Strong Q1 for Dollarama

Dollarama Inc.  reported significant increases in sales and net earnings for the quarter ended May 1, 2011. The Corporation is also pleased to announce that the Board of Directors has declared the first quarterly dividend in Dollarama's history as a public corporation. The initial quarterly dividend is set at $0.09 per common share.

Financial and Operating Highlights

(All comparative figures below and in the "Financial Results" section that follows, are for the first quarter ended May 1, 2011 compared to the first quarter ended May 2, 2010.  All financial information presented in this news release has been prepared in accordance with generally accepted accounting principles ("GAAP") 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 first quarter ended May 1, 2011, and all figures relating to the first quarter ended May 2, 2010 have been restated to reflect the Corporation's adoption of IFRS. As a result of the adoption of IFRS, there was no material change required to the Corporation's statement of earnings. 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, a Non-GAAP measure, is used to provide a better understanding of the Corporation's financial results. For a full explanation of the Corporation's use of EBITDA, please refer to footnote 1 of the Selected Consolidated Financial Information section of this news release.)

    Sales increased 11.0%;
    Launched 15 net new stores;
    Comparable store sales grew 3.4%;
    Gross margin improved to 35.7% of sales from 34.3% of sales;
    EBITDA(1) grew 22.8% to $55.5 million, or 16.0% of sales;
    Operating income grew 23.7% to $47.7 million, or 13.8% of sales;
    Diluted net earnings per share increased to $0.40 from $0.30;
    IFRS adoption has no material impact on our statement of earnings;
    Net debt declined to $294.1 million as of May 1, 2011; and
    Dollarama declares its first quarterly dividend in the amount of $0.09 per common share

"Consumers all across Canada continue to discover Dollarama's compelling merchandise offering, which helped to drive double-digit sales and earnings growth in the first quarter while generating strong cash flows", said Larry Rossy, Chief Executive Officer of Dollarama. "Our growth plans remain on track.  We continue to open stores in markets across Canada, and launched 15 net new stores during the quarter. We feel strongly that the market remains underpenetrated and we are confident that we will achieve our store opening target of 50 net new stores during the current fiscal year."

Financial Results

Sales for the first quarter ended May 1, 2011 increased 11.0% to $346.3 million from $311.9 million in the first quarter ended May 2, 2010. The increase was mainly driven by the opening of 56 net new stores during the last twelve months and by comparable store sales growth of 3.4% in the first quarter ended May 1, 2011 over and above strong comparable store sales growth of 8.6% recorded in the first quarter of the prior fiscal year. Comparable store sales growth consisted of a 6.3% increase in transaction size, offset in part by a 2.8% decrease in the number of transactions. Unfavourable weather conditions in the first quarter ended May 1, 2011 compared to the first quarter ended May 2, 2010 negatively impacted the number of transactions in the first quarter.

Gross margin increased to 35.7% of sales in the first quarter ended May 1, 2011 compared to 34.3% of sales in the first quarter ended May 2, 2010 driven mainly by improved product margins and a lower shrink provision, partially offset by higher transportation costs and occupancy costs as a percentage of sales.

General, administrative and store operating expenses ("SG&A") in the first quarter ended May 1, 2011 decreased to 19.7% of sales compared to 19.8% of sales in the same period last fiscal year, due primarily to the scaling effects of certain fixed costs over the higher sales volume this year. SG&A expense was $68.2 million for the first quarter ended May 1, 2011, a 10.4% increase over $61.8 million for the same period last fiscal year. The increase is due primarily to the opening of 56 net new stores since the end of the first quarter ended May 2, 2010.

Net financial costs decreased $2.0 million to $4.4 million for the first quarter ended May 1, 2011 from $6.4 million for the first quarter ended May 2, 2010 due primarily to a lower debt level and a lower interest rate on our long-term debt.

For the first quarter ended May 1, 2011, net earnings increased to $30.4 million, or $0.40 per diluted share, compared to $22.5 million, or $0.30 per diluted share, for the first quarter last fiscal year. The increase in net earnings was driven by an increase in operating income and reduced interest expense on long-term debt, and was partially offset by higher income taxes.

Declaration of First Quarterly Dividend

Dollarama announced today that its Board of Directors approved a quarterly dividend for holders of its common shares of $0.09 per common share. Dollarama's first quarterly dividend will be paid on August 3, 2011 to shareholders of record at the close of business on June 29, 2011. This dividend is designated as an "eligible dividend" for Canadian tax purposes.

The Board of Directors expects to declare quarterly dividends each in the amount of $0.09 per common share and has determined that this 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 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.

"We are very pleased to announce that we will pay our first quarterly dividend since becoming a publicly traded company in October 2009", said Larry Rossy, Dollarama's Chief Executive Officer. "Establishing Dollarama as a dividend-paying issuer is a measure of the success of our growth-oriented business model and our resulting strong financial performance. The Board of Directors believes that Dollarama's healthy balance sheet and strong free cash flow generation provide us with financing capacity and flexibility to continue pursuing our growth strategy and to continue repaying existing indebtedness. Enhancing total return to shareholders through a regular quarterly dividend rewards our existing shareholders and also positions us to attract new shareholders looking for both growth and income in their portfolios".
 

on June 13, 2011