Dollarama reports solid results

Despite some investor skepticism about Dollarama's stock market performance, the company eased concerns somewhat with the latest fourth quarter and fiscal year 2019 results: Q4 sales increased by 13 per cent to $1,059.7 million and comparable store sales grew 2.6 per cent, while fiscal 2019 sales increased to almost 9 per cent and fiscal 2019 store sales grew close to 3 per cent.

"Dollarama delivered strong financial and operating results in fiscal 2019, in the context of a competitive, low-inflation environment," said Neil Rossy, Dollarama's president and chief executive officer. "This performance demonstrates the resilience of our business model, which rests on well-executed organic growth, our direct sourcing strengths, and our multi-price point strategy."

During is fiscal 2019, the company opened 65 new stores, the same number of stores it opened in 2008. 

Rossy told investors the company's priority for fiscal 2020 is to "continue to reinvest in our strong value proposition and enhance our product assortment, always with the consumer in mind. We also continue to focus on the execution of our growth strategy by adding 60 to 70 net new stores for the year, and on initiatives to increase store traffic and sales."

Part of investors' concerns on longer term performance is that while the company now sells items ranging up to $4 and has stated it won't go any further in the face of competition, the cost pressure isn't being passed on to consumers, says Bruce Winder, co-founder and partner at Retail Advisors Network, in a Yahoo Finance Canada article. 

“When you have cost pressures that you can’t pass on to the consumers, it hurts your gross margins, and ultimately your net margins or profitability.”

Some investors were not satisfied with the results. TD Waterhouse noted in release that it viewed the results as "negative" and added that it continues "to see a lack of near-term catalysts to the share price to drive the applied multiple higher in the absence of a change in Dollarama's ability to implement further price increases while maintaining its value proposition."

Sales for the fourth quarter of fiscal 2019 increased by 13.0 per cent to $1,059.7 million, compared to $938.1 million in the corresponding period of the prior fiscal year. Continued organic sales growth was driven by balanced growth in comparable store sales and in the total number of stores over the past twelve months, from 1,160 stores on January 28, 2018 to 1,225 stores on February 3, 2019. 

Comparable store sales grew 2.6 per cent in the fourth quarter of fiscal 2019, over and above comparable store sales growth of 5.5 per cent in the same quarter a year ago. 

For fiscal 2019, sales increased 8.6 per cent to $3,548.5 milllion compared to $3,266.1 million in fiscal 2018.

Comparable store sales for fiscal 2019 grew 2.7 per cent, over and above store sales growth of 5.2 per cent for fiscal 2018.

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