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Thursday, June 8, 2017

At Dollarama’s annual general meeting, June 7, 2017: Larry Rossy, chairman (left) and Neil Rossy, CEO.

By Peter Diekmeyer

Dollarama will maintain its cross-Canada pricing strategy despite an impending minimum wage hike in Ontario, CEO Neil Rossy told journalists during a Q&A session following Dollarama’s annual general meeting on Wednesday.

“If it affects us, it affects all our competitors,” said Rossy. “We have lived through many similar challenges ranging from rising energy and transport costs, to currency fluctuations and inflation in China (where Dollarama sources more than half of its inputs). But we have always stuck to our strategy.”

Spirits were high during the AGM, with shareholders visibly pleased with Dollarama’s share price, which has risen by more than a third during the past year. The release of yet another positive earnings report also contributed. Sales, same-store sales and earnings per share were all up significantly during the first quarter of fiscal 2018, ended April 30, 2017.

Neil Rossy and Larry Rossy, who chaired the AGM, also provided a recap of key achievements during 2017 as well as clarity regarding Dollarama’s future plans. These included the completion of a $60-million, 500,000-square-foot warehouse in Lachine Que., on time and on budget, coupled with the attainment of a 98 per cent brand recognition level among Canadian consumers.

Neil Rossy also confirmed that Dollarama has substantial runway in front of it. The company, which currently operates 1,108 Canadian stores and is planning to open between 60 and 70 new outlets during the coming 12 months, could eventually grow to 1,700 stores within the next eight to 10 years Rossy said.

Rossy also provided clarity regarding Dollarama’s food offerings, which form part of its “consumables” category that competes directly with grocers’ offerings. The food component within this grouping is unlikely to grow as a percentage of Dollarama sales, Rossy said, due to the low margins on food items and regulatory issues surrounding many categories of food distribution.

News that Dollar Tree, which operates more than 200 outlets in Western Canada and in Ontario, is renewing its efforts to grow to 1,000 outlets, was taken into account in Dollarama’s projections said Rossy.

Neil Rossy also commented on possible threats to NAFTA, the trade agreement that links Canada, the U.S. and Mexico, acknowledging that possible price hikes resulting from new barriers are a concern, particularly for local manufacturers.

“While we are always looking for new sources, we prefer to buy local – first in Quebec (where our head office is located) then in Canada and more broadly in North America,” he said.

Rossy also confirmed that Dollarama continues to work on the development of an e-commerce platform that will enable shoppers to buy items in bulk online rather than make the effort to buy at multiple stores.

Dollarama Q1 (ended April 30, 2018) highlights versus Q1 2017

  • Sales increased by 10% to $704.9 million;

 

  • Comparable store sales grew 4.6%, over and above a 6.6% increase the previous year;

 

  • Gross margin was 37.6% of sales, compared to 37% of sales;

 

  • EBITDA grew 16.4% to $155.8 million, or 22.1% of sales, compared to 20.9% of sales;

 

  • Operating income grew 15.7% to $139.3 million, or 19.8% of sales, compared to 18.8% of sales; and

 

  • Diluted net earnings per common share increased by 20.6%, from $0.68 to $0.82.
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