Dollarama announces strong third quarter results

Dollarama Inc.  reported an increase in sales and an improvement in net earnings for the third quarter ended November 3, 2013. The quarter was characterized by continued growth in the store network and solid comparable store sales growth.
 
Financial and Operating Highlights
 
(All comparative figures below and in the "Financial Results" section that follows are for the third quarter ended November 3, 2013 compared to the third quarter ended October 28, 2012.  All financial information presented in this news release has been prepared in accordance with generally accepted accounting principles in Canada ("GAAP") as set out in the Handbook of the Canadian Institute of Chartered Accountants - Part 1 which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Throughout this news release, EBITDA, total debt and net debt, which are referred to as "non-GAAP measures", are used to provide a better understanding of the Corporation's financial results. For a full explanation of the Corporation's use of non-GAAP 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 2013" are to the Corporation's fiscal year ended February 3, 2013 and to "Fiscal 2014" are to the Corporation's fiscal year ending February 2, 2014.
 
Compared to the third quarter of Fiscal 2013
 
Sales increased by 14.2% to $522.9 million;
Comparable store sales grew 4.8%;
Gross margin stood at 37.1% of sales, compared to 37.2% of sales;
EBITDA(1) grew 19.4% to $99.8 million, or 19.1% of sales;
Operating income grew 18.9% to $87.5 million, or 16.7% of sales; and
Diluted net earnings per share increased by 27.9%, from $0.68 to $0.87.
In addition, 86 net new stores were opened over the past 12 months, including 19 net new stores opened during the third quarter of Fiscal 2014.
 
"We are very satisfied with our continued growth in comparable store sales in the third quarter. The consistent growth and strength of our operating results are a testimony to the success of our merchandising strategy, the compelling value of our product offering and the dedication of our employees", stated Larry Rossy, Chairman and Chief Executive Officer of Dollarama.
 
Financial Results
 
Sales for the third quarter of Fiscal 2014 increased by 14.2% to $522.9 million from $458.0 million in the corresponding period of the prior fiscal year. The increase was driven by the growth in the number of stores over the past twelve months, from 761 stores on October 28, 2012 to 847 stores on November 3, 2013, and by continued organic sales growth driven by comparable store sales growth of 4.8% in the third quarter of Fiscal 2014, over and above comparable store sales growth of 6.6% in the third quarter of Fiscal 2013. Comparable store sales growth for the third quarter of Fiscal 2014 consisted of a 2.9% increase in average transaction size and a 1.9% increase in the number of transactions. In this quarter, 62% of our sales originated from products priced higher than $1.00 compared to 57% in the corresponding quarter last year. Debit card penetration also increased, as 41% of sales were paid with debit cards compared to 38% in the corresponding period of the previous fiscal year.
 
The gross margin stood at 37.1% of sales in the third quarter of Fiscal 2014, compared to 37.2% of sales in the third quarter of Fiscal 2013, mainly due to stable product margins slightly offset by additional occupancy costs. The acceleration of net new store openings over the past 12 months to 86 net new stores compared to 71 net new stores during the prior comparable period had a temporary cost impact of approximately 0.1 % on gross margin in the third quarter. This cost impact associated with the acceleration of net new store openings decreased steadily over the first three quarters of Fiscal 2014 and this acceleration is not expected to have a significant impact in the last quarter of Fiscal 2014.
 
General, administrative and store expenses ("SG&A expenses") for the third quarter of Fiscal 2014 decreased to 18.1% of sales, compared to 19.0% of sales in the corresponding period of Fiscal 2013. During the quarter, we continued to realize the benefit of several productivity initiatives implemented to date. Additionally, in the corresponding period of Fiscal 2013, the Corporation incurred a $3.1 million charge representing a payroll-related tax, more specifically a mandatory contribution to Quebec's Health Services Fund calculated based on the Corporation's aggregate salary pool, which was increased as a result of the exercise of a significant number of options by members of senior management. SG&A expenses in the third quarter of Fiscal 2014 stood at $94.5 million, an 8.5% increase over $87.0 million over the corresponding quarter of Fiscal 2013.
 
Net financing costs increased by $0.3 million, from $2.8 million for the third quarter of Fiscal 2013 to $3.1 million for the third quarter of Fiscal 2014. This increase is attributable to an increase in borrowings compared to the corresponding period of Fiscal 2013 which was largely associated with the Corporation's share buyback initiatives.
 
For the third quarter of Fiscal 2014, net earnings increased to $61.7 million, or $0.87 per diluted share, compared to $51.5 million, or $0.68 per diluted share, for the corresponding period of Fiscal 2013.
 

on December 12, 2013