Dollarama Inc. reported a strong first quarter, with sales climbing 21% year over year to nearly $1.85 billion, beating analyst expectations, as the discount retailer benefited from a growing Canadian store footprint and heightened consumer demand driven by cost-of-living concerns, Chief Executive Neil Rossy said Thursday.
Strong Financial Performance
The Montreal-based company reported net earnings grew 10% to just over $302 million, or $1.11 in diluted earnings per share, surpassing analysts' forecasts of $0.99 per share. The results were fueled by a 5.6% increase in comparable store sales, a key retail metric that tracks locations open for more than 12 months, driven by traffic and basket growth.
Store Expansion and Consumer Demand
Dollarama has opened 81 new stores across Canada over the last year, including 28 during the first quarter. Rossy noted that front-loading store openings is always the objective given that the second half of the fiscal year historically represents the seasonally busiest sales period. The company's value proposition continued to resonate with consumers as affordability and everyday value remained top of mind in an uncertain economic environment, he added.
Chief Financial Officer Patrick Bui said the retailer saw demand recover after extreme winter weather curtailed store traffic in the fourth quarter. Sales in Dollarama's core Canadian market reached $1.65 billion during the quarter.
Dividend and Share Repurchases
Dollarama declared a dividend of $0.12 cents per share, unchanged from the previous quarter. The company also repurchased more than 1.9 million shares during the quarter for a total cash consideration of $339 million.
Outlook and Costs
Bui said Dollarama's first quarter wasn't affected by higher fuel prices due to the war in Iran, though the company expects costs in the second half of the year. The retailer reiterated its margin guidance of 45% to 45.5% for 2027, assuming the conflict ends soon and fuel prices normalize in short order. However, if the conflict and fuel prices increase and drag on for a much longer period, the company may need to revise its assumptions.
Australian Operations
The retailer reported $192.8 million from sales in its 410 locations in Australia, which includes stores that are part of The Reject Shop (TRS) chain that Dollarama acquired last year. Dollarama is both building new stores and converting existing TRS outlets with the goal of reaching 700 stores in Australia by 2034. Rossy said the company is starting to transition merchandise to Dollarama-sourced products, with the first batch reaching shelves after the quarter ended. He expects about half of imported merchandise to be changed over by year end. Although these customer-facing changes remain preliminary, the company has seen encouraging signs in terms of customer interest and reception to the new layout and imports. As it moves forward with its Australian expansion, the company expects the unit to post a net loss in fiscal 2027.
Dollarama shares were trading higher on Thursday afternoon after the earnings release and are up around one percent over the last year.
