Dollarama Reports $183.4m Q3 Profit, Up From $161.9m a Year Ago, Sales Rise

Dollarama Inc. says it’s well-stocked for the busy holiday shopping period despite facing ongoing supply chain issues, inflationary pressure and a tight labour market across Canada. “We entered the fourth quarter in a solid inventory position with well-stocked stores ahead of the important holiday season,” Dollarama president and CEO Neil Rossy told analysts. 

The retailer beat estimates with its third-quarter profit, posting a profit of $183.4 million up from $161.9 million in the same quarter last year. The profit amounted to 61 cents per diluted share, up from 52 cents per diluted share a year earlier. Rossy said the retailer’s financial performance in the quarter ended Oct. 31 represents a “return to a more normalized situation.” Sales in the quarter totalled $1.12 billion, up from $1.06 billion in the same quarter last year.

“There were fewer restrictions in place, and no restrictions on the sale of goods or on specific retail channels,” he told analysts during a conference call. The reduction in restrictions led to a shift in shopping habits, he said. Customers shopped more often but bought less at one time — a reversal of the pandemic trend of shoppers stocking up but making fewer trips to the store. Dollarama said the average transaction size fell 2.8%, but the number of transactions rose 3.7%.

Meanwhile, despite ongoing inflation and logistics challenges, Rossy said Dollarama is avoiding price increases — for now. “There are a number of strategies on the table to address the inflation question,” he said. “One of those strategies is adding a new price point. But for the moment, we have nothing to announce on adding a new price point.”

The retailer is also facing a challenging labour market across the country, and has ramped up its usual hiring practices to attract workers. “We’ve put more effort into our HR initiatives for job fairs and other like-practices to help us garner the attention we need to get the employees we need,” he said. Dollarama chief financial officer J.P. Towner added that from a wage perspective, the company hasn’t yet seen any “material increases in wages” as a result of the labour market issues.

Dollarama aslo opened 13 net new stores, same as in prior year comparable period, bringing its total store count to 1,381 from 1,314 a year ago.

Source: The Star
Source: News Wire

Sobeys Parent Empire Posts Profit Gain on Longo’s Acquisition, Strategic Shifts

One of Canada’s biggest food retailers says the pandemic is having a lasting impact on food consumption as consumers continue to spend more at grocery stores and cook at home rather than return to restaurants. Michael Medline, president and CEO of Empire Co. Ltd. and its subsidiary Sobeys Inc., said the shift appears to be permanent.

“We are seeing a structural change in consumption of food at home,” Medline said during a conference call with analysts on December 9 to discuss Empire’s second quarter results. “Customers have seen and experienced the affordability and convenience of eating at home with their families,” he said. “We believe there is permanence in this shift.”

One of the most notable changes in grocery shopping habits is an ongoing elevated basket size, indicating that consumers are buying more food with each shop. “We’re seeing basket sizes remain at elevated levels,” Medline said, adding that in conjunction with the grocer’s other data on shopping habits there is evidence of a “permanent shift.”

Empire, which owns multiple food retailers including Sobeys, Safeway, IGA, Foodland and FreshCo, earned $175.4 million in its latest quarter, up from $161.4 million in the same quarter last year, helped by a nearly 5% increase in sales. Its profit amounted to 66 cents per diluted share for the 13-week period ended Oct. 30, up from 60 cents per diluted share a year earlier. Sales in what was the company’s second quarter totalled $7.32 billion, up from $6.98 billion.

Yet Empire noted that its sales are affected by fluctuations in inflation, with higher prices starting to shape what products shoppers buy. “Inflation is unusually high right now,” Medline said. “Where we’ve had unavoidable price increases, we see customers sometimes substituting products within their basket.”

New research says consumers can expect to see bigger grocery bills. Food inflation in Canada will hit 5% – 7% in 2022, according to the Food Price Report released by Dalhousie University, University of Guelph, University of Saskatchewan and University of British Columbia.

Shoppers often respond to inflationary pressures by gravitating to discount rather than full-price grocery stores. But Empire, which owns both full-service chains such as Sobeys and IGA, as well as discount chains such as FreshCo, has also seen shoppers stick with their regular stores, while opting to substitute certain products. In addition to cost pressures facing their suppliers, grocers are also affected by labour shortages, which Medline said are particularly pronounced in B.C. and Quebec, but are a factor across Canada.

Retailers are also grappling with supply chain challenges, recently exacerbated by the floods in B.C., where rail service has resumed but a major highway remains closed, slowing the flow of goods. Medline said many retailers still have some empty shelves, a situation he said is temporary. “It’s just a reality, because it’s a slower supply chain – it’s working, but it’s slow,” he said.

Meanwhile, Empire said its sales growth was due to its acquisition of the Longo’s supermarket chain earlier in 2021 and higher fuel sales, as well as the expansion of its Farm Boy banner and Voilà online grocery service in Ontario and its FreshCo banner in Western Canada. The gains were offset by a stabilization of shopper behaviour as COVID-19 restrictions were eased across the country. 

Same-store sales grew 0.4% compared with a year ago, while same-store sales, excluding fuel, fell 1.3%. The company said it expects same-store sales will continue to decline for the rest of fiscal 2022, as grocery volumes fall from last year’s “unusually high” pandemic peak.

Source: Globe and Mail
Source: The Star
Source: Financial Post

Costco Wholesale Corporation Reports First Quarter Fiscal Year 2022 Operating Results

Costco reported solid first-quarter fiscal 2022 results on December 9. Total revenue increased 16.5% year-over-year to $50.363 billion and beat FactSet estimates of $49.652 billion, while earnings per share grew nearly 14% year-over-year to $2.98 and beat  FactSet estimates of $2.62. The results include a tax benefit of $0.21 per share related to stock-based compensation and a write-off of certain IT assets of $0.20 per share.

Over the full 12-week period, adjusted comparable sales (which exclude impacts from changes in gasoline prices and foreign exchange) grew 9.9% in the United States, 8.3% in Canada, 10.9% in Other International, and 13.3% in E-commerce. 

Traffic, or shipping, frequency in Costco’s warehouses inflected and increased 6.8% worldwide and 5.9% in the United States. Costco’s average transaction increased 7.7% worldwide and 8.5% in the United States.

Revenue from membership fees is a closely followed metric because that’s where the majority of Costco’s profits come from. Membership fees increased about 9.9% year-over-year to $946 million, beating estimates of $929.6 million.

Costco ended its quarter with 113.1 million total cardholders, an increase from 111.6 million total cardholders last quarter. Paid executive members ended the quarter at 26.5 million, up 836,000 from last quarter.

Renewal rates in the United States and Canada were 91.6%. That’s up 0.3% from last quarter.  The worldwide renewal rate was 89%, also up 0.3%. Auto-renewals continue to be a driver of the strong retention rates. Also, increased penetration of executive members — who tend to renew at a higher rate than non-exec members — was a driver for the strong retention rate.

On company margins, reported gross margins were lower by 49 basis points year-over-year, or 6 basis points,  excluding gas inflation. The main driver of the gross margin compression was core merchandise — where margins were lower by 63 basis points year-over-year on a reported basis and 26 basis points without gas inflation — though management did point out that they were able to retain a significant amount of gross margin improvement from two years ago. This might be due to structural improvements and market share gains.

Considering some of the ongoing inflationary pressures and management’s best efforts to limit passing through price increases on to its members, CFO  Richard Galanti said on the earnings call that he thought the gross margin results were “pretty good.”

As for some other items, the global popularity of Costco means the company still has plenty of room for expansion. The company had 8 net openings in the reporting quarter and they plan to open a net 19 new units over the remainder of the year.

On the supply chain and the resulting inflationary pressures, Galanti outlined some of the challenges that every retailer is going through right now. Overall, Galanti said he feels “pretty good” about their inventory position and their work to mitigate cost and price increases. Galanti said he is seeing year-over-year price inflation at about 4.5% to 5%. This is slightly higher than the range Costco discussed last quarter but consistent with what others are experiencing.

Source: Costco
Source: CNBC