Dollarama reported a strong fourth quarter and 2021 year end despite dampened sales due to increased public health restrictions.

Dollarama Inc. has reported its financial results for the fourth quarter and fiscal year ended January 31, 2021. “In Fiscal 2021, we achieved solid results in a truly unprecedented year, which reconfirmed the resilience of our business model and the relevance of our offering to Canadians from all walks of life. Our store teams and business leaders came together quickly to implement new operating procedures to protect customers and staff in order to provide Canadians with convenient and affordable access to everyday essentials throughout the pandemic,” stated Neil Rossy, President and CEO.

“In the fourth quarter, historically our highest sales period of the year, our strong sales momentum was interrupted by the introduction of more stringent public health measures in several provinces in the month of December. These stricter measures resulted in an abrupt and sustained decline in store traffic and sales through to fiscal year-end. With such restrictions gradually lifted starting in February, strong sales momentum returned in Fiscal 2022 and has remained quarter to date, as consumers continue to recognize the value and convenience of shopping at Dollarama.”

“Based on our historical performance, our hard-earned position as a weekly shopping destination for Canadian families, and a careful evaluation of market potential and dynamics, we are increasing our long-term growth target in Canada to 2,000 stores by 2031,” concluded Mr. Rossy.

Fiscal 2021 Fourth Quarter Results Highlights (Compared to Fiscal 2020 Fourth Quarter Results)

  • Sales increased by 3.6% to $1,103.7 million;
  • Comparable store sales (excluding temporarily closed stores) decreased 0.2%;
  • Gross margin was 45.5% of sales, compared to 44.7% of sales;
  • EBITDA decreased by 0.7% to $326.9 million, or 29.6% of sales, compared to 30.9% of sales;
  • Operating income decreased by 3.8% to $256.1 million, or 23.2% of sales, compared to 25.0% of sales;
  • Incremental direct costs related to COVID-19 measures amounted to $23.8 million;
  • Diluted net earnings per common share was $0.56, compared to $0.57; and
  • The Corporation opened 23 net new stores compared to 20 net new stores.

Fiscal 2021 Results Highlights (Compared to Fiscal 2020 Results)

  • Sales increased by 6.3% to $4,026.3 million;
  • Comparable store sales (excluding temporarily closed stores) grew 3.2%;
  • Gross margin was 43.8% of sales, compared to 43.6% of sales;
  • EBITDA increased by 1.8% to $1,130.6 million, or 28.1% of sales, compared to 29.3% of sales;
  • Operating income decreased by 0.8% to $861.0 million, or 21.4% of sales, compared to 22.9% of sales;
  • Incremental direct costs related to COVID-19 measures amounted to $84.0 million;
  • Diluted net earnings per common share increased by 1.7%, to $1.81 from $1.78; and
  • The Corporation opened 65 net new stores, compared to 66 net new stores.

New Long-term Store Target

Following a careful evaluation of the market potential for Dollarama stores across Canada and the continued relevance of Dollarama’s business model, management believes that the Corporation can profitably grow its Canadian store network to approximately 2,000 stores over the next 10 years, or by 2031, with an average new store capital payback period of approximately two years. This is an increase from Dollarama’s previously disclosed long-term store target of 1,700 stores in Canada by 2027.

Dollarcity, the Latin American unit, will also expand its network to 600 stores by 2029 from 264 now, across Colombia, El Salvador and Guatemala. It’s also looking to enter the Peru market.

Click here to read the full press release.

Source: Dollarama
Source: Financial Post
Source: Yahoo Finance

Dollarama vs. Dollar Tree

While Dollar Tree is one of the best-known discount retailers in the U.S., in Canada, it’s almost an afterthought. In 2017, the chain announced it would be boosting its presence in Canada to 1,000 stores, from its then-total of 226. However in March 2021 the current Canadian store count is 230. During that same period, by contrast, Dollarama has grown from 1,095 stores here to 1,356.

Boosting Dollarama’s bricks-and-mortar presence at a time when the retail world is heading even more rapidly into e-commerce might seem counterintuitive. But the discount segment is one area where bricks and mortar has staying power, says retail analyst Lisa Hutcheson. “I think there’s an assumption by customers that delivery is going to make something more expensive. So for customers, that would probably defeat the purpose of shopping at a discount chain,” said Hutcheson, managing director of retail consultancy J.C. Williams Group. Expanding also makes especially good sense in the wake of COVID, given that there’s a lot more retail space available for rent than there was before the pandemic, Hutcheson added. 

However, keeping an eye on its highly competitive home market — or at least not expanding much in Canada — seems to have paid off for Dollar Tree’s bottom line. In the fourth quarter, Dollar Tree’s earnings more than quadrupled, rising to $502.8 million (U.S.) from $123 million in the same period a year ago. It’s also substantially less leveraged than Dollarama, with a debt-to-equity ratio of 1.8 (Dollarama’s is 10.3).

Source: Toronto Star