Dollarama shares soar on boosted dividend

Dollarama's shares set a record high Wednesday after the discount retailer's latest quarterly profit beat expectations and the company announced it will boost its quarterly dividend by 14 per cent.

The Montreal-based company's stocks briefly hit an intraday high of $92, above the previous record $90.74 set last November, before giving up some of the gains. The stock was up $7 at $92.82 at noon.

The company also said it earned $83 million or $1.17 diluted earnings per share for the 13-week period ended Feb. 2

That compared with $77.1 million, or $1.04 per share for 14 weeks in the prior year.

Sales up 9.9%

Dollarama's sales for the quarter were $582.2 million, up 3.6 per cent from $561.8 million last year. Sales increased by 9.9 per cent when adjusting for the extra week of business last year that contributed $32.1 million of total sales.

Dollarama was expected to earn $1.09 per share of net income or $1.10 per share of adjusted earnings on $575.8 million in revenues during the quarter, according to Thomson Reuters data.

The increase in sales was driven by an 11.3 per cent growth in the total number of stores with the addition of 89 location over the year, including 27 in the quarter, and a 1.1 per cent increase in same-store sales on a 13-week basis — a key retail measure for sales in stores open at least a year.

The increased same-store sales was helped by a 4.4 per cent increase in average transaction size, partially offset by a 3.1 per cent decrease in the number of transactions because of weather disruptions that reduced store traffic.

Sales bounced back after winter closures

The quarter spanned the important holiday shopping period when many Canadian retailers coped with especially bad weather before Christmas and early in the new year. In January, Dollarama said that its December sales fell significantly due to the temporary closures affecting nearly 10 per cent of the chain but said customer traffic returned to normal levels in January.

Sixty-one per cent of Dollarama's sales came from products over $1, up from 56 per cent a year earlier.

For fiscal 2013, Dollarama's annual sales surpassed $2 billion, rising nearly 14 per cent from $1.86 billion in the previous year when it benefited from an extra week of business. Net earnings for the year were $250.1 million, or $3.47 per diluted share, compared with $221 million, or $2.94 per diluted share in 2012.

"Fourth quarter and full-year financial results came out strong despite the adverse impact of severe weather conditions on store traffic, particularly in December, during our peak sales period," stated chairman and CEO Larry Rossy.

"While not as severe, weather conditions did remain challenging for the remainder of the winter season."

Irene Nattel of RBC Capital Markets said Dollarama posted another "solid quarter" that once again beat analyst expectations.

"We remain confident that Dollarama can deliver solid high teens EPS growth through our forecast period," Nattel wrote in a report.