Yahoo Finance Dollarama Inc (DLMAF) Q4 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Comparable Store Sales Growth (Q4): 8.7%
Earnings Per Share (Q4): Increased by over 26%
Comparable Store Sales Growth (Fiscal Year): 12.8%
Earnings Per Share (Fiscal Year): Increased 29%
New Store Openings (Fiscal Year): 65 net new stores
Total Store Count: 1,551 at year-end
Q4 Sales: Increased by 11.3% to over $1.6 billion
Annual Sales: Increased 16.1% to nearly $5.9 billion
Gross Margin (Q4): 46.3%
Gross Margin (Fiscal Year): 44.5%
SG&A (Q4): 14.5% of sales
SG&A (Fiscal Year): 14.4% of sales
Dollarcity Net Earnings (Q4): $32.8 million
Dollarcity Net Earnings (Fiscal Year): $75.3 million
EBITDA (Q4): Grew 19.5% to $558.9 million
EBITDA Margin (Q4): 34.1%
EBITDA (Fiscal Year): Increased by 22.2% to over $1.8 billion
EBITDA Margin (Fiscal Year): 31.7%
Diluted Net Earnings Per Share (Q4): $1.15
Diluted Net Earnings Per Share (Fiscal Year): $3.56
Dividend Increase: 29.9% to $0.0920 per share
Leverage Ratio: 2.16x at fiscal year-end
Share Repurchases (Fiscal Year): Over 7.1 million common shares for $665.9 million
Fiscal 2025 Comparable Store Sales Growth Forecast: Between 3.5% and 4.5%
Fiscal 2025 Gross Margin Target: Between 44% and 45% of sales
Fiscal 2025 SG&A Target: Between 14.5% and 15% of sales
Release Date: April 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Comparable store sales growth exceeded expectations at 8.7% for the quarter and 12.8% for the full fiscal year.
Earnings per share (EPS) increased by over 26% for the quarter and 29% for the fiscal year.
Opened 65 net new stores in fiscal 2024, bringing the total store count to 1,551.
Dollarcity, a subsidiary, opened 92 net new stores in calendar 2023, ending the year with over 530 stores.
Gross margin for the full year was strong at 44.5%, reaching the top end of the guidance range.
Negative Points
Average transaction size decreased by 2.2% in Q4, reflecting a potential shift in consumer spending behavior.
SG&A represented 14.5% of sales for Q4, slightly higher than the same period last year due to increased labor costs.
The company faces continued economic uncertainty and difficulty in predicting future consumer behavior.
Shrink (loss of inventory due to theft, damage, or error) is increasing, although it appears to be plateauing.
The company is experiencing higher than historical wage inflation, which is pressuring SG&A as a percentage of sales.
Q & A Highlights
Q: Can you talk through what you saw any shift in cadence as we moved through the quarter? And can you provide some commentary on Q1 to date, please? A: (Patrick Bui - CFO) We continue to see strong consumer demand. For Q1, we finished Q4 at 8.7% and mentioned that we see a progressive normalization. We're seeing still very strong consumer demand.
Q: Is it safe to assume that we are -- the Q1 to date is above the upper end of guidance at this point in time, understanding that we're very early in the year? A: (Patrick Bui - CFO) To be above the full year guidance, I mean, I think that's a safe assumption. But we do say that there is a progressive normalization throughout the year.
Q: Clearly, Dollarcity is making great strides in terms of improving the profitability and the cash flow. How should we be thinking about the evolution there? A: (Patrick Bui - CFO) We're very pleased with the results of Dollarcity. We think there's still lots of growth potential, lots on the store front and as well in terms of scaling and margin expansion. We do expect the business to continue doing well.
Q: Patrick, just wondering what your initial observations are as you enter Dollarama, versus what you thought and what it actually is like and if there's any incremental changes that we should expect in the finance function as a result of your hire? A: (Patrick Bui - CFO) It's a business grounded in solid fundamentals, capable of generating strong cash flows and a strong return on invested capital. There's a strong culture here at Dollarama, laser-focused on delivering on its promises and always focus on efficiency.
Q: How is shrink trending? And what can management do to control that line a bit better? A: (Patrick Bui - CFO) Shrink is increasing, but it seems to be plateauing as well. Managing shrink is a high priority at Dollarama, and we've put in place a host of initiatives to combat shrink.
Q: We had very strong transaction growth and a modest decline in basket size. Is that mainly because consumers are just generally going to Dollarama more often, but buying less each time as they try to manage their budgets? A: (Neil Rossy - CEO, President & Director) Your assessment is correct. We believe that consumers are going to Dollarama more often, but buying less each time as they try to manage their budgets.
Q: On your fiscal '25 same-store sales guidance, I was just wondering how you're thinking about the different drivers? A: (Patrick Bui - CFO) We're seeing strong consumer demand and response to our value proposition. We focus on what we control, which is every day focusing on delivering the best value to consumers through product refresh. We also see population growth as being a driver in the future.
Q: Capital allocation and the 30% increase in the dividend. Is that what we should expect going forward? A: (Patrick Bui - CFO) We try to keep our dividend consistent with our growth. Our earnings per share increased by close to 30%, and there is a link between our EPS growth and our dividend growth.
Q: What you're seeing in terms of production capacity coming out of Asia and product prices in Asia, do you expect it to be flat or up or slightly down in fiscal '25? A: (Neil Rossy - CEO, President & Director) Production in Asia is business as usual from the perspective of capacities. The pricing is pretty stable at this point in time.
Q: On the last call, you mentioned consumables in North America is kind of a challenging -- a tough backdrop. Just wondering if you can talk a little bit about -- presumably that's still the case, but any chance you can see lower North American vendor prices you think in fiscal '25? A: (Neil Rossy - CEO, President & Director) There's still price pressure from a supply domestic national brand supply perspective. But I think at the retail end, things have settled and the market is fairly stable.
Q: My first question is on your EBITDA margins. They've reached 31.7%. It's the highest level ever for you this year. The question is where do we go from here? A: (Patrick Bui - CFO) When we think of margin expansion, we think a lot more on the SG&A front. We always think that there's room for improvement. We have some productivity initiatives. Hopefully, in the future, that will subside. We don't know. So looking in the future, we'll see, but hopefully, we could find other opportunities down the road.
Q: I just want to touch on your $5 price points. Is the ramp-up complete at this point? A: (Neil Rossy - CEO, President & Director) I don't think a price point rollout is ever complete. It's a continuation in perpetuity to be honest. Certainly, the original ramp-up is complete and $5 is part of the assortment well integrated into the offer for the shopper.
Q: Inflation has been very high in the last 2 years. Wondering if you've started to think about your next price point introduction? A: (Neil Rossy - CEO, President & Director) We're always thinking about all of the key drivers of the business. At this point in time, we have no plans to introduce any other price points.
This article first appeared on GuruFocus.
