PR Newswire | Dec 8, 2021 07:01AM EST

12/08 06:00 CST

Dollarama Reports Fiscal 2022 Third Quarter Results MONTREAL, Dec. 8, 2021

MONTREAL, Dec. 8, 2021 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") today reported its financial results for the third quarter ended October 31, 2021.

Fiscal 2022 Third Quarter Highlights Compared to Fiscal 2021 Third Quarter Results

* Sales increased by 5.5% to $1,122.3 million * Comparable store sales(1) increased by 0.8%, over and above 7.1% growth in the prior year, and averaged 3.9% per year over a two-year period * Gross margin(1) was 44.4% of sales, compared to 44.0% of sales * EBITDA(1) increased by 11.2% to $347.0 million, or 30.9% of sales, compared to 29.3% of sales * Operating income increased by 11.4% to $271.6 million, or 24.2% of sales, compared to 22.9% of sales * Diluted net earnings per common share increased by 17.3%, to $0.61 from $0.52 * 16 net new stores were opened, compared to 19 net new stores, bringing total store count to 1,397 from 1,333 a year ago * 5,266,219 common shares were repurchased for cancellation for $294.5 million

"We delivered a solid performance across key metrics in the third quarter of Fiscal 2022. We are pleased with our comparable store sales growth, both year-over-year following exceptionally strong seasonal sales in the same quarter last year, and on a two-year average basis. We also generated strong EPS growth and an industry-leading gross margin despite the various headwinds impacting the retail sector," said President and CEO Neil Rossy.

"Our teams have worked nimbly to ensure that we entered the fourth quarter with well-stocked stores offering compelling value on everyday and seasonal goods to Canadians from all walks of life ahead of the holidays. Our ability to adapt in the second year of the pandemic in what continues to be a complex environment further reinforces the resilience of our unique business model, the relevance of our brand and strong value proposition to Canadian consumers," concluded Mr. Rossy.

Fiscal 2022 Third Quarter Financial Results

All comparative figures that follow are for the third quarter ended October 31, 2021 compared to the third quarter ended November 1, 2020. All financial information presented in this press release has been prepared in accordance with generally accepted accounting principles in Canada ("GAAP") as set out in the CPA Canada Handbook - Accounting under Part I, which incorporates International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). EBITDA, EBITDA margin, total debt, net debt and adjusted net-debt-to-EBITDA ratio, which are referred to as "non-GAAP measures", are used throughout this press release to provide a better understanding of the Corporation's financial results. For a full explanation of the Corporation's use of non-GAAP measures, please refer to footnote 1 of the "Selected Consolidated Financial Information" section of this press release. All references to "Fiscal 2021" are to the Corporation's fiscal year ended January 31, 2021, and to "Fiscal 2022" are to the Corporation's fiscal year ending January 30, 2022.

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^(1) We refer the reader to the notes in the section entitled "SelectedConsolidated Financial Information" of this press release for the definition ofthese items and, when applicable, their reconciliation with the most directlycomparable GAAP measure.

Sales for the third quarter of Fiscal 2022 increased by 5.5% to $1,122.3 million, compared to $1,064.2 million in the corresponding period of the prior fiscal year. This increase is attributable to the growth in the total number of stores over the past twelve months, from 1,333 on November 1, 2020 to 1,397 stores on October 31, 2021, and to an increase in comparable store sales driven by strong Halloween sales.

Comparable store sales for the third quarter of Fiscal 2022 increased by 0.8%, over and above 7.1% growth in the prior year. Comparable store sales consisted of a 2.8% decrease in average transaction size and a 3.7% increase in the number of transactions, reflecting a gradual reversal in consumer shopping patterns compared to the prior year. Over a two-year period, comparable store sales growth for the third quarter averages 3.9% per year.

Gross margin was 44.4% of sales in the third quarter of Fiscal 2022, compared to 44.0% of sales in the third quarter of Fiscal 2021. Gross margin was higher year over year primarily due to a higher proportion of sales of high-margin seasonal products.

General, administrative and store operating expenses ("SG&A") for the third quarter of Fiscal 2022 decreased by 1.1% to $159.1 million, compared to $160.9 million for the third quarter of Fiscal 2021. SG&A for the third quarter of Fiscal 2022 represented 14.2% of sales, compared to 15.1% of sales for the third quarter of Fiscal 2021. This 0.9% variance primarily reflects lower COVID-19 related costs recorded in the third quarter of Fiscal 2022 compared to the prior year.

Incremental direct costs related to COVID-19 measures for the third quarter of Fiscal 2022, all recorded in SG&A, totalled $1.1 million, representing a 10 basis-point impact. This is compared to $10.9 million, representing a 100 basis-point impact, recorded in SG&A in the same period last year.

The Corporation's 50.1% share of Dollarcity's net earnings for the period from July 1, 2021 to September 30, 2021 was $7.3 million, compared to $4.3 million for the same period last year. The Corporation's investment in Dollarcity is accounted for as a joint arrangement using the equity method.

Financing costs increased by $0.1 million, from $23.0 million for the third quarter of Fiscal 2021 to $23.1 million for the third quarter of Fiscal 2022.

Net earnings were $183.4 million, or $0.61 per diluted common share, in the third quarter of Fiscal 2022, compared to $161.9 million, or $0.52 per diluted common share, in the third quarter of Fiscal 2021.

Dollarcity Store Growth

During its third quarter ended September 30, 2021, Dollarcity opened 18 net new stores, bringing its total store count to 312 stores with 180 locations in Colombia, 57 in El Salvador, 72 in Guatemala and 3 in Peru. This compares to a total of 264 stores as at December 31, 2020.

Dividend

On December 8, 2021, the Corporation announced that its Board of Directors approved a quarterly cash dividend for holders of common shares of $0.0503 per share. This dividend is payable on February 4, 2022 to shareholders of record at the close of business on January 7, 2022. The dividend is designated as an "eligible dividend" for Canadian tax purposes.

Normal Course Issuer Bid

On July 5, 2021, the Corporation announced the renewal of its normal course issuer bid and the approval from the Toronto Stock Exchange to repurchase for cancellation up to 19,376,824 common shares, representing 7.5% of the public float as at the close of markets on June 30, 2021, during the 12-month period from July 7, 2021 to July 6, 2022.

During the third quarter of Fiscal 2022, 5,266,219 common shares were repurchased for cancellation under the normal course issuer bid, for a total cash consideration of $294.5 million, at a weighted average price of $55.92 per share.

Barring factors outside of its control due to the ongoing COVID-19 pandemic, the Corporation intends to continue share repurchases under its normal course issuer bid in Fiscal 2022 while maintaining its adjusted net-debt-to-EBITDA ratio within the 2.75 to 3.00 times range. As at October 31, 2021, the Corporation's adjusted net-debt-to-EBITDA ratio(1) was 2.80 times.

Outlook and COVID-19 Impact

The future impact of the ongoing COVID-19 pandemic on consumer shopping patterns and the Corporation's results, including potential additional COVID-19 measures that may be taken by provincial governments, as well as the pandemic's disruptive effect on international freight among other external factors, remain difficult to quantify or forecast. As a result, guidance for Fiscal 2022 remains limited to the following key metrics:

Fiscal 2022 Guidance

Net new store openings 60 to 70

Capital expenditures^(i) $160.0 million to $170.0 million

^(i) Includes additions to property, plant and equipment, computer hardware and software.

These guidance ranges for Fiscal 2022 are based on a number of assumptions, including the following:

* the number of signed offers to lease and store pipeline for the next three months; * the absence of COVID-related restrictions on construction activities in the provinces where new store openings are planned; and * the capital budget for Fiscal 2022 for new store openings, maintenance capital expenditures, and transformational capital expenditures (the latter being mainly related to information technology projects).

Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, risks related to the ongoing COVID-19 pandemic, which may slow down store openings or which may prompt the Corporation to hold off on planned capital expenditures in order to preserve liquidity. This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the cautionary statement on forward-looking statements.

Forward-Looking Statements

Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements.

Forward-looking statements are based on information currently available to management and on estimates and assumptions made by management regarding, among other things, general economic conditions and the competitive environment within the retail industry in Canada and in Latin America, in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including the factors which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's annual management's discussion and analysis for Fiscal 2021, available on SEDAR at www.sedar.com.

These factors are not intended to represent a complete list of the factors that could affect the Corporation or Dollarcity; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's and Dollarcity's financial performance and may not be appropriate for other purposes. Readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as at December 8, 2021 and management has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Conference Call

Dollarama will hold a conference call to discuss its Fiscal 2022 third quarter results today, December 8, 2021 at 10:30 a.m. (ET). Financial analysts are invited to ask questions during the call. Other interested parties may participate in the call on a listen-only basis. The live audio webcast is accessible through Dollarama's website at https://www.dollarama.com/en-CA/corp/events-presentations.

About Dollarama

Dollarama is a recognized Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. Our 1,397 locations across Canada provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Select products are also available, by the full case only, through our online store at www.dollarama.com. Our quality merchandise is sold at select fixed price points up to $4.00.

Dollarama also owns a 50.1% interest in Dollarcity, a growing Latin American value retailer. Dollarcity offers a broad assortment of consumable products, general merchandise and seasonal items at select fixed price points up to US$4.00 (or the equivalent in local currency) in El Salvador, Guatemala, Colombia and Peru through its 312 conveniently located stores.

www.dollarama.com

Selected Consolidated Financial Information

13-Week Periods Ended 39-Week Periods Ended

(dollars and shares in thousands, except per share amounts) October 31, November 1, October 31, November 1, 2021 2020 2021 2020

$ $ $ $

Earnings Data

Sales 1,122,267 1,064,201 3,105,861 2,922,591

Cost of sales 623,480 595,455 1,756,974 1,660,044

Gross profit 498,787 468,746 1,348,887 1,262,547

SG&A 159,076 160,904 474,841 467,979

Depreciation and amortization 75,375 68,291 219,962 198,773

Share of net earnings of equity-accounted investment (7,311) (4,259) (14,814) (9,136)

Operating income 271,647 243,810 668,898 604,931

Financing costs 23,054 23,048 68,056 72,854

Earnings before income taxes 248,593 220,762 600,842 532,077

Income taxes 65,192 58,891 157,639 141,631

Net earnings 183,401 161,871 443,203 390,446

Basic net earnings per common share $0.61 $0.52 $1.45 $1.26

Diluted net earnings per common share $0.61 $0.52 $1.45 $1.25

Weighted average number of common shares outstanding:

Basic 301,135 311,146 305,105 310,725

Diluted 302,573 312,838 306,544 312,494

Other Data

Year-over-year sales growth 5.5% 12.3% 6.3% 7.4%

Comparable store sales growth ^(2) 0.8% 7.1% 0.2% 4.6%

Gross margin ^(3) 44.4% 44.0% 43.4% 43.2%

SG&A as a % of sales ^(3) 14.2% 15.1% 15.3% 16.0%

EBITDA ^(1) 347,022 312,101 888,860 803,704

Operating margin ^(3) 24.2% 22.9% 21.5% 20.7%

Capital expenditures 35,228 33,602 110,279 116,102

Number of stores ^(4) 1,397 1,333 1,397 1,333

Average store size (gross square feet) ^(4) 10,346 10,313 10,346 10,313

Declared dividends per common share $0.0503 $0.044 $0.1509 $0.132

As at

October 31, January 31, 2021 2021

$ $

Statement of Financial Position Data

Cash 96,999 439,144

Inventories 599,204 630,655

Total current assets 736,236 1,100,362

Property, plant and equipment 741,400 709,469

Right-of-use assets 1,443,260 1,344,639

Total assets 3,998,801 4,223,746

Total current liabilities 558,738 1,321,165

Total non-current liabilities 3,421,541 2,567,727

Total debt ^(1) 1,813,778 1,883,051

Net debt ^(1) 1,716,779 1,443,907

Shareholders' equity 18,522 334,854

In this press release, EBITDA, EBITDA margin, total debt, net debt and adjusted net-debt-to-EBITDA ratio are referred to as "non-GAAP measures". Non-GAAP measures are not generally accepted measures under GAAP and do not^ have a standardized meaning under GAAP. EBITDA, EBITDA margin, total debt(1) and net debt are reconciled below, and the formula for the calculation of^ the adjusted net-debt-to-EBITDA ratio is set out in note 5 below. The non-GAAP measures, as calculated by the Corporation, may not be comparable to those of other issuers and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with GAAP.

We have included non-GAAP measures to provide investors with supplemental measures of our operating and financial performance. We believe that non-GAAP measures are important supplemental metrics of operating and financial performance because they eliminate items that have less bearing on our operating and financial performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP measures. We also believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers, many of which present non-GAAP measures when reporting their results. Our management also uses non-GAAP measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.

13-Week Periods Ended 39-Week Periods Ended

October 31, November 1, October 31, November 1,(dollars in thousands) 2021 2020 2021 2020

$ $ $ $

A reconciliation of operating income to

EBITDA is included below:

Operating income 271,647 243,810 668,898 604,931

Add: Depreciation and amortization 75,375 68,291 219,962 198,773

EBITDA 347,022 312,101 888,860 803,704

EBITDA margin ^(3) 30.9% 29.3% 28.6% 27.5%

A reconciliation of long-term debt to total debt is included below: As at

October 31, January 31,(dollars in thousands) 2021 2021

$ $

Senior unsecured notes bearing interest at:

Fixed annual rate of 2.443% payable in equal semi-annual instalments,

maturing July 9, 2029 375,000 -

Fixed annual rate of 1.505% payable in equal semi-annual instalments,

maturing September 20, 2027 300,000 300,000

Fixed annual rate of 1.871% payable in equal semi-annual instalments,

maturing July 8, 2026 375,000 -

Fixed annual rate of 3.55% payable in equal semi-annual instalments,

maturing November 6, 2023 500,000 500,000

Fixed annual rate of 2.203% payable in equal semi-annual instalments,

maturing November 10, 2022 250,000 250,000

Fixed annual rate of 2.337% payable in equal semi-annual instalments,

repaid on July 22, 2021 - 525,000

Variable rate equal to 3-month bankers' acceptance rate (CDOR) plus 27 basis

points payable quarterly, repaid on February 1, 2021 - 300,000

Accrued interest on senior unsecured notes 16,522 8,051

Fair value hedge - basis adjustment on interest rate swap (2,744) -

Total debt 1,813,778 1,883,051

Adjusted net-debt-to-EBITDA ratio ^(4)(5) 2.80x 2.68x

A reconciliation of total debt to net debt is included below:

Total debt 1,813,778 1,883,051

Cash (96,999) (439,144)

Net debt 1,716,779 1,443,907

Comparable store sales growth is a measure of the percentage increase or decrease, as applicable, of the sales of stores, including relocated and^ expanded stores, open for at least 13 complete fiscal months relative to(2) the same period in the prior fiscal year. For the first and second quarters of Fiscal 2021 and Fiscal 2022, comparable store sales growth excludes temporarily closed stores in the context of the COVID-19 pandemic.

Gross margin represents gross profit divided by sales. SG&A as a percentage^ of sales represents SG&A divided by sales. Operating margin represents(3) operating income divided by sales. EBITDA margin represents EBITDA divided by sales.

^ At the end of the period.(4)

This ratio is calculated as adjusted net debt (sum of total long-term debt,^ short-term borrowings and total lease liabilities, less cash) over last(5) twelve months consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization).

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SOURCE Dollarama Inc.