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Thursday, September 7, 2017

Dollarama’s Q2 results show sales growth of 11.5 per cent and a same-store increase of 6.1 per cent. Notably, gross margins rose to 39.6 per cent compared with 38.4 per cent for the same period last year.

The strong gross margin results are attributed to higher product margins, increased pricing and the benefits of scale and lower logistics and occupancy costs as a per cent of sales, according to TD Waterhouse.

"We are very pleased with our financial and operational performance in the first half of fiscal 2018, with notably strong sales and operating margins in the second quarter," Neil Rossy, president and CEO of Dollarama, said in a press release.  

"The sustained growth in comparable store sales demonstrates that consumers appreciate the compelling value we offer through our broad range of products at low, fixed price points," stated Rossy. "We continue our efforts to enhance the Dollarama shopping experience for our customers while reaching new consumers through store openings in underserved markets."

TD Waterhouse also reports that:

  • Basket size was up 5.9% and traffic increased 0.2%
  • Sales products increased 68.1% vs. 63.9% in Q2/F17
  • In Q2/F18 Dollarama opened 17 net new stores, which is line with management’s annual target of 60-70 new store openings per year.

Despite solid gains, some headwinds are expected as retailers are facing challenges around the planned minimum wage increases in Ontario and Alberta. According to the Financial Post, Barclays estimates wage increases could add $17 million in incremental wage costs, but also states that Dollarama could offset half of this increase, "through labour scheduling optimization and productivity initiatives."

Rossy noted, in the company’s analysts’ call this morning, that the company will continue to pursue the productivity and cost reduction initiatives implemented earlier, including the introduction of balers in stores to reduce waste management costs and enhancements to in-store mobile applications. He said that other plans are being considered, including self-checkouts "to streamline cost structures in support of our profitable growth."

Dollarama, which is based in Montreal, operates 1,125 stores across Canada with an average store size of 10,076 sq. ft.

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