Dollarama sales slump a rare misstep for retail juggernaut

Dollarama investors don’t take kindly to average results.

Shares of Dollarama Inc., the Montreal-based retailer that’s been adding stores throughout Canada, fell the most since December after it reported the lowest comparable-store sales growth in more than four years. It said poor April weather pushed back demand for summer goods such as hats and gardening tools. It maintained a full-year forecast of four-percent to five-per-cent growth. “We’re a month into the second quarter and we’re seeing a catch-up,” chief financial officer Michael Ross said at a press conference after Dollarama’s annual meeting. “Not too many retailers give you four to five-per-cent outlook on samestore sales, that’s pretty good.” Dollarama shares soared more than 1,500 per cent since it went public in 2009 and investors have got used to a regular stream of good news. In the past, that’s included sales growth above four per cent and long-term plans to open 1,700 stores.

This time, comparable sales increased 2.6 per cent in the quarter for the 13 weeks April 29, compared with 4.6 per cent a year earlier. Shares in Toronto dropped as much as 6.9 per cent, and ended the day at $146.03, down 6.7 per cent. Its first-quarter profits rose to $101.6 million (92 cents per diluted share) from $94.7 million (82 cents) last year. Sales were $756.1 million, up 7.3 per cent from $704.9 million in the comparable period a year earlier. The earnings per share were just short of the 93 cents it was expected to earn, according to analysts polled by Thomson Reuters Eikon.

The number of stores grew by 62 locations to 1,170. Excluding the impact on seasonal goods, same-store sales were within its forecast of four to five per cent. It said sales normalized with the warmer May weather. Analyst Irene Nattel of RBC Capital Markets said the results are best viewed as a blip on Dollarama’s consistent trajectory of 15 to 20-per-cent earnings per share increases. “We remain confident in Dollarama’s ability to continue to deliver EPS compounded growth approaching 20 per cent over our forecast horizon,” she wrote in a report.