MONTREAL, Dec. 6, 2018 /PRNewswire/ - Dollarama Inc. (TSX: DOL)
("Dollarama" or the "Corporation") today reported increases in sales, net earnings and earnings per common share for the Fiscal
2019 third quarter ended October 28, 2018. Diluted net earnings per common share rose 7.9% to
$0.41.
Financial and Operating Highlights
All comparative figures that follow are for the third quarter ended October 28, 2018 compared to
the third quarter ended October 29, 2017. 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 and 39-week periods ended October 29, 2017 presented in this press release has been retrospectively
restated to reflect the three-for-one share split of the Corporation's outstanding common shares implemented on June 20, 2018 (the "Share Split"). 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 Consolidated Financial Information" section of this press release.
Throughout this press release, all references to "Fiscal 2018" are to the Corporation's fiscal year ended January 28,
2018, and to "Fiscal 2019" are to the Corporation's fiscal year ending February 3, 2019. The Corporation's fiscal year
ends on the Sunday closest to January 31 of each year and usually has 52 weeks. However, as is
traditional with the retail calendar, every five or six years, a week is added to the fiscal year. Fiscal 2018 was comprised
of 52 weeks whereas Fiscal 2019 will be comprised of 53 weeks.
Compared to the third quarter of Fiscal 2018:
- Sales increased by 6.6% to $864.3 million;
- Comparable store sales(1) grew 3.1%, over and above 4.6% growth the previous year;
- Gross margin(1) was 38.9% of sales, compared to 40.1% of sales;
- EBITDA(1) grew 3.5% to $214.6 million, or 24.8% of sales, compared to 25.6% of
sales;
- Operating income grew 3.0% to $195.0 million, or 22.6% of sales, compared to 23.3% of sales;
and
- Diluted net earnings per common share increased by 7.9% to $0.41 from $0.38.
During the third quarter of Fiscal 2019, the Corporation opened 14 net new stores, compared to 10 net new stores during the
corresponding period of the previous fiscal year. As at December 5, 2018, the Corporation had
opened 11 net new stores since the beginning of the fourth quarter of Fiscal 2019, bringing the total number of net new stores
opened to date in Fiscal 2019 to 43. The Corporation continues to expect to open 60 to 70 net new stores in the current fiscal
year.
"Same store sales grew 3.1% in the third quarter compared to 2.6% in the second quarter of Fiscal 2019 reflecting Dollarama's
compelling value proposition, further reinforced by our strategic decision earlier this year to carefully manage price increases
in the current competitive retail environment," said President and Chief Executive Officer Neil
Rossy. "The strength of our operations and the efficiency of our simple, growth-oriented business model are further
demonstrated by our solid performance across our key operating metrics, our robust earnings and our sustained ability to return
substantial capital to our shareholders."
|
_______________________________
|
|
(1) We refer the reader to the notes in the section entitled "Selected
Consolidated Financial Information" of this press release for the definition of these items and, when applicable, their
reconciliation with the most directly comparable GAAP measure.
|
Financial Results
Sales for the third quarter of Fiscal 2019 increased by 6.6% to $864.3 million, compared to
$810.6 million in the corresponding period of the prior fiscal year. Continued organic sales growth
was fuelled by balanced growth in both comparable store sales and in the total number of stores over the past twelve months, from
1,135 stores on October 29, 2017 to 1,192 stores on October 28,
2018.
Comparable store sales grew 3.1% in the third quarter of Fiscal 2019, over and above strong comparable store sales growth of
4.6% in the same quarter a year ago. Comparable store sales growth consisted of a 4.0% increase in average transaction size, over
and above a 4.5% increase in the corresponding quarter of Fiscal 2018, partially offset by a 0.9% decrease in the number of
transactions. The rate of comparable store sales growth in the third quarter of Fiscal 2019 reflects management's decision
to strategically limit price increases in recent quarters, in order to ensure an even more compelling and competitive value
proposition to consumers in the current retail environment.
Gross margin was 38.9% of sales in the third quarter of Fiscal 2019, compared to 40.1% of sales in the third quarter of
Fiscal 2018. Gross margin was lower due to lower product margins attributable to management's decision to minimize price
increases in Fiscal 2019 compared to Fiscal 2018. Gross margin includes sales made by the Corporation to Dollar City, as
principal, which represent approximately 1% of the Corporation's total sales, and a nominal markup margin. Consequently, these
sales had minimal impact on overall gross margin in either the current or prior year quarter.
General, administrative and store operating expenses ("SG&A") for the third quarter of Fiscal 2019 was $121.2 million, a 3.1% increase over $117.6 million for the third quarter of
Fiscal 2018. This increase is primarily related to the continued growth in the total number of stores. SG&A for the third
quarter of Fiscal 2019 represented 14.0% of sales, compared to 14.5% of sales for the third quarter of Fiscal 2018. The
0.5% improvement is mainly the result of continuing labour productivity initiatives, the timing of certain expenses incurred as
well as scaling, which contributed to mitigate the impact of minimum wage increases in certain jurisdictions, primarily in
Ontario.
Net financing costs increased by $1.2 million, from $10.2 million
for the third quarter of Fiscal 2018 to $11.4 million for the third quarter of
Fiscal 2019. The increase is mainly due to increased borrowings on long-term debt.
Net earnings increased to $133.5 million, or $0.41 per diluted
common share, in the third quarter of Fiscal 2019, compared to $130.1 million, or
$0.38 per diluted common share (retrospectively restated to reflect the Share Split), in the third
quarter of Fiscal 2018. The increase in net earnings is mainly the result of a 6.6% increase in sales and lower SG&A as a
percentage of sales, partially offset by a lower gross margin. Earnings per share were also positively impacted by the repurchase
of shares through the Corporation's normal course issuer bid.
Dividend
On December 6, 2018, the Corporation announced that its board of directors had approved a
quarterly cash dividend for holders of its common shares of $0.04 per common share. The
Corporation's quarterly cash dividend will be paid on February 8, 2019 to shareholders of record at
the close of business on January 11, 2019 and is designated as an "eligible dividend" for Canadian
tax purposes.
Normal Course Issuer Bid
On December 5, 2018, the Corporation received approval from the Toronto Stock Exchange to amend
the normal course issuer bid launched in June 2018 (the "2018-2019 NCIB") in order to increase the
number of shares that may be repurchased thereunder over the 12-month period between June 20, 2018
to June 19, 2019 from 16,386,351 to 30,095,056 common shares (now representing 10.0% of the Corporation's public float as at
June 6, 2018). The other terms of the 2018-2019 NCIB remain unchanged.
During the third quarter of Fiscal 2019, a total of 7,103,616 common shares were repurchased for cancellation under the
2018-2019 NCIB, at a weighted average price of $40.56 per common share, for a total cash
consideration of $288.1 million.
Distribution Capacity Expansion Update
The expansion of Dollarama's Montreal-area distribution centre, announced in March 2018, is proceeding as planned. Phase 1, which is comprised of the construction of the building
extension, is slated for completion by early 2019. This will be followed by construction work within the existing facility, ahead
of the integration of the new building extension. The distribution centre continues to operate at normal levels during the
capacity expansion. Project completion, including the installation of fixtures and equipment, is expected to occur before the end
of calendar 2019, on schedule and on budget.
The range for capital expenditures for Fiscal 2019 has been revised downwards based on an updated schedule of progress
payments for the expansion of the distribution centre. Costs in the amount of $10.0 million,
initially expected to be incurred in Fiscal 2019, will now be incurred in Fiscal 2020, and as a result will be included in
capital expenditures for Fiscal 2020. Management does not expect this to have any impact on the commissioning date of the
expanded distribution facility.
Dollar City Store Network Growth Update
The Corporation continues to assess the progress of its partnership with Dollar City in Latin
America. Dollar City is an independently-owned and operated value retailer with operations in El
Salvador, Guatemala and Colombia founded in 2009. Under
an arm's length agreement signed in 2013, Dollarama provides consulting and sourcing services to Dollar City at cost, with a
nominal markup in some cases, allowing Dollar City to benefit from Dollarama's business expertise and purchasing scale. Dollarama
will have the option to acquire a 50.1% interest in the business starting in 2020. At its latest quarter ended September 30, 2018, Dollar City owned and operated 150 stores with 61 locations in Colombia, 42 in El Salvador and 47 in Guatemala. This is up from a
total of 107 stores as of December 31, 2017.
|
Outlook
|
|
|
|
(as a percentage of sales except net new store openings in units and
capital expenditures in millions of dollars)
|
Fiscal 2019
|
|
Guidance as Provided on
September 13, 2018
|
Revised Guidance as at
December 6, 2018
|
|
Net new store openings
|
60 to 70
|
No change
|
|
Gross margin
|
38.5% to 39.5%(i)
|
No change
|
|
SG&A
|
14.5% to 15.0%(ii)
|
No change
|
|
EBITDA margin
|
23.5% to 25.0%
|
No change
|
|
Capital expenditures(iii)
|
$190.0 to $200.0
|
$180.0 to $190.0(iv)
|
|
|
|
(i)
|
Based on the expectation that inflation on products imported from China
will remain lower than originally anticipated for the remainder of Fiscal 2019, management expects that gross margin for
Fiscal 2019 will be in the top half of the guidance range.
|
|
(ii)
|
As a result of the positive impact of in-store productivity improvements
and cost reduction initiatives, management expects that SG&A as a percentage of sales for Fiscal 2019 will be in the
bottom half of the guidance range.
|
|
(iii)
|
Includes additions to property, plant and equipment, computer hardware and
software.
|
|
(iv)
|
Includes the acquisition cost of the existing distribution centre, as well
as actual and estimated remaining construction and related costs to be incurred in Fiscal 2019 in connection with the
expansion of distribution capacity. The range for capital expenditures for Fiscal 2019 was revised downwards based on the
updated schedule of progress payments for the expansion of the distribution centre.
|
The guidance ranges for Fiscal 2019 are based on a number of assumptions, including the following:
- comparable store sales growth in the range of 2.5% to 3.5%;
- the number of signed offers to lease and store pipeline for the next three months;
- lower than expected impact of inflation on product margins for goods imported from China;
- positive customer response to our product offering, value proposition and in-store merchandising;
- the active management of product margins, including by refreshing 25% to 30% of our offering on an annual basis;
- approximately three months of visibility on open orders and product margins;
- the entering into of foreign exchange forward contracts to hedge the majority of forecasted purchases of merchandise in
U.S. dollars against fluctuations of the Canadian dollar against the U.S. dollar;
- the continued execution of in?store productivity initiatives, including, without limitation, the efficient use of advanced
scheduling and the realization of cost savings and benefits aimed at improving operating expenses;
- ongoing cost monitoring;
- the capital budget for Fiscal 2019 for new store openings, maintenance capital expenditures, and transformational capital
expenditures (the latter being mainly related to information technology projects) as well as the acquisition of the existing
distribution centre and estimated construction and related costs to be incurred in Fiscal 2019 associated with the expansion of
distribution capacity;
- the successful execution of our business strategy;
- the absence of a significant shift in economic conditions or material changes in the retail competitive environment;
and
- the absence of unusually adverse weather, especially in peak seasons around major holidays and celebrations.
Many factors could cause 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, risks related
to: future increases in operating costs (including increases in statutory minimum wage), future increases in merchandise costs
(including as a result of tariff disputes), 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, and head office leases on favourable terms,
seasonality, market acceptance of private brands, foreign exchange rate fluctuations, competition in the retail industry, current
economic conditions, failure to attract and retain quality employees, disruption in information technology systems, unsuccessful
execution of the growth strategy, adverse weather, product liability claims and product recalls, litigation and regulatory
compliance.
This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the
cautionary statement on forward-looking statements.
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 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 factors which are discussed in greater detail in
the "Risks and Uncertainties" section of the Corporation's most recent annual management's discussion and analysis and annual
information form for Fiscal 2018, both available on SEDAR at www.sedar.com.
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 December 6, 2018 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.
About Dollarama
Dollarama is a recognized Canadian value retailer offering a broad assortment of consumer products, general merchandise and
seasonal items. Our 1,203 locations across Canada provide customers with compelling value in
convenient locations, including metropolitan areas, mid-sized cities and small towns. Our quality merchandise is sold in
individual or multiple units at select, fixed price points up to $4.00.
www.dollarama.com
|
Selected Consolidated Financial Information
|
|
|
|
|
|
13-Week Periods Ended
|
|
39-Week Periods Ended
|
|
(dollars and shares in thousands, except per share amounts)
|
October 28,
2018
|
|
October 29,
2017
|
|
October 28,
2018
|
|
October 29,
2017
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Earnings Data
|
|
|
|
|
|
|
|
|
Sales
|
864,267
|
|
810,583
|
|
2,488,789
|
|
2,328,015
|
|
Cost of sales
|
528,411
|
|
485,703
|
|
1,523,869
|
|
1,415,816
|
|
Gross profit
|
335,856
|
|
324,880
|
|
964,920
|
|
912,199
|
|
SG&A
|
121,227
|
|
117,630
|
|
354,282
|
|
339,887
|
|
Depreciation and amortization
|
19,629
|
|
17,999
|
|
57,495
|
|
51,845
|
|
Operating income
|
195,000
|
|
189,251
|
|
553,143
|
|
520,467
|
|
Net financing costs
|
11,443
|
|
10,154
|
|
34,178
|
|
29,621
|
|
Earnings before income taxes
|
183,557
|
|
179,097
|
|
518,965
|
|
490,846
|
|
Income taxes
|
50,010
|
|
49,005
|
|
142,071
|
|
134,264
|
|
Net earnings
|
133,547
|
|
130,092
|
|
376,894
|
|
356,582
|
|
|
|
|
|
|
|
|
|
Basic net earnings per common share (4)
|
$0.41
|
|
$0.39
|
|
$1.15
|
|
$1.05
|
|
Diluted net earnings per common share (4)
|
$0.41
|
|
$0.38
|
|
$1.14
|
|
$1.04
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
(4):
|
|
|
|
|
|
|
|
|
Basic
|
325,032
|
|
336,573
|
|
326,752
|
|
339,909
|
|
Diluted
|
328,905
|
|
340,803
|
|
330,992
|
|
344,001
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
Year-over-year sales growth
|
6.6%
|
|
9.7%
|
|
6.9%
|
|
10.4%
|
|
Comparable store sales growth (2)
|
3.1%
|
|
4.6%
|
|
2.7%
|
|
5.1%
|
|
Gross margin (3)
|
38.9%
|
|
40.1%
|
|
38.8%
|
|
39.2%
|
|
SG&A as a % of sales (3)
|
14.0%
|
|
14.5%
|
|
14.2%
|
|
14.6%
|
|
EBITDA (1)
|
214,629
|
|
207,250
|
|
610,638
|
|
572,312
|
|
Operating margin (3)
|
22.6%
|
|
23.3%
|
|
22.2%
|
|
22.4%
|
|
Capital expenditures
|
32,970
|
|
31,420
|
|
124,078
|
|
80,497
|
|
Number of stores (5)
|
1,192
|
|
1,135
|
|
1,192
|
|
1,135
|
|
Average store size (gross square feet) (5)
|
10,193
|
|
10,099
|
|
10,193
|
|
10,099
|
|
Declared dividends per common share
|
$0.04
|
|
$0.04
|
|
$0.12
|
|
$0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
|
|
October 28,
2018
|
|
January 28,
2018
|
|
|
|
|
|
$
|
|
$
|
|
Statement of Financial Position Data
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
78,843
|
|
54,844
|
|
Inventories
|
|
|
|
|
570,955
|
|
490,927
|
|
Total current assets
|
|
|
|
|
708,140
|
|
569,969
|
|
Property, plant and equipment
|
|
|
|
|
557,590
|
|
490,988
|
|
Total assets
|
|
|
|
|
2,141,984
|
|
1,934,339
|
|
Total current liabilities
|
|
|
|
|
641,330
|
|
720,945
|
|
Total non-current liabilities
|
|
|
|
|
1,717,120
|
|
1,465,752
|
|
Total debt (1)
|
|
|
|
|
1,904,243
|
|
1,671,192
|
|
Net debt (1)
|
|
|
|
|
1,825,400
|
|
1,616,348
|
|
Shareholders' deficit
|
|
|
|
|
(216,466)
|
|
(252,358)
|
|
|
|
|
|
|
|
|
(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
|
|
39-Week Periods Ended
|
(dollars in thousands)
|
October 28,
2018
|
|
October 29,
2017
|
|
October 28,
2018
|
|
October 29,
2017
|
|
$
|
|
$
|
|
$
|
|
$
|
|
A reconciliation of operating income to EBITDA is included
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
195,000
|
|
189,251
|
|
553,143
|
|
520,467
|
|
Add: Depreciation and amortization
|
19,629
|
|
17,999
|
|
57,495
|
|
51,845
|
|
EBITDA
|
214,629
|
|
207,250
|
|
610,638
|
|
572,312
|
|
EBITDA margin (3)
|
24.8%
|
|
25.6%
|
|
24.5 %
|
|
24.6%
|
|
|
|
|
|
|
|
|
A reconciliation of long-term debt to total debt is included
below:
|
|
|
|
|
As at
|
|
(dollars in thousands)
|
October 28,
2018
|
|
January 28,
2018
|
|
$
|
|
$
|
|
|
|
|
|
Senior unsecured notes bearing interest at:
|
|
|
|
|
Fixed annual rate of 2.203% payable in equal semi-annual instalments,
maturing November 10, 2022
|
250,000
|
|
250,000
|
|
Fixed annual rate of 2.337% payable in equal semi-annual instalments,
maturing July 22, 2021
|
525,000
|
|
525,000
|
|
Fixed annual rate of 3.095% payable in equal semi-annual instalments,
maturing November 5, 2018
|
400,000
|
|
400,000
|
|
Variable rate equal to 3?month bankers' acceptance rate plus 27 basis
points payable quarterly, maturing February 1, 2021
|
300,000
|
|
-
|
|
Variable rate equal to 3?month bankers' acceptance rate plus 59 basis
points payable quarterly, maturing March 16, 2020
|
300,000
|
|
300,000
|
|
Unsecured revolving credit facility maturing September 29,
2023
|
115,000
|
|
191,000
|
|
Accrued interest on senior unsecured notes
|
14,243
|
|
5,192
|
|
Total debt
|
1,904,243
|
|
1,671,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of total debt to net debt is included below:
|
|
|
|
|
|
Total debt
|
1,904,243
|
|
1,671,192
|
|
Cash
|
(78,843)
|
|
(54,844)
|
|
Net debt
|
1,825,400
|
|
1,616,348
|
|
|
|
(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 and numbers of outstanding common shares as at October
29, 2017 reflect the retrospective application of the Share Split.
|
|
(5)
|
At the end of the period.
|
View original content:http://www.prnewswire.com/news-releases/dollarama-reports-fiscal-2019-third-quarter-results-300761057.html
SOURCE Dollarama Inc.