Cheap-stuff re­tailer feels mar­ket wrath over fi­nan­cials

Dol­larama in­creases earn­ings to $133.54M in fis­cal Q3

Stockwatch Daily - - FRONT PAGE - Mr. Neil Rossy re­ports

DOL­LARAMA INC. had in­creases in sales, net earn­ings and earn­ings per com­mon share for the fis­cal 2019 third quar­ter ended Oct. 28, 2018. Di­luted net earn­ings per com­mon share rose 7.9 per cent to 41 cents.

Dur­ing the third quar­ter of fis­cal 2019, the cor­po­ra­tion opened 14 net new stores, com­pared with 10 net new stores dur­ing the cor­re­spond­ing pe­riod of the pre­vi­ous fis­cal year. As at Dec. 5, 2018, the cor­po­ra­tion had opened 11 net new stores since the be­gin­ning of the fourth quar­ter of fis­cal 2019, bring­ing the to­tal num­ber of net new stores opened to date in fis­cal 2019 to 43. The cor­po­ra­tion con­tin­ues to ex­pect to open 60 to 70 net new stores in the cur­rent fis­cal year.

“Same-store sales grew 3.1 per cent in the third quar­ter com­pared with 2.6 per cent in the sec­ond quar­ter of fis­cal 2019 re­flect­ing Dol­larama’s com­pelling value propo­si­tion, fur­ther re­in­forced by our strate­gic de­ci­sion ear­lier this year to care­fully man­age price in­creases in the cur­rent com­pet­i­tive re­tail en­vi­ron­ment,” said pres­i­dent and chief exec--

utive of­fi­cer Neil Rossy. “The strength of our op­er­a­tions and the ef­fi­ciency of our sim­ple, growthori­ented busi­ness model are fur­ther demon­strated by our solid per­for­mance across our key op­er­at­ing met­rics, our ro­bust earn­ings and our sus­tained abil­ity to re­turn sub­stan­tial cap­i­tal to our share­hold­ers.”

Fi­nan­cial and op­er­at­ing high­lights Com­pared with the third quar­ter of fis­cal 2018:

• Sales in­creased by 6.6 per cent to $864.3-mil­lion.

• Com­pa­ra­ble store sales grew 3.1 per cent, over and above 4.6-per-cent growth the pre­vi­ous year.

• Gross mar­gin was 38.9 per cent of sales, com­pared with 40.1 per cent of sales.

• EBITDA grew 3.5 per cent to $214.6-mil­lion, or 24.8 per cent of sales, com­pared with 25.6 per cent of sales.

• Op­er­at­ing in­come grew 3.0 per cent to $195.0-mil­lion, or 22.6 per cent of sales, com pared with 23.3 per cent of sales.

• Di­luted net earn­ings per com­mon share in­creased by 7.9 per cent to 41 cents from 38 cents.

The ex­pan­sion of Dol­larama’s Mon­treal-area distri­bu­tion cen­tre, an­nounced in March, 2018, is pro­ceed­ing as planned. Phase 1, which com­prises the con­struc­tion of the build­ing ex­ten­sion, is slated for com­ple­tion by early 2019. This will be fol­lowed by con­struc­tion work within the ex­ist­ing fa­cil­ity, ahead of the in­te­gra­tion of the new build­ing ex­ten­sion. The distri­bu­tion cen­tre con­tin­ues to op­er­ate at nor­mal lev­els dur­ing the ca­pac­ity ex­pan­sion. Project com­ple­tion, in­clud­ing the in­stal­la­tion of fix­tures and equip­ment, is ex­pected to oc­cur be­fore the end of cal­en­dar 2019, on sched­ule and on bud­get. The range for cap­i­tal ex­pen­di­tures for fis­cal 2019 has been re­vised down­ward based on an up­dated sched­ule of progress pay­ments for the ex­pan­sion of the distri­bu­tion cen­tre. Costs in the amount of $10.0-mil­lion, ini­tially ex­pected to be in­curred in fis-

cal 2019, will now be in­curred in fis­cal 2020, and as a re­sult will be in­cluded in cap­i­tal ex­pen­di­tures for fis­cal 2020. Man­age­ment does not ex­pect this to have any im­pact on the com­mis­sion­ing date of the ex­panded distri­bu­tion fa­cil­ity.

Dol­lar City store net­work growth up­date

The cor­po­ra­tion con­tin­ues to as­sess the progress of its part­ner­ship with Dol­lar City in Latin Amer­ica. Dol­lar City is an in­de­pen­dently owned and oper­ated value re­tailer with op­er­a­tions in El Sal­vador, Gu­atemala and Colom­bia founded in 2009. Un­der an arm’s-length agree­ment signed in 2013, Dol­larama pro­vides con­sult­ing and sourc­ing ser­vices to Dol­lar City at cost, with a nom­i­nal markup in some cases, al­low­ing Dol­lar City to ben­e­fit from Dol­larama’s busi­ness ex­per­tise and pur­chas­ing scale. Dol­larama will have the op­tion to ac­quire a 50.1-per-cent in­ter­est in the busi­ness start­ing in 2020. At its lat­est quar­ter ended Sept. 30, 2018, Dol­lar City owned and oper­ated 150 stores with 61 lo­ca­tions in Colom­bia, 42 in El Sal­vador and 47 in Gu­atemala. This is up from a to­tal of 107 stores as of Dec. 31, 2017.

(See DOL Ta­ble 1 on page 44)

(See DOL Ta­ble 2 on page 44)

We seek Safe Har­bor.

Mike Caswell con­densed this news re­lease ([email protected]­

Joshua Beken­stein, Gre­gory David, Elisa D C Gar­cia, Stephen Ken­rick Gunn, Kristin Wil­liams Mug­ford, Ni­cholas Ge­orge Nomi­cos, Neil Ge­orge Rossy, Richard G Roy, John Huw Thomas

(DOL) Shares: 324,478,887

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