Canadian bargain retailer Dollarama (TSE:DOL) posted its earnings report earlier today, and the news was met with wild applause from shareholders. Everything from sales figures to the dividend was up, and that was more than enough for shareholders, who sent shares up around 5% in Thursday morning’s trading.
Everything proved up for Dollarama, starting with earnings per share figures. Dollarama posted earnings per share of $1.40 per diluted share. This was up substantially from the $1.15 per share from last year’s fourth quarter figures. Sales also surged, up from $1.64 billion a year prior to $1.88 billion with the latest figures, largely proving that the discount retail market is doing pretty well in a time when economic uncertainty stalks the land.
Better yet, for investors, Dollarama also put a little extra under the quarterly dividend. Now, Dollarama will pay $0.1058 instead of the previous $0.092. That may not sound like much—and it really is not unless you own several thousand shares—but it is still a fairly large boost on a percentage scale. Even comparable store sales growth was up, gaining 4.9%, with a 5.3% increase in total transactions. The only figure that was down was average transaction size, which slipped 0.4%.
The Australian Job
So not long ago, we found out that Dollarama was making a bigger push on Australia with its acquisition of the Reject Shop. This plan will prove a bit troublesome, reports note, as the Reject Shop actually has some troubling indicators associated with it. It has higher costs for both labor and real estate, and also has “seasonal revenue variations,” which probably should come as little surprise. Most retail operations do have seasonal variations in one way or another.
However, Dollarama reportedly has a plan to address these issues. A combination of improved operational efficiency along with “shared merchandise sourcing,” reports note, should allow Dollarama and its new Reject Shop to take better advantage of bulk pricing and economies of scale. That may smooth out some of those seasonal variations and give Dollarama much better market penetration.
Is Dollarama a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Dollarama stock based on five Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 52.89% rally in its share price over the past year, the average Dollarama price target of C$153.50 per share implies 8% downside risk.
