Dollarama still bullish on expansion as profits tumble amid pandemic
Dollarama Inc. remained optimistic about the future of the discount chain in Canada, even as its profits slipped amid rising costs and pandemic-related restrictions in its final quarter.
The Montreal-based retailer has increased the number of stores it expects to have in Canada to 2,000 over the next decade, up nearly 50% from its total of 1,356 stores at the end of January.
“Based on our experience, historical performance and what we see for the future, we are very confident in increasing our long term store target at this time,” said Neil Rossy, President and CEO of Dollarama, on a call with analysts Wednesday morning.
The new target is up from the previous target of 1,700 stores by 2027. The discount retailer also said it plans to increase its quarterly dividend by 7%.
Dollarama shares rose about 5.5% in the early afternoon on the Toronto Stock Exchange.
Plans to open new stores across the country continue despite a difficult fourth quarter – historically the strongest sales period of the year for the company.
“Our strong sales momentum was interrupted by the introduction of stricter public health measures in several provinces in December,” Rossy said in a statement. “These more stringent measures resulted in a sharp and sustained decline in traffic and in-store sales through the end of the year.”
In Quebec, where Dollarama operates nearly a third of its stores, retailers were banned for much of the winter from selling items deemed non-essential, with some stores closing entire aisles of merchandise.
Although the ban went into effect on December 26, Dollarama CFO Jean-Philippe Towner said on the earnings call that the impact on store traffic began shortly after the new restrictions announced in mid-December.
Return to sales of non-essential items in Quebec
“The strong sales momentum has returned following the end of certain COVID-19 restrictions, including the ban on the sale of non-essential items in Quebec,” Desjardins analyst Chris Li said in a memo .
The retailer said it earned $ 173.9 million or 56 cents per diluted share for the quarter ended Jan. 31, compared to earnings of $ 178.7 million or 57 cents per diluted share a year earlier.
Sales during the 13-week period totaled $ 1.10 billion, compared to nearly $ 1.07 billion. Excluding temporarily closed stores, same store sales for the quarter were down 0.2% from a year earlier.
Meanwhile, Dollarama’s annual results showed positive growth, with sales increasing 6.3% to $ 4.03 million in fiscal 2021.
“We delivered strong results in a truly unprecedented year, which confirmed the resilience of our business model and the relevance of our offering to Canadians of all walks of life,” Rossy said in a statement.
Like other retailers, Dollarama has faced rising health and sanitation costs for its workforce. For the last fiscal year, Dollarama invested $ 84 million in COVID-related measures, Rossy said.
In January, the Bureau de la sécurité au travail du Québec imposed 11 fines at nine locations in Dollarama for failing to comply with provincial health guidelines. The fines came after Dollarama workers last year protested what they described as inadequate sanitation measures at company facilities.