subsidiaries, including Dollarama L.P. and Dollarama International Inc. (Dollarama International). Dollarama L.P. operates the chain of stores in Canada and performs related logistical... see more

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TSX:DOL - Post Discussion

Dollarama Inc > RBC

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Post by retiredcf on Jun 07, 2023 10:05am

RBC

June 7, 2023

Dollarama Inc.
DOL-ariffic! Q1/F24 results strong and ahead of forecast, guidance unchanged

TSX: DOL | CAD 82.86 | Outperform | Price Target CAD 98.00

Sentiment: Positive

Our view: Results supportive of our constructive view and investment thesis, and DOL premium valuation. Exceptionally strong SSS +17.1%, up sequentially despite tougher prior year comps, reflects 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. Despite strong start to F24, guidance unchanged in our view likely reflecting inherent management conservatism, but even without upward revision points to strong SSS/gross margin, offset by higher than normal SG&A growth led by minimum wage increases in QC/ON.

First impression: Positive

DOL's Q1 results strong (again) with EPS $0.63 +28.6%, vs forecast/consensus $0.59 (+18.5% Y/Y), driven by significantly stronger than expected SSS as consumers continue to turn to DOL for consumables in addition to everyday household items and seasonal products, offset by higher-than-expected SG&A.

Highlights of Q1/F24 results:

Revenue/SSS strong and better than expected, total revenue +20.7%, SSS +17.1% vs RBC +8%.
Basket/traffic trends reflect strong demand for consumables above and beyond strong demand for other categories: Basket +1.4% (-20 bps sequentially), traffic +15.5% reflecting higher sales of consumables and strong seasonal demand.
Gross margins flat Y/Y but shy of forecast on mix, we have long maintained that to the extent that SSS upside driven by consumables, likely offset is at GM line, and we are fine with that. Opex higher than forecast on labour costs.
EBITDA including Dollarcity +21.1%% Y/Y, 6% above consensus.
Dollarcity contribution $13.1 MM, a tick above forecast.
Inventory $938 MM, below forecast on strong consumer sell-through.

F24 guidance reiterated/updated:

SSS: 5.0%-6.0% despite very strong Q1 print, last published forecast +6.1%.
New unit growth: 60-70, consistent with LT objectives, last published forecast 65.
Gross margin: Range 43.5%-44.5%, RBC CM published 44.4%
SG&A as % of sales: 14.7%-15.2%, RBC CM published 14.7%
Implied EBITDA margin range: 28.3%-29.8%, RBC last published 29.8%.
NCIB: Language unchanged, FCF to be applied to NCIB, although release notes that DOL intends to keep leverage slightly below historical target range of 2.75-3.0x.

Expect focus of 11:00 AM conference call to be: i) consumer demand trends, notably mix/price points; ii) recent consumer behaviour as summer (finally) arrived across Canada, iii) whether or not management is seeing any meaningful slowing in demand with broader weakness in non-essential spending and trade-down in essentials;iv) update on supply-chain situation including product availability, unit pricing; v) performance at Dollarcity, realistic expectations for annual contribution as store base tips more in favour of mature, existing stores vs new stores.