Mr. Neil Rossy reports

DOLLARAMA REPORTS FISCAL 2024 THIRD QUARTER RESULTS

Dollarama Inc. has released its financial results for the third quarter ended Oct. 29, 2023.

Fiscal 2024 third-quarter highlights compared with fiscal 2023 third-quarter results:

• Sales increased by 14.6 per cent to $1,477,700;
• Comparable store sales grew 11.1 per cent, over and above 10.8 per cent growth the previous year;
• EBITDA (earnings before interest, taxes, depreciation and amortization) increased by 24 per cent to $478.8-million, or 32.4 per cent of sales, compared with 29.9 per cent of sales;
• Operating income increased by 27.8 per cent to $386.7-million, or 26.2 per cent of sales, compared with 23.5 per cent of sales;
• Diluted net earnings per common share increased by 31.4 per cent to 92 cents, from 70 cents;
• 16 net new stores opened, compared with 18 net new stores;
• 1,740,514 common shares repurchased for cancellation for a total consideration of $166-million.

"Sustained consumer demand for our broad range of affordable everyday products and strong execution in the third quarter of fiscal 2024 drove double-digit same-store sales growth for a sixth consecutive quarter, as well as over 31-per-cent earnings-per-share growth. Our financial and operational performance year to date reflects the strength and relevance of our value proposition and business model in a challenging macro-economic context," said Neil Rossy, president and chief executive officer.

Explanatory notes

All comparative figures that follow are for the third quarter ended Oct. 29, 2023, compared with the third quarter ended Oct. 30, 2022. All financial information presented in this press release has been prepared in accordance with generally accepted accounting principles in Canada (GAAP) as set out in the CPA Canada Handbook -- Accounting, under Part I, which incorporates international financial reporting standards (IFRS) as issued by the International Accounting Standards Board (IASB). EBITDA, EBITDA margin, total debt, net debt and adjusted net debt to EBITDA ratio, which are referred to as non-GAAP measures, are used to provide a better understanding of the corporation's financial results. All references to fiscal 2023 are to the corporation's fiscal year ended Jan. 29, 2023, and to fiscal 2024 are to the corporation's fiscal year ending Jan. 28, 2024.

Fiscal 2024 third-quarter financial results

Sales for the third quarter of fiscal 2024 increased by 14.6 per cent to $1,477,700, compared with $1,289,600 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 1,462 stores on Oct. 30, 2022, to 1,541 stores on Oct. 29, 2023) and increased comparable store sales.

Comparable store sales for the third quarter of fiscal 2024 increased by 11.1 per cent, consisting of a 10.4-per-cent increase in the number of transactions and a 0.6-per-cent increase in average transaction size, over and above comparable store sales growth of 10.8 per cent in the corresponding period of the prior fiscal year. The increase in comparable store sales is primarily attributable to higher sales across all product categories, including continued higher than historical demand for consumables.

EBITDA totalled $478.8-million, or 32.4 per cent of sales, for the third quarter of fiscal 2024, compared with $386.2-million, or 29.9 per cent of sales, in the third quarter of fiscal 2023.

Gross margin was 45.4 per cent of sales in the third quarter of fiscal 2024, compared with 43.3 per cent of sales in the third quarter of fiscal 2023. Gross margin as a percentage of sales was higher primarily as a result of lower inbound shipping costs and lower logistics costs.

General, administrative and store operating expenses (SG&A) for the third quarter of fiscal 2024 increased by 17.6 per cent to $213.8-million, compared with $181.8-million for the third quarter of fiscal 2023. SG&A represented 14.5 per cent of sales for the third quarter of fiscal 2024, compared with 14.1 per cent of sales for the third quarter of fiscal 2023. This variance reflects higher store labour costs and the timing of other operating costs.

The corporation's 50.1-per-cent share of Dollarcity's net earnings for the period from July 1, 2023, to Sept. 30, 2023, was $18-million, compared with $9.2-million for the same period last year. The corporation's investment in Dollarcity is accounted for as a joint arrangement using the equity method.

Net financing costs increased by $6.3-million, from $30.4-million for the third quarter of fiscal 2023, to $36.7-million for the third quarter of fiscal 2024. The increase is mainly due to a higher average borrowing rate, as well as higher average debt levels from fixed rate notes (defined hereinafter) and lease liabilities.

Net earnings were $261.1-million, or 92 cents per diluted common share, in the third quarter of fiscal 2024, compared with $201.6-million, or 70 cents per diluted common share, in the third quarter of fiscal 2023.

Dollarcity store growth

During its third quarter ended Sept. 30, 2023, Dollarcity opened 22 net new stores, compared with 18 net new stores in the same period last year. As at Sept. 30, 2023, Dollarcity had 480 stores with 287 locations in Colombia, 96 in Guatemala, 68 in El Salvador and 29 in Peru. This compares to 440 stores as at Dec. 31, 2022.

Normal course issuer bid (NCIB)

During the third quarter of fiscal 2024, 1,740,514 common shares were repurchased for cancellation under the corporation's NCIB for a total cash consideration of $166-million, at a weighted average price of $95.40 per share.

Dividend

On Dec. 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 Feb. 2, 2024, to shareholders of record at the close of business on Jan. 5, 2024. The dividend is designated as an eligible dividend for Canadian tax purposes.

Outlook

Based on the company's performance fiscal-year-to-date, and assuming continued positive customer response to the company's product offering, value proposition and in-store merchandising in the fourth quarter of fiscal 2024, the corporation has increased its full-year comparable store sales guidance to a range of 11 per cent to 12 per cent. All other guidance ranges and underlying assumptions remain unchanged.

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 three months, and the absence of delays outside of its 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 the company'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 United States 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, which closed on Aug. 16, 2023;
• The successful execution of the company'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.

The corporation has generated six consecutive quarters of double-digit comparable store sales and expects that comparable store sales growth will eventually normalize.

Conference call

Dollarama will hold a conference call to discuss its fiscal 2024 third-quarter results today, Dec. 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 on-line 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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