Canadian dollar-store operator Dollarama Inc’s quarterly same-store sales growth came ahead of Wall Street expectations on December 4th, as shoppers spent more at its stores.

Sales at stores open for at least 13 months rose 5.3% in the third quarter ended Nov. 3, beating the average analyst estimate of 3.84%, according to IBES data from Refinitiv.

Dollarama reported a 2.8% boost in average transaction size, thanks in part to an increase in the number of units per basket. A 2.4% increase in traffic also helped same-store sales grow.

Net sales rose 9.6% to $947.6 million. 

“Based on our performance to date, we are narrowing our underlying full-year comparable store sales assumption to 4% to 4.5%, the top end of the previously disclosed range,” said CEO Neil Rossy in a statement.

Sustained momentum in this metric in the 2021 financial year — Dollarama is currently reporting for its 2020 financial year — “could be a catalyst for share price/modest valuation expansion, in our view,” wrote Irene Nattel, an RBC Dominion Securities Inc. analyst, in a note. Analysts had expected a 3.75% quarterly increase in same-store sales for the discounter, she wrote, below the reported 5.3% increase.

Despite these strong results, shares in Dollarama Inc. dropped nearly 9% on December 4th despite reporting strong third-quarter results.

Dollarama shares closed down $4.34, or 8.85%, to $44.70 on the Toronto Stock Exchange.

Nattel attributed the intraday trading activity to management’s cautious tone around fourth-quarter expectations and projected shipping costs for the next financial year.

For the quarter, Dollarama reported a profit of $138.6 million, up from $132.1 million in the same quarter last year, helped by a boost in sales.

The discount retailer says the profit amounted to 44 cents per diluted share compared with a profit of 40 cents per diluted share in the same quarter last year.

New stores helped boost sales. Dollarama added 21 net new stores in the quarter — up from 14 in the same quarter last year — for a total count of 1,271 as of Nov. 3. It remains on track to open between 60 and 70 net new stores in this financial year as it works to grow to 1,700 locations in Canada by 2027.

Source: Financial Post
Source: BNN