Dollarama Q2 EPS Rises 4.3%, Misses Estimates

Dollarama Inc. (DOL) sales and profits increased slightly in the second quarter of Fiscal Year 2022, but its comparable store sales decreased due to the impact of COVID-19 restrictions.

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The dollar-store chain offers a wide variety of consumer goods, general merchandise, and seasonal items at prices of C$1 to C$4. (See Dollarama Inc stock charts on TipRanks)

Sales came in at C$1.03 billion in Q2 2022, up 1.6% from C$1.01 billion in Q2 2021, but short of analysts’ estimates of C$1.04 billion. Comparable store sales decreased by 5.1%, due to a ban on the sale of non-essential products in Ontario for the first 5.5 weeks of the quarter. The company says that for the 7.5-week period after the ban in Ontario was lifted, comparable store sales were up 5.1% from a year ago.

Gross margin was 43.4% of sales in the quarter ended August 1, compared to 43.9% of sales a year earlier.

Meanwhile, net earnings amounted to C$146.2 million (C$0.48 per diluted share), up from C$142.5 million (C$0.46 per diluted share) in the prior-year quarter. It missed estimates by C$0.01.

Shares of Dollarama fell approximately 1.1% in early trading Thursday.

Dollarama resident and CEO Neil Rossy said, “Our top-line performance in the second quarter of Fiscal 2022 reflects the impact of COVID-19 restrictions in place throughout the quarter, most notably a 5.5-week ban on the sale of non-essential products in our largest Canadian market during peak spring sales season.

“We nonetheless delivered positive EPS growth in a challenging landscape for value retailers, and we were pleased to see a notable uptick in customer traffic in our stores, a trend we continue to see today. Over 18 months into the pandemic, our fundamentals and value proposition are strong, and we are well-positioned to continue serving Canadians from all walks of life as the economy reopens.”

Dollarama opened 13 net new stores during the quarter, bringing its total number of stores to 1,381 from 1,314 a year ago.

Three days ago, Desjardins analyst Chris Li reiterated a Hold rating on DOL, with a C$61 price target. This implies 7.2% upside potential. Li said: “We believe there is potential upside to our C$61 target but prefer to wait for better visibility.”

The rest of the Street is cautiously optimistic on DOL, with a Moderate Buy consensus rating, based on three Buys and four Holds. The average Dollarama price target of C$64.47 implies 13.3% upside potential to current levels.