Dollarama Q1 Sales Rise 13%, Misses Estimates; Shares Fall More Than 3%

Despite COVID-19 restrictions, Dollarama Inc (DOL) posted a double-digit increase in sales for Q1 2022, but the company missed estimates. The dollar-store chain offers a wide variety of consumer goods, general merchandise, and seasonal items at fixed prices of C$1 to C$4.

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Canada’s provincial governments reintroduced tough restrictions in April, including a temporary ban on the sale of discretionary goods and in-store capacity limits.

Sales came in at C$954.2 million in Q1 2022, up 13% from C$844.8 million in Q1 2021, but fell short of analysts’ estimates of C$963 million. Growth in the number of stores over the past 12 months, from 1,301 on May 3, 2020, to 1,368 on May 2, 2021, and a rise in same-store sales of 5.8%, drove the increase in overall sales. Gross margin was 42.3% of sales, an improvement compared to 41.3% of sales a year earlier.

Meanwhile, net income amounted to C$113.6 million (C$0.37 per diluted share), from C$86.1 million (C$0.28 per diluted share) in the prior-year quarter. It missed estimates by C$0.01.

Shares of Dollarama fell more than 3% in early trading on Wednesday. (See Dollarama Inc stock analysis on TipRanks)

Dollarama’s President and CEO Neil Rossy said, “Despite the near-term impact of COVID-19 restrictions which remain in place, our solid momentum in the first two months of the first quarter reflects the relevance of our unique business model and compelling product offering to Canadian consumers from all walks of life. I am also pleased with the progress we have made integrating sustainability initiatives company-wide over the last two years and amidst the pandemic, as outlined in our latest ESG report published this morning. We are proud of our achievements, committed to our goals, and motivated as a team to continue integrating ESG across our business and to meet the expectations of our stakeholders.”

On Tuesday, Desjardins analyst Keith Howlett reiterated a Hold rating on DOL with a C$61.00 price target. This implies 12.4% upside potential.

The rest of the Street is cautiously optimistic on DOL with a Moderate Buy consensus rating based on 5 Buys and 4 Holds. The DOL average analyst price target of C$62.77 implies 16% upside potential to current levels. Shares have gained approximately 4% year-to-date.