Weather dampens discount retailer’s second-quarter results
Discount chain Dollarama Inc. fell short of analysts’ estimates for profit in the second quarter as bad weather kept customers at home, prompting a cut in its same-store sales forecast and sending shares up to 20 per cent lower.
Montreal-based Dollarama operates more than 1,000 stores across Canada and sells everything from kitchen ware to clothing accessories.
The company, which has been facing increased competition from U.S.-based Dollar Tree, said it kept price rises in check during the quarter, leading to a 2.6-percent rise in comparable sales.
That, however, was just half of analysts’ consensus forecast of a 5.26-per-cent rise, according to Thomson Reuters.
For fiscal 2019, the chain expects comparable store sales growth in the 2.5- to 3.5-per-cent range, down from its earlier estimates of a four- to five-per-cent rise.
“The negative same store sales guidance revision, while partially mitigated by a positive increase in gross margins (and decrease in SG&A margins), is problematic in our opinion,” Raymond James analyst Kenric Tyghe said.
The company said that the impact of a drawn-out winter that kept shoppers away from stores in the first quarter had spilled over into the second. Numbers were also hit by weak Canada Day sales on July 1, the company said.
The company’s net income rose to $141.8 million, or 43 cents per share, in the second quarter ended July 29, from $131.8 million, or 38 cents per share, a year earlier.
Excluding items, it earned 43 cents per share. Sales rose 6.9 per cent to $868.5 million.