Dollarama bucks economic downturn
Montreal-based discount chain posts ‘outstanding’ results amid shallow recession, but fortune shines less brightly on Lululemon Athletica and Hudson’s Bay Co.
Three of Canada’s best-known retailers reported earnings Thursday that mirrored the current state of the economy.
Discount retailer Dollarama did well in an economy that suffered a shallow recession in the first six months of the year, caused in part by a worldwide plunge in oil prices.
Lululemon, the pioneer in high-quality, high-priced yogawear and once a seemingly unstoppable retail force, is seeing improvement after a succession of embarrassing lapses in quality, changes in leadership and a turf war that saw founder Chip Wilson quit the board and sell his stake in the company.
And despite pouring money into store renovations, Hudson’s Bay Co. would have lost money in the last quarter if not for blockbuster real estate deals that improved its financial position. Dollarama Inc.: The Montreal-based retailer said overall sales in the second quarter were more than 14-per-cent higher than last year, driving profit to $95.5 million. Dollarama says the increased profit was the result of higher sales volume and bigger profit margins. It added 17 locations in the second quarter. Dollarama has been introducing more higher-priced products into the mix — at $2 and up — to increase sales and profit, and that strategy seems to be working, as transaction values were up 6.2 per cent. The number of transactions was up 1.5 per cent. Desjardins Capital Markets analyst Keith Howlett called the results “outstanding.” Lululemon Athletica Inc.: The Vancouver-based athleticwear company saw its profit increase 16 per cent in the second quarter compared with the second quarter last year, to $47.7 million (U.S.). Lululemon shares have climbed 15 per cent since the beginning of the year, and the stock has increased 66 per cent in the last 12 months. Lululemon has been expanding its range of products in order to appeal to a wider market, selling more casual wear and apparel for men as it also seeks to expand internationally. Comparable store sales for the second quarter increased by 6 per cent on a constant dollar basis. Hudson’s Bay Co.: HBC’s net income for the second quarter was $67 million compared with a loss of $36 million in the second quarter of 2014.
But the quarter included a $107-million gain from a real estate deal that saw HBC contribute properties to joint real estate ventures. Without that gain, HBC lost $53 million in the quarter — up from a $28 million loss a year earlier.
HBC’s retail sales under all banners, which include Lord & Taylor and Saks Fifth Avenue in the United States as well as Hudson’s Bay and Home Outfitters in Canada, were up 4.2 per cent once the impact of the U.S. dollar was factored out. That included a 4.9-per-cent increase at the Department Store Group, a paltry 0.1-per-cent jump at Saks Fifth Avenue and a12.7-per-cent rise at Off 5th, another discount banner.
HBC also entered into a definitive agreement to acquire Galeria Kaufhof, Germany’s leading department store chain, which HBC governor and executive chairman Richard Baker said will benefit shareholders. With files from Star news services