- Published: 11 April 2012
- Written by Editor
Dollarama reports record results to close fiscal 2012 and increases dividend by 22%
Dollarama Inc. (TSX: DOL.TO - News) ("Dollarama" or the "Corporation") reported significant increases in sales and net earnings today for the quarter and fiscal year ended January 29, 2012. These strong results support the Board of Directors' initiative to return value to shareholders by increasing the quarterly dividend from $0.09 to $0.11 per common share, while retaining full financial flexibility to support Dollarama's growth strategy.
Financial and Operating Highlights
(All comparative figures below and in the "Financial Results" section that follows, are for the fourth quarter and fiscal year ended January 29, 2012 compared to the fourth quarter and fiscal year ended January 30, 2011. All financial information presented in this news release has been prepared in accordance with generally accepted accounting principles in Canada which were revised to incorporate International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and became effective for years beginning on or after January 1, 2011. Accordingly, the Corporation commenced reporting on this basis in its unaudited condensed interim consolidated financial statements for the quarter ended May 1, 2011, and, for comparison purposes, all figures relating to the fiscal year ended January 30, 2011 as well as the consolidated statement of financial position as of February 1, 2010 have been restated to reflect the Corporation's adoption of IFRS, effective from February 1, 2010. As a result of the adoption of IFRS, there were no material changes required to the Corporation's statement of comprehensive income. At the transition date, a one-time adjustment was required to recognize an additional deferred tax liability of $7.0 million through retained earnings in the statement of financial position. Throughout this news release, EBITDA and Normalized net earnings, collectively referred to as the "Non-IFRS Measures", are used to provide a better understanding of the Corporation's financial results. For a full explanation of the Corporation's use of the Non-IFRS Measures, please refer to footnote 1 of the "Selected Consolidated Financial Information" section of this news release.)
Throughout this news release, all references to "Fiscal 2011" are to the Corporation's fiscal year ended January 30, 2011 and to "Fiscal 2012" are to the Corporation's fiscal year ended January 29, 2012 .
Compared to the fourth quarter of Fiscal 2011:
Sales increased by 14.7%;
Comparable store sales grew 7.9%;
Gross margin improved from 38.2% of sales to 39.8% of sales;
EBITDA(1) grew 33.1% to $100.1 million , or 21.4% of sales;
Operating income grew 34.8% to $91.4 million , or 19.5% of sales;
Diluted net earnings per share increased by 50.0%, from $0.56 to $0.84 ; and
14 net new stores were opened during the fourth quarter of Fiscal 2012, for a total of 52 net new stores opened since January 31, 2011.
Compared to Fiscal 2011:
Sales increased by 12.9%;
Comparable store sales grew 5.4%;
Gross margin improved from 36.1% of sales to 37.5% of sales;
EBITDA(1) grew 26.2% to $295.2 million , or 18.4% of sales, compared to 16.5% of sales;
Operating income grew 27.5% to $261.9 million , or 16.3% of sales; and
Diluted net earnings per share increased by 40.2%, from $1.64 (on a normalized basis)(1) to $2.30 .
"We are extremely pleased with our fourth quarter financial and operating results," said Larry Rossy, Chief Executive Officer of Dollarama. "Once again, we recorded double-digit growth performance in sales, operating income and net earnings as well as a 7.9% growth in comparable store sales. We owe this achievement to the strength of our business model, the solid operating foundation we have built, the continued growth of our store network and to our team's disciplined execution."
Financial Results
Sales for the fourth quarter of Fiscal 2012 increased by 14.7%, from $408.7 million in the fourth quarter of Fiscal 2011 to $468.7 million. The increase was mainly driven by the opening of 52 net new stores during Fiscal 2012 and by comparable store sales growth of 7.9% in the fourth quarter of Fiscal 2012, over and above comparable store sales growth of 5.3% in the fourth quarter of Fiscal 2011. Comparable store sales growth for the fourth quarter consisted of a 3.8% increase in average transaction size combined with a 4.0% increase in the number of transactions. The holiday season and the favourable weather conditions experienced during the fourth quarter of Fiscal 2012 helped boost the overall sales results.
Sales for Fiscal 2012 increased by 12.9%, from $1,419.9 million in Fiscal 2011 to $1,602.8 million. The increase was mainly driven by new store openings as well as a 5.4% increase in comparable store sales. Comparable store sales growth consisted of a 5.2% increase in the average transaction size combined with a 0.2% increase in the number of transactions.
The gross margin increased to 39.8% of sales in the fourth quarter of Fiscal 2012, compared to 38.2% of sales in the fourth quarter of Fiscal 2011, driven mainly by (i) continuing improvement of product margins, (ii) lower shrink expenses as a percentage of sales resulting from the use of point of sale scanners and the implementation of various loss prevention initiatives, and (iii) lower occupancy costs as a percentage of sales due mainly to the scaling effects of fixed costs over the higher sales volumes in Fiscal 2012. For the same reasons, the gross margin increased to 37.5% of sales in Fiscal 2012, compared to 36.1% of sales in Fiscal 2011.
General, administrative and store operating expenses ("SG&A") for the fourth quarter of Fiscal 2012 decreased to 18.4% of sales, compared to 19.8% of sales in the corresponding period of Fiscal 2011, due primarily to store labour productivity improvements and to the scaling effects of certain fixed costs over the higher sales volume this year. SG&A expenses in the fourth quarter of Fiscal 2012 stood at $86.3 million, a 6.7% increase over $80.9 million in the corresponding period of Fiscal 2011. The increase is due primarily to the opening of 52 net new stores since the end of the fourth quarter of Fiscal 2011. SG&A expenses for Fiscal 2012 stood at $305.1 million, or 19.0% of sales, a 9.4% increase over $279.0 million, or 19.6% of sales, in Fiscal 2011.
Net financing costs decreased by $2.7 million, from $5.8 million for the fourth quarter of Fiscal 2011 to $3.1 million for the fourth quarter of Fiscal 2012. This decrease is attributable to a lower debt level and a lower interest rate on the long-term debt as well as to lower amortization of debt issue costs and discounts compared to the corresponding period of Fiscal 2011. For Fiscal 2012, net financing costs decreased by $17.9 million, from $34.5 million for Fiscal 2011 to $16.6 million. This decrease is not only attributable to a lower debt level and lower interest rates on the long-term debt, but also to the fact that net financing costs for Fiscal 2011 included a write-off of debt issue costs of $5.7 million and debt repayment premium and expenses of $2.2 million resulting from the repayment of the previous senior secured credit facility and the redemption of the senior floating rate deferred interest notes in Fiscal 2011.
For the fourth quarter of Fiscal 2012, net earnings increased to $63.6 million, or $0.84 per diluted share, compared to $42.0 million, or $0.56 per diluted share, for the corresponding period of Fiscal 2011. For Fiscal 2012, net earnings per diluted share increased to $2.30 , compared to $1.55 (or $1.64 on a normalized basis(1)) for Fiscal 2011.
Dividend Increase
Dollarama's Board of Directors approved a 22% increase of the quarterly dividend for holders of its common shares, from $0.09 per common share to $0.11 per common share. Dollarama's increased dividend will be paid on May 4, 2012 to shareholders of record at the close of business on April 25, 2012 and is designated as an "eligible dividend" for Canadian tax purposes. Dollarama's first quarterly dividend was declared by the Board of Directors in June 2011.
The Board of Directors has determined that this new level of quarterly dividend is appropriate based on Dollarama's current cash flow, earnings, financial position and on other relevant factors. The dividend is expected to remain at this new level subject to the Board of Directors' ongoing assessment of Dollarama's future requirements, financial performance, liquidity and outlook. The payment of each quarterly dividend will remain subject to declaration of that dividend by the Board of Directors. The actual amount of each quarterly dividend, as well as each declaration date, record date and payment date is subject to the discretion of the Board of Directors.
"Dollarama completed a very successful fiscal year", said Larry Rossy, Dollarama's Chief Executive Officer. "Our healthy balance sheet and strong and improving free cash flows support our decision to increase the quarterly dividend. This increase reflects management's and Board's confidence in Dollarama's ability to return value to shareholders concurrently with pursuing its growth strategy."
About Dollarama
Dollarama is Canada's leading dollar store operator with 704 locations across the country. Our stores provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Dollarama aims to provide customers with a consistent shopping experience, offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Products are sold in individual or multiple units at select fixed price points up to $2.00 .
Forward-Looking Statements
Certain statements in this news release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements are based on information currently available to us and on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's management's discussion and analysis (MD&A) for Fiscal 2012 and in its continuous disclosure filings (available on SEDAR at www.sedar.com): future increases in operating and merchandise costs, inability to sustain assortment and replenishment of our merchandise, increase in the cost or a disruption in the flow of imported goods, disruption of distribution infrastructure, inventory shrinkage, inability to renew store, warehouse, distribution center and head office leases on favourable terms, inability to increase our warehouse and distribution center capacity in a timely manner, seasonality, market acceptance of our private brands, failure to protect trademarks and other proprietary rights, foreign exchange rate fluctuations, potential losses associated with using derivative financial instruments, level of indebtedness and inability to generate sufficient cash to service our debt, interest rate risk associated with variable rate indebtedness, competition in the retail industry, current economic conditions, failure to attract and retain qualified employees, departure of senior executives, disruption in information technology systems, unsuccessful execution of our growth strategy, holding company structure, adverse weather, natural disasters and geo-political events, unexpected costs associated with our current insurance program, litigation, product liability claims and product recalls, and environmental and regulatory compliance.
These factors are not intended to represent a complete list of the factors that could affect us; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this news release are made as of April 11, 2012, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Dollarama Inc.
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts and 13-Week Period Ended 52-Week Period Ended
number of shares) Jan. 29, 2012 Jan. 3 0, 2011 Jan. 29, 2012 Jan. 30, 2011
Earnings Data
Sales $ 468,706 $ 408,712 $ 1,602,827 $ 1,419,914
Cost of sales 282,307 252,578 1,002,487 906,982
Gross profit 186,399 156,134 600,340 512,932
Expenses:
SG&A 86,295 80,897 305,121 278,952
Amortization and depreciation 8,721 7,463 33,336 28,508
Total expenses 95,016 88,360 338,457 307,460
Operating income 91,383 67,774 261,883 205,472
Net financing costs 3,052 5,824 16,555 34,460
Earnings before income taxes 88,331 61,950 245,328 171,012
Provision for income taxes 24,724 19,916 71,854 54,185
Net earnings $ 63,607 $ 42,034 $ 173,474 $ 116,827
Basic net earnings per common share $ 0.86 $ 0.57 $ 2.35 $ 1.60
Diluted net earnings per common share $ 0.84 $ 0.56 $ 2.30 $ 1.55
Weighted average number of common shares outstanding during the period:
Basic (in thousands) 73,741 73,395 73,684 73,153
Diluted (in thousands) 75,651 75,465 75,563 75,377
Other Data
Year-over-year sales growth 14.7% 12.3% 12.9% 13.3%
Comparable store sales growth(2) 7.9% 5.3% 5.4% 7.3%
Gross margin(3) 39.8% 38.2% 37.5% 36.1%
SG&A as a % of sales(3) 18.4% 19.8% 19.0% 19.6%
EBITDA(1) $ 100,104 $ 75,237 $ 295,219 $ 233,980
Operating margin(3) 19.5% 16.6% 16.3% 14.5%
Normalized net earnings(1) $ 63,607 $ 42,034 $ 173,474 $ 123,494
Capital expenditures $ 17,323 $ 13,131 $ 52,957 $ 42,981
Number of stores(4) 704 652 704 652
Average store size (gross square feet)(4) 9,905 9,874 9,905 9,874
Declared dividends per common share(5) $ 0.09 $ - $ 0.27 $ -
As of
(dollars in thousands) Jan. 29 , 2012 Jan. 30, 2011
Balance Sheet Data
Cash and cash equivalents $ 70,271 $ 53,129
Merchandise inventories 315,873 258,905
Property and equipment 173,053 152,081
Total assets 1,407,741 1,311,131
Total debt(6) 274,997 366,875
Net debt(7) 204,726 313,746
_____________________________
(1) In this news release, we make reference to EBITDA (which represents operating income plus amortization and depreciation) and Normalized net earnings, collectively referred to as the "Non-IFRS Measures". The Non-IFRS Measures are not generally accepted earnings measures under IFRS and do not have a standardized meaning under IFRS. The Non-IFRS Measures, as calculated by the Corporation, may not be comparable to that of other companies and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with IFRS.
We have included the Non-IFRS Measures to provide investors with supplemental measures of our operating and financial performance. We believe the Non-IFRS Measures are important supplemental metrics of operating and financial performance because they eliminate items that have less bearing on our operating and financial performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers, many of which present non-IFRS measures when reporting their results. Our management also uses the Non-IFRS Measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.
13-Week Period Ended 52-Week Period Ended
(dollars in thousands) Jan. 29, 2012 Jan. 30, 2011 Jan. 29, 2012 Jan. 30, 2011
A reconciliation of operating income to EBITDA is included below:
Operating income $ 91,383 $ 67,774 $ 261,883 $ 205,472
Add: Amortization and depreciation 8,721 7,463 33,336 28,508
EBITDA $ 100,104 $ 75,237 $ 295,219 $ 233,980
EBITDA margin 21.4% 18.4% 18.4% 16.5%
A reconciliation of net earnings to Normalized net earnings is included below:
Net earnings $ 63,607 $ 42,034 $ 173,474 $ 116,827
Diluted net earnings per common share $ 0.84 $ 0.56 $ 2.30 $ 1.55
Add/(deduct) pre-tax:
Write-off of debt issue costs(a) - - - 5,681
Debt repayment premium and expenses(b) - - - 2,193
Tax impact - - - (1,207)
Normalized net earnings $ 63,607 $ 42,034 $ 173,474 $ 123,494
Diluted Normalized net earnings per common share $ 0.84 $ 0.56 $ 2.30 $ 1.64
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(a) Write-off of debt issue costs associated with the repayment of the previous senior secured credit facility and the redemption of the senior subordinated deferred interest notes during the second quarter ended August 1 , 2010.
(b) Call premium, prepayment expenses and other fees associated with the redemption of our senior subordinated deferred interest notes in the second quarter ended August 1, 2010 .
(2) Comparable store sales means sales of stores, including relocated and expanded stores, open for at least 13 complete fiscal months relative to the same period in the prior year.
(3) Gross margin represents gross profit divided by sales. SG&A as a % of sales represents SG&A divided by sales. Operating margin represents operating income divided by sales.
(4) At the end of the period.
(5) The Corporation's first quarterly dividend, in the amount of $0.09 per common share, was declared by the Board of Directors on June 8, 2011 . Subsequent quarterly dividends for Fiscal 2012, each in the amount of $0.09 per common share, were declared on September 14, 2011 and December 6, 2011 . Dividends are usually paid at the beginning of the quarter following the declaration date.
(6) Total debt is comprised of current portion of long-term debt, and long-term debt before debt issue costs and discounts.
(7) Net debt is defined as total debt (see note 6) minus cash and cash equivalents.
