Canadian dollar store operator Dollarama, Inc. (DOL.TO: Quote) reported Wednesday a 40 percent year-over-year increase in profit for the first quarter, reflecting improved margins and 8.1 percent comparable store sales growth. The company also approved a quarterly dividend and received approval from the TSX to implement a normal course issuer bid to repurchase or cancel 3.5 percent of its common shares.
"Our business momentum remains strong as sales, operating margins and earnings continued to improve as our customers continue to appreciate our great merchandise value and conveniently located stores," CEO Larry Rossy said in a statement.
The Montreal, Canada-based retailer of items of two dollar or less reported net earnings of C$42.58 million or C$0.56 per share for the first quarter, higher than C$30.42 million or C$0.40 per share in the prior-year quarter.
On average, 7 analysts polled by Thomson Reuters expected the company to report earnings of C$0.50 per share for the first quarter. Analysts' estimates typically exclude special items.
Sales for the quarter grew 14.9 percent to C$397.97 million from C$346.30 million in the same quarter last year. Wall Street analysts had a consensus revenue estimate of $390.25 million for the quarter.
The growth in sales was driven primarily by the net addition of 54 stores in the past year and comparable store sales growth of 8.1 percent amid continued organic sales growth. This was achieved by a 4.5 percent growth in number of transactions and a 3.5 percent increase in average transaction size.
Operating margin for the quarter improved 180 basis points to 15.6 percent from last year's 13.8 percent as selling, general and administrative expenses as a percentage of total sales decreased 120 basis points and gross margins expanded 60 basis points.
Gross margin improvement reflected improved product margins and improved logistics cost efficiencies, partially offset by higher transportation costs resulting from higher fuel costs.
The company's board also approved a quarterly dividend for holders of its common shares of C$0.11 per common share, payable on July 31 to shareholders of record at the close of business on July 5, 2012.
Dollarama noted that it will slowly introduce non-grocery items at the $2.50 and $3.00 price points starting in August 2012. Currently, it prices seasonal and general merchandise product selection at fixed price points of $0.69, $1.00, $1.25, $1.50 and $2.00, with the majority of the continuing to be priced at $1.00 or less.
Separately, Dollarama said it received approval from the Toronto Stock Exchange to implement a normal course issuer bid to purchase, for cancellation, up to 2.58 million common shares, representing 3.5 percent of the 73.81 million issued and outstanding shares as of June 1, 2012. The repurchase program starts on June 15, 2012 and ends no later than June 14, 2013.
The company's board said, "it believes that the purchase by Dollarama of its common shares represents an appropriate and desirable use of its available cash to increase shareholder value."
DOL.TO closed Tuesday's regular trading session on the Toronto Stock Exchange at C$56.87, down C$0.40 on a volume of 0.16 million shares.
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by RTT Staff Writer
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