Dollarama Inc. DOL-T +3.29%increase is predicting sales growth will slow slightly in the coming year, signalling the discount retailer that has benefited from budget-conscious shoppers may be sensing a shift in consumer behaviour.
On Tuesday, the Montreal-based retailer forecast same-store sales growth to be between 3 to 4 per cent in the year ahead, after reporting full-year same-store sales growth of 4.2 per cent in the fiscal year ended Feb. 1.
Same-store sales, which tracks sales growth excluding the impact of acquisitions or the opening of new locations, is an important metric in the retail industry.
Dollarama has benefitted in recent years from a challenging economic backdrop, as Canadians in search of lower-priced goods have been driven to visit discount stores more often – a trend that grocery retailers have also noted.
And Dollarama’s sales are still growing. In the fourth quarter, the company reported same-store sales growth of 3.5 per cent, when adjusted to remove the impact of an extra week that was included in the same period the prior year. Even with the adjustment, however, growth did slip somewhat compared to the prior year, when fourth-quarter same-store sales grew by almost 5 per cent.
Rough weather conditions negatively impacted traffic to the stores during the quarter, president and CEO Neil Rossy said in a press release on Tuesday. The number of checkouts at Dollarama stores fell by 1.6 per cent, and people also bought less during each trip, leading to a 3.1-per-cent decline in average transaction size.
The calendar shift also meant that this year’s quarter was missing a strong week of pre-holiday and Halloween sales, which was included in the quarterly results in the prior year.
Dollarama reported $2.1-billion in sales in the fourth quarter, up 11 per cent compared to the same period the prior year. That increase was largely driven by Dollarama’s acquisition last year of Australia’s largest discount retailer, The Reject Shop – whose 402 stores were not part of the fourth-quarter results the prior year – as well as 75 new store openings in Canada over the past year.
The retailer’s profits were roughly flat in the quarter, and fell on an earnings-per share basis. Dollarama reported net earnings of $392.5-million or $1.43 in diluted net earnings per common share, compared to $391-million or $1.40 per share during the same period the prior year.
For the full fiscal year, Dollarama’s sales grew by 13.1 per cent to $7.26-billion, and comparable sales were up 4.2 per cent, accounting for the calendar shift with the additional week the prior year. Net earnings grew to $1.3-billion or $4.73 in diluted net earnings per common share, compared to nearly $1.2-billion or $4.16 per share the year before.
In the year ahead, Dollarama is planning to open 60 to 70 new stores in Canada. In Australia, the company is planning to stock more lower-priced products that it will import to that country, and to renovate 60 to 80 stores with the Dollarama layout, as well as open 15 to 25 new stores. Investments in Australia will mean that segment of the business will likely report a net loss in the coming fiscal year, according to the company.
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