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 Sep 13, 2023 9:15am

RBC

September 13, 2023

Dollarama Inc.
Almighty DOL-lar: DOL Q2/F24 first look—strong and better than expected

TSX: DOL | CAD 89.36 | Outperform | Price Target CAD 101.00

Sentiment: Positive

First impression: Modest positive. Results supportive of our constructive view and investment thesis, and DOL premium valuation. Q2 saw DOL deliver another quarter of exceptionally strong SSS +15.5%, only modestly down sequentially from Q1 torrid 17.1% despite tougher prior-year comps. 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. Updated guidance on SSS reflects strong H1 performance, implies moderating cadence in H2, likely to be a key topic of questioning on the 10:30 am conference call. Calling it "modest positive" despite strong beat due to what we hope is the conservative H2 outlook.

EPS $0.86 +30%, vs forecast/consensus $0.78/$0.77 (+17% 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, in-line gross margin, slightly offset by higher-than-expected SG&A.

Highlights of Q2/F24 results:

Revenue/SSS strong and better than expected, total revenue +19.6%, SSS +15.5% vs RBC +10.5%.
Basket/traffic trends reflect strong demand for consumables above and beyond strong demand for other categories: Basket

+2.3% (+90 bps sequentially), traffic +12.9% reflecting higher sales of consumables and strong seasonal demand.
Gross margins up Y/Y, opex a tick lower than forecast.
EBITDA including Dollarcity +22% Y/Y, 8% above consensus.
Dollarcity contribution $11.4 MM in line.

Updated F24 guidance to reflect strong H1 SSS, balance unchanged:

• SSS: 10-11%, H1 average 16.3% implying 3.75%-5.75% in H2, unchanged, and consistent with last published forecasts 4-5%. • New unit growth: 60-70, consistent with LT objectives.
• Gross margin: Range 43.5%-44.5%
• SG&A as % of sales: 14.7%-15.2%

• Implied EBITDA margin range: 28.3%-29.8%, RBC last published 29.5%.

Expect focus of 10:30 AM conference call to be: i) rationale behind leaving implied H2 SSS guidance unchanged; ii) consumer demand trends, notably mix/price points and BTS demand; 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.

Conference call 10:30 AM, webcast link on the Investor Relations tab under "events": https://edge.media-server.com/mmc/p/ c3cda8gz