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Press release from PR Newswire

Dollarama announces strong third quarter results

Thursday, December 06, 2012

Dollarama announces strong third quarter results07:30 EST Thursday, December 06, 2012 MONTREAL, Dec. 6, 2012 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported strong increases in sales and net earnings for the third quarter ended October 28, 2012. Financial and Operating Highlights (All comparative figures below and in the "Financial Results" section that follows, are for the third quarter ended October 28, 2012 compared to the third quarter ended October 30, 2011.  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 Handbook of the Canadian Institute of Chartered Accountants - Part 1 which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.  Throughout this press release the term "Normalized" is used to refer to financial results that have been adjusted to exclude a non-recurring item. For a full explanation of the Corporation's use of these non-GAAP measures, please refer to footnote 1 of the "Selected Consolidated Financial Information" section of this press release.) Throughout this press release, all references to "Fiscal 2012" are to the Corporation's fiscal year ended January 29, 2012 and to "Fiscal 2013" are to the Corporation's fiscal year ending February 3, 2013. Compared to the third quarter of Fiscal 2012: Sales increased by 14.4%; Comparable store sales grew 6.6%; Gross margin improved to 37.2% of sales from 37.0% of sales; Normalized EBITDA(1) grew 20.2% to $86.6 million, or 18.9% of sales; Normalized operating income(1) grew 20.9% to $76.7 million, or 16.7% of sales; Normalized diluted net earnings per share (1) increased by 29.1%, from $0.55 to $0.71. In addition, during the third quarter ended October 28, 2012, the Corporation opened 26 net new stores. "We once again delivered strong results in the third quarter", said Larry Rossy, Chief Executive Officer of Dollarama.  "We are pleased with our continued double-digit growth performance in sales, operating income and net earnings and are particularly happy to see a 6.6% growth in comparable store sales over the third quarter of fiscal year 2012.  We have maintained the focus on execution in a quarter where we have opened a record 26 new stores and we are on track to open 75 to 80 new stores for this fiscal year". Financial Results Sales for the third quarter of Fiscal 2013 increased by 14.4% to $458.0 million from $400.3 million in the corresponding period of the prior fiscal year. The increase is due to continued organic sales growth driven by comparable store sales growth of 6.6% in the third quarter of Fiscal 2013, over and above comparable store sales growth of 5.1% in the third quarter of Fiscal 2012. The increase in sales was also attributed to the 10.3% growth in the number of stores over the past twelve months as we added 71 stores to go from 690 stores on October 30, 2011 to 761 stores on October 28, 2012. Comparable store sales growth for the third quarter of Fiscal 2013 consisted of a 4.9% increase in average transaction size combined with a 1.6% increase in the number of transactions. In this quarter, 57% of our sales originated from products priced higher than $1.00 compared to 49% in the corresponding quarter last year. The gross margin increased to 37.2% of sales in the third quarter of Fiscal 2013, compared to 37.0% of sales in the third quarter of Fiscal 2012, mainly due to a slight improvement in product margins and lower inventory shrink levels, partially offset by higher occupancy costs associated with the significantly higher number of store openings in the third quarter ended October 28, 2012. General, administrative and store operating expenses ("SG&A") for the third quarter of Fiscal 2013 was 18.3% of sales on a normalized basis(1), compared to 19.0% of sales in the corresponding period of Fiscal 2012. This decrease is due to the scaling effects of certain fixed costs over the higher sales volume, partially offset by incremental labour costs associated with the significantly higher number of store openings in the third quarter ended October 28, 2012. Normalized SG&A expenses(1) in the third quarter of Fiscal 2013 stood at $83.9 million, a 10.5% increase over $76.0 million in the corresponding period of Fiscal 2012. The increase is due primarily to the opening of 71 net new stores over the past twelve months. Net financing costs decreased by $0.6 million, from $3.4 million for the third quarter of Fiscal 2012 to $2.8 million for the third quarter of Fiscal 2013. This decrease is attributable to a lower debt level and a lower interest rate on the long-term debt compared to the corresponding period of Fiscal 2012. For the third quarter of Fiscal 2013, normalized net earnings(1) increased to $53.7 million, or $0.71 per diluted share, compared to $41.8 million, or $0.55 per diluted share, for the corresponding period of Fiscal 2012. Normal Course Issuer Bid On June 13, 2012, the Corporation received approval from the Toronto Stock Exchange to implement a normal course issuer bid ("NCIB") to purchase, for cancellation, up to 2,583,264 common shares (representing 3.5% of the total issued and outstanding shares of the Corporation as of June 1, 2012) during the period from June 15, 2012 to no later than June 14, 2013.  Total common shares repurchased during the period from June 15, 2012 to October 28, 2012, amounted to 1,613,656 common shares for a total cash consideration of $100.0 million. As of October 28, 2012, all shares repurchased under the NCIB were cancelled, except for 54,518 common shares (representing a total consideration of $3.4 million), which were held in the treasury and subsequently cancelled. Dividend The Corporation's Board of Directors approved a quarterly dividend for holders of its common shares of $0.11 per common share. The Corporation's quarterly dividend will be paid on February 5, 2013 to shareholders of record at the close of business on January 4, 2013 and is designated as an "eligible dividend" for Canadian tax purposes. About Dollarama Dollarama is Canada's leading dollar store operator with 761 locations across the country. Our stores provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Dollarama aims to provide customers with a consistent shopping experience, offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Products are sold in individual or multiple units at select fixed price points up to $3.00. Forward-Looking Statements Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements are based on information currently available to us and on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's management's discussion and analysis (MD&A) for Fiscal 2012 and in its continuous disclosure filings (available on SEDAR at www.sedar.com): future increases in operating and merchandise costs, inability to sustain assortment and replenishment of our merchandise, increase in the cost or a disruption in the flow of imported goods, disruption of distribution infrastructure, inventory shrinkage, inability to renew store, warehouse, distribution center and head office leases on favourable terms, inability to increase our warehouse and distribution center capacity in a timely manner, seasonality, market acceptance of our private brands, failure to protect trademarks and other proprietary rights, foreign exchange rate fluctuations, potential losses associated with using derivative financial instruments, level of indebtedness and inability to generate sufficient cash to service our debt, interest rate risk associated with variable rate indebtedness, competition in the retail industry, current economic conditions, failure to attract and retain qualified employees, departure of senior executives, disruption in information technology systems, unsuccessful execution of our growth strategy, holding company structure, adverse weather, natural disasters and geo-political events, unexpected costs associated with our current insurance program, litigation, product liability claims and product recalls, and environmental and regulatory compliance. These factors are not intended to represent a complete list of the factors that could affect us; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as of December 6, 2012, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Dollarama Inc.                           Selected Consolidated Financial Information                                                       13-Week Period Ended   39-Week Period Ended (dollars in thousands, except per share amounts)   Oct. 28, 2012   Oct. 30, 2011     Oct. 28, 2012   Oct. 30, 2011                           Earnings Data                         Sales   $ 457,993   $ 400,347   $ 1,296,939   $ 1,134,121 Cost of sales     287,428     252,270     819,444     720,180 Gross profit     170,565     148,077     477,495     413,941 SG&A     87,021     75,990     241,429     218,826 Depreciation and amortization     9,961     8,667     28,478     24,615 Operating income     73,583     63,420     207,588     170,500 Net financing costs     2,794     3,444     8,145     13,503 Earnings before income taxes     70,789     59,976     199,443     156,997 Provision for income taxes.     19,308     18,184     55,588     47,130 Net earnings   $ 51,481   $ 41,792   $ 143,855   $ 109,867                           Basic net earnings per common share   $ 0.70   $ 0.57   $ 1.95   $ 1.49 Diluted net earnings per common share   $ 0.68   $ 0.55   $ 1.90   $ 1.45                           Weighted average number of common shares outstanding during the period:                 Basic (in thousands)     73,667     73,713     73,763     73,665   Diluted (in thousands)     75,525     75,533     75,699     75,537                           Other Data                         Year-over-year sales growth     14.4%     12.5%     14.4%     12.2% Comparable store sales growth(2)     6.6%     5.1%     7.3%     4.4% Gross margin(3)     37.2%     37.0%     36.8%     36.5% Normalized SG&A as a % of sales(1) (3)     18.3%     19.0%     18.4%     19.3% Normalized EBITDA(1)   $ 86,616   $ 72,087   $ 239,138   $ 195,115 Normalized operating margin(1) (3)     16.7%     15.8%     16.2%     15.0% Normalized net earnings(1)   $ 53,730   $ 41,792   $ 146,104   $ 109,867 Capital expenditures   $ 20,054   $ 12,201   $ 52,483   $ 35,634 Number of stores(4)     761     690     761     690 Average store size (gross square feet)(4)     9,932     9,910     9,932     9,910 Declared dividends per common share(5)   $ 0.11   $ 0.09   $ 0.33   $ 0.18                               As of             (dollars in thousands)   Oct. 28, 2012     Jan. 29, 2012                                       Statement of Financial Position Data                         Cash and cash equivalents   $ 32,045   $ 70,271             Merchandise inventories     349,906     315,873             Property and equipment     196,337     173,053             Total assets     1,429,449     1,407,741             Total debt(6)     264,420     274,997             Net debt(7)     232,375     204,726             ________________________________ (1) In this news release, Normalized operating income, Normalized EBITDA, Normalized SG&A and Normalized net earnings are collectively referred to as the "Non-GAAP measures". Normalized operating income represents operating income, in accordance with GAAP, adjusted for significant non-recurring charges. Normalized EBITDA represents Normalized operating income plus amortization. Normalized SG&A represents SG&A, in accordance with GAAP, adjusted for significant non-recurring charges. Normalized net earnings represents net earnings, in accordance with GAAP, adjusted for significant non-recurring charges, net of tax impacts. The Non-GAAP measures are not generally accepted measures under GAAP and do not have a standardized meaning under GAAP. The Non-GAAP measures, as calculated by the Corporation, may not be comparable to those of other issuers and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with GAAP.   We have included the Non-GAAP measures to provide investors with supplemental measures of our operating and financial performance. We believe the Non-GAAP measures are important supplemental metrics of operating and financial performance because they eliminate items that have less bearing on our operating and financial performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP measures. We also believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers, many of which present non-GAAP measures when reporting their results. Our management also uses the Non-GAAP measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.   13-Week Period Ended   39-Week Period Ended (dollars in thousands) Oct. 28, 2012   Oct. 30, 2011   Oct. 28, 2012   Oct. 30, 2011                         A reconciliation of operating income to Normalized operating income is included below:                         Operating income  $ 73,583   $ 63,420   $ 207,588   $ 170,500 Add: non-recurring charges:                         Payroll taxes on exercise of options(a)   3,072     ?     3,072     ?                         Normalized operating income $ 76,655   $ 63,420   $ 210,660   $ 170,500   Normalized operating margin   16.7%     15.8%     16.2%     15.0%                         A reconciliation of Normalized operating income to Normalized EBITDA is included below:                         Normalized operating income $ 76,655   $ 63,420   $ 210,660   $ 170,500 Add: Depreciation and amortization   9,961     8,667     28,478     24,615                         Normalized EBITDA $ 86,616   $ 72,087   $ 239,138   $ 195,115   Normalized EBITDA margin   18.9%     18.0%     18.4%     17.2%                         A reconciliation of SG&A to Normalized SG&A is included below:                         SG&A $ 87,021   $ 75,990   $ 241,429   $ 218,826 Deduct: non-recurring charges:                         Payroll taxes on exercise of options(a)   (3,072)     ?     (3,072)     ?                         Normalized SG&A $ 83,949   $ 75,990   $ 238,357   $ 218,826   Normalized SG&A as a % of sales   18.3%     19.0%     18.4%     19.3%                         A reconciliation of net earnings to Normalized net earnings is included below:                         Net earnings $ 51,481   $ 41,792   $ 143,855   $ 109,867   Diluted net earnings per common share $ 0.68   $ 0.55   $ 1.90   $ 1.45                         Add non-recurring charges (pre-tax):                         Payroll taxes on exercise of options(a)   3,072     ?     3,072     ?                         Tax impact   (823)     ?     (823)     ?                         Normalized net earnings $ 53,730   $ 41,792   $ 146,104   $ 109,867   Diluted Normalized net earnings per common share $ 0.71   $ 0.55     $ 1.93     $ 1.45 ________________________________ (a) During the quarter ended October 28, 2012, the Corporation incurred a non-recurring payroll-related charge resulting from the exercise of stock options by senior management. (2) Comparable store sales represents sales of stores, including relocated and expanded stores, open for at least 13 complete fiscal months relative to the same period in the prior year. (3) Gross margin represents gross profit divided by sales. Normalized SG&A as a % of sales represents Normalized SG&A (see note 1) divided by sales. Normalized operating margin represents Normalized operating income (see note 1) divided by sales. (4) At the end of the period. (5) The Corporation's first quarterly dividend, in the amount of $0.09 per common share, was declared by the Board of Directors on June 8, 2011. On April 11, 2012, the Corporation announced that its Board of Directors had approved a 22% increase of the quarterly dividend, from $0.09 to $0.11 per common share.  (6) Total debt is comprised of the current portion of long-term debt, and long-term debt before debt issue costs and discounts. (7) Net debt is defined as total debt minus cash and cash equivalents.       SOURCE DOLLARAMA INC.For further information: <p> <i>Investors</i><br/> Michael Ross, FCPA, FCA<br/> Chief Financial Officer and Secretary<br/> (514) 737-1006 x1237<br/> <a href="mailto:michael.ross@dollarama.com">michael.ross@dollarama.com</a> </p> <p> <i>Media</i><br/> Lyla Radmanovich<br/> NATIONAL Public Relations<br/> (514) 843-2336<br/> </p> <p> <a href="http://www.dollarama.com">www.dollarama.com</a> </p>