Canadian dollar store operator Dollarama, Inc. (DOL.TO) reported Wednesday a profit for the first quarter that grew from last year, reflecting double-digit sales growth and solid comparable-store sales growth despite difficult weather conditions. Both earnings per share and quarterly revenues missed analysts' expectations.
The company also approved a quarterly dividend and received approval from the TSX to renew a normal course issuer bid to repurchase or cancel 5 percent of its common shares.
"We are pleased with our first quarter financial and operating results. Our business continues to deliver improved sales and earnings as we remain focused on providing great value to our customers from our growing number of 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$45.65 million or C$0.62 per share for the first quarter, higher than C$42.58 million or C$0.56 per share in the prior-year quarter.
On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of C$0.67 per share for the first quarter. Analysts' estimates typically exclude special items.
Sales for the quarter grew 12.6 percent to C$448.12 million from C$397.97 million in the same quarter last year, but missed five Wall Street analysts' consensus estimate of C$449.31 million by a whisker.
The growth in sales was driven primarily by the net addition of 85 new stores in the past year and comparable store sales growth of 3.7 percent amid continued organic sales growth. This was achieved by a 4.6 percent increase in average transaction size, partially offset by 0.9 percent drop in number of transactions amid the difficult weather conditions.
Operating margin for the quarter contracted 110 basis points to 14.5 percent from last year's 15.6 percent as selling, general and administrative expenses as a percentage of total sales increased 30 basis points, and gross margin declined 40 basis points.
The company's board also approved a quarterly dividend for holders of its common shares of C$0.14 per common share, payable on August 7 to shareholders of record at the close of business on July 5, 2013.
Separately, Dollarama said it received approval from the Toronto Stock Exchange to renew a normal course issuer bid to purchase, for cancellation, up to 3.36 million common shares, representing 5 percent of the public float of 67.29 million as of May 31, 2013. The repurchase program starts on June 17, 2013 and ends no later than June 16, 2014.
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."
"For Fiscal 2014, we are committed to opening a minimum of 80 net new stores thereby maintaining the increased pace of new store openings established in Fiscal 2013," Rossy added.
DOL.TO closed Tuesday's regular trading session on the Toronto Stock Exchange at C$72.58, down C$1.53 or 2/06% on a volume of 0.18 million shares.
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