Virus fears pay off for Dollarama
Discount retailer reports rise in sales, but foresees dip in coming year,
Dollarama Inc. declined to provide its annual financial guidance for its 2021 financial year due to COVID-19 pandemic, but said it expects to see some negative impacts.
The discount retailer typically includes a fiscal year outlook along with its fourth-quarter and full-year results, which the company released Wednesday.
“Due to the exceptional circumstances stemming from the global COVID-19 pandemic and our limited visibility on future performance, we have suspended this practice for now,” said Michael Ross, chief financial officer.
The retailer will revisit that decision ahead of its first-quarter earnings release, he said, “should the situation normalize by then.”
The company is in the midst of its first quarter, which ends May 3. It started with strong same-store sales and store traffic momentum, carried over from the fourth quarter, he said.
When the coronavirus outbreak ramped up in late February to mid-March, Dollarama saw a surge in transactions and the amount customers purchased as they stocked up on household cleaning supplies, food and craft supplies, among other things, said Ross.
“After this bump in sales, which lasted a few weeks, transactions began to level off,” he said, as increasingly strict social distancing measures from various governments resulted in mass shutdowns of retailers.
Dollarama was deemed an essential service in areas where non-essential businesses were ordered to shut operations, he noted, though roughly 54 of the company’s 1,291 stores remain closed temporarily.
Most of these, he said, are in shopping malls in Quebec that have been asked to close down. The company’s stores outside of malls that have street access are not seeing traffic dip.
The company is tracking costs related to the outbreak, he said, nearly all of which are labourrelated due to pay increases and scheduling additional employee hours to comply with measures to help curtail COVID-19.
Dollarama is paying its store, distribution centre and warehouse employees an extra 10 per cent between March 23 and July 1, said chief executive Neil Rossy.
The company is doing its best not to raise prices on any products, said Rossy, but the drop in value of the loonie and increases to some raw material costs will have an impact at retail at some point in the future.
“We will do our best to push it off as long as we can.”
The financial guidance suspension came as the company reported its fourth-quarter profit rose compared with a year ago.
Dollarama earned $178.7 million or 57 cents per diluted share, up from $171.0 million or 53 cents per diluted share in the same period a year earlier.
Sales for the 13-week period ended Feb. 2 totalled nearly $1.07 billion, up from nearly $1.06 billion in a 14-week period ended Feb. 3, 2019.