Shares of Dollarama Inc. (TSE:DOL) have been on a strong uptrend year to date in 2017, with a gain of more than 37%, on continued strong financial and operating performance
SmallCapPower | September 8, 2017: Dollarama Inc. (TSX: DOL), Canada’s leading discount retailer with more than 1000 stores across 10 provinces, saw its shares hit an all-time high of $137.43 intraday Thursday before closing the day up 10.64% at $134.72. This followed strong second-quarter earnings that came in well above Street estimates.
Sales for 2QFY18 rose 11.5% YOY to $812.5 million, driven by strong comparable store sales growth of 6.1% versus 5.7% in the prior year quarter. Dollarama opened 17 net new stores during the quarter compared to 13 net new stores in the prior year quarter. The Company stated that new stores that are not yet comparable stores, now reach annual sales of ~$2.2 million within their first two years of operation, and achieve an average capital payback period of approximately two years.
During the quarter, 68.1% of sales originated from products priced higher than $1.25, which along with lower logistics and occupancy costs drove gross margins to 39.6% compared to 38.4% in the corresponding quarter last year. EBITDA and operating income grew 24.1% to $209.2 million and $191.9 million, respectively. Owing to the factors mentioned above, net earnings increased 23.9% to $131.8 million, or $1.15 per share, well above the consensus estimates of $1.04 per share.
Neil Rossy, President and CEO of Dollarama said, “We are very pleased with our financial and operational performance in the first half of Fiscal 2018, with notably strong sales and operating margins in the second quarter. The sustained growth in comparable store sales demonstrates that consumers appreciate the compelling value we offer through our broad range of products at low, fixed price points. We continue our efforts to enhance the Dollarama shopping experience for our customers while reaching new consumers through store openings in underserved markets.”
Shares of Dollarama have been on a strong uptrend year to date in 2017, with a gain of nearly 37% on continued strong financial and operating performance in an improving economic environment. In terms of valuation, the Company currently trades at a PE multiple of 34.8x.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
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