Mr. Neil Rossy reports

DOLLARAMA REPORTS FISCAL 2024 SECOND QUARTER RESULTS

Dollarama Inc. has released its financial results for the second quarter ended July 30, 2023.

Fiscal 2024 second quarter highlights compared with fiscal 2023 second quarter results:

• Sales increased by 19.6 per cent to $1,455.9-million;
• Comparable store sales increased by 15.5 per cent over and above a 13.2-per-cent growth the previous year;
• EBITDA (earnings before interest, taxes, depreciation and amortization) increased by 23.8 per cent to $457.2-million, or 31.4 per cent of sales, compared with 30.4 per cent of sales;
• Operating income increased by 27.6 per cent to $366.8-million, or 25.2 per cent of sales, compared with 23.6 per cent of sales;
• Diluted net earnings per common share increased by 30.3 per cent to 86 cents from 66 cents;
• 18 net new stores opened, compared with 13 net new stores;
• 2,858,160 common shares repurchased for cancellation for a total consideration of $248.1-million.

"Once again this quarter, we delivered excellent operational and financial results, including notable growth in comparable store sales, EBITDA and earnings per share. Our performance year to date for this fiscal year reflects our differentiated ability to provide compelling value across our broad product mix and a consistent shopping experience. Dollarama continues to deliver unparalleled value to a growing number of consumers seeking affordable everyday products at low price points, and we expect this strong demand to persist through the second half of the year in the current macroeconomic context," said Neil Rossy, president and chief executive officer.

Fiscal 2024 second quarter financial results

Sales for the second quarter of fiscal 2024 increased by 19.6 per cent to $1,455.9-million, compared with $1,217.1-million in the corresponding period of the prior fiscal year. This increase was driven by growth in the total number of stores over the past 12 months (from 1,444 stores on July 31, 2022, to 1,525 stores on July 30, 2023) and increased comparable store sales.

Comparable store sales for the second quarter of fiscal 2024 increased by 15.5 per cent, consisting of a 12.9-per-cent increase in the number of transactions and a 2.3-per-cent increase in average transaction size, over and above comparable store sales growth of 13.2 per cent in the corresponding period of the prior fiscal year. The increase in comparable store sales is primarily attributable to higher sales across the corporation's product categories, including continued higher-than-historical demand for consumables.

EBITDA totalled $457.2-million, or 31.4 per cent of sales, for the second quarter of fiscal 2024, compared with $369.4-million, or 30.4 per cent of sales, in the second quarter of fiscal 2023.

Gross margin was 43.9 per cent of sales in the second quarter of fiscal 2024, compared with 43.6 per cent of sales in the second quarter of fiscal 2023. Gross margin as a percentage of sales was slightly higher due to lower inbound shipping costs, partially offset by higher logistics costs.

General, administrative and store operating expenses (SG&A) for the second quarter of fiscal 2024 increased by 17.9 per cent to $198.4-million, compared with $168.3-million for the second quarter of fiscal 2023. SG&A represented 13.6 per cent of sales for the second quarter of fiscal 2024, compared with 13.8 per cent of sales for the second quarter of fiscal 2023. The improvement in SG&A as a percentage of sales is primarily attributable to the positive impact of scaling.

The corporation's 50.1-per-cent share of Dollarcity's net earnings for the period from April 1, 2023, to June 30, 2023, was $11.4-million, compared with $7.7-million for the same period last year. The corporation's investment in Dollarcity is accounted for as a joint arrangement using the equity method.

Financing costs increased by $9.4-million, from $26.7-million for the second quarter of fiscal 2023 to $36.1-million for the second quarter of fiscal 2024. The increase is mainly due to a higher average borrowing rate, as well as higher average debt levels.

Net earnings were $245.8-million, or 86 cents per diluted common share, in the second quarter of fiscal 2024, compared with $193.5-million, or 66 cents per diluted common share, in the second quarter of fiscal 2023.

Dollarcity store growth

During its second quarter ended June 30, 2023, Dollarcity opened 10 net new stores, compared with 19 net new stores in the same period last year. As at June 30, 2023, Dollarcity had 458 stores with 272 locations in Colombia, 93 in Guatemala, 66 in El Salvador and 27 in Peru. This compares with 440 stores as at Dec. 31, 2022.

Closing of acquisition of properties strategically located near logistics operations

On Aug. 16, 2023, the corporation closed its previously announced acquisition of three contiguous industrial properties in the town of Mount Royal, Que., for a total cash consideration of $88.1-million, which takes into account closing adjustments. The properties are strategically situated near the corporation's centralized logistics operations and adjacent to its distribution centre. The acquisition was paid with available cash on hand.

Normal course issuer bid

On July 5, 2023, the corporation announced the renewal of its normal course issuer bid and the approval from the Toronto Stock Exchange to repurchase for cancellation up to 13,695,242 of its common shares, representing approximately 4.8 per cent of the 283,376,026 common shares issued and outstanding as at June 30, 2023, during the 12-month period starting on July 7, 2023, and ending no later than July 6, 2024.

During the second quarter of fiscal 2024, 2,858,160 common shares were repurchased for cancellation under the 2023 to 2024 NCIB and the normal course issuer bid previously in effect, for a total cash consideration of $248.1-million, at a weighted average price of $86.81 per share.

Dividend

On Sept. 13, 2023, the corporation announced that its board of directors approved a quarterly cash dividend for holders of common shares of 7.08 cents per common share. This dividend is payable on Nov. 3, 2023, to shareholders of record at the close of business on Oct. 6, 2023. The dividend is designated as an eligible dividend for Canadian tax purposes.

Outlook

In the second half of fiscal 2024, the corporation expects to continue to benefit from strong demand for its affordable, everyday items in the current macroeconomic and inflationary context. As a result, the corporation has revised its comparable store sales growth guidance upward for the full fiscal year.

These guidance ranges are based on several assumptions, including the following:

• The number of signed offers to lease and the store pipeline for the next six months and the absence of delays outside of Dollarama's control on construction activities;
• No material increases in occupancy costs in the short to medium term;
• Continued positive customer response to Dollarama's product offering, value proposition and in-store merchandising;
• Approximately three months of visibility on open orders and product margins;
• The active management of product margins, including through pricing strategies and refreshing some of the product offering;
• The continued stabilization of Dollarama's supply chain and logistics environment;
• The inclusion of the corporation's share of net earnings of its equity-accounted investment;
• The entering into of foreign exchange forward contracts to hedge the majority of forecasted purchases of merchandise in U.S. dollars against fluctuations of the Canadian dollar against the U.S. dollar;
• The continued execution of in-store productivity initiatives and the realization of cost savings and benefits aimed at improving operating expense;
• The absence of a significant shift in labour, economic and geopolitical conditions, or material changes in the retail competitive environment;
• No significant changes in the capital budget for fiscal 2024 for new store openings, maintenance capital expenditures and transformational capital expenditures, the latter being mainly related to information technology projects and which budget excludes the purchase price for the previously announced property acquisition;
• The successful execution of Dollarama's business strategy;
• The absence of pandemic-related restrictions impacting consumer shopping patterns or incremental direct costs related to health and safety measures;
• The absence of unusually adverse weather, especially in peak seasons around major holidays and celebrations.

Conference call

Dollarama will hold a conference call to discuss its fiscal 2024 second quarter results today, Sept. 13, 2023, at 10:30 a.m. (ET). Financial analysts are invited to ask questions during the call. Other interested parties may participate in the call on a listen-only basis. The live audio webcast is accessible through Dollarama's website.

About Dollarama Inc.

Dollarama is a recognized Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and on-line. Its 1,525 locations across Canada provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Select products are also available, by the full case only, through Dollarama's online store. The company's quality merchandise is sold at select fixed price points up to $5.

Dollarama also owns a 50.1-per-cent interest in Dollarcity, a growing Latin American value retailer. Dollarcity offers a broad assortment of consumable products, general merchandise and seasonal items at select, fixed price points up to $4 (U.S.) (or the equivalent in local currency) in 458 conveniently located stores in El Salvador, Guatemala, Colombia and Peru.

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