Decline in the profit of the Dollarama in the 1st quarter

Photo: Michael Monnier Archives The Duty
Dollarama has surpassed the expectations of analysts, who believed that the pandemic would weigh more on its results.

Dollarama posted on Wednesday a decline in its earnings for its most recent quarter, but the retailer has nevertheless surpassed the expectations of analysts, who believed that the pandemic would weigh more on its results.

“Following a sales environment volatile in the first quarter, we are pleased and satisfied with the momentum that we are seeing in our business at the beginning of the second quarter,” said chief financial officer Michael Ross during a conference call with analysts after the publication of the financial results for the first quarter of the retailer.

The montreal company has made a profit of almost $ 86.1 million, or 28 cents per share, for the quarter ended may 3. In comparison, he had earned 103.5 million $, or 33 cents per share, for the same quarter a year earlier.

This surpassed the estimate of Desjardins securities and the analysts ‘ consensus, which was for a profit of 26 cents per share, wrote analyst Chris Li in a note.

“This superior performance is explained by the fact that the comparable store sales and gross margin were better than expected, because the negative impact of COVID-19 was inferior to what we and (the analysts) had expected,” he writes.

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Excluding the establishments temporarily closed, Dollarama has indicated that its sales at stores open for at least a year had climbed by 0.7 %. The average size of transactions has increased by 22.6 %, but the number of transactions has decreased by 17.9 %, consumers outgoing less often, but spending more during their visits.

Analysts expect a decrease of 3.6 % to the quarter, ” said Mr. Li.

Taking into account the closed stores, comparable sales decreased 2.4 %.

In total, sales amounted to 844,8 million $, compared to 828,0 million during the first quarter of last year.

The company has seen a strong increase in customer traffic in stores in early march, stressed the chief executive officer, Neil Rossy, while customers stocking up on household products and cleaning products, health and hygiene, and food.

“It is not surprising that the demand for seasonal products for Easter, and for the beginning of the summer, party goods and greeting cards have been lower in these exceptional circumstances,” he said.

At the end of march, Holdings has experienced a steep decline in customer traffic in the stores, he explained, so that governments and health authorities imposed strict measures to help curb the spread of the coronavirus.

The stores located in malls have been the most affected, ” said Mr. Rossy. These represent about one-quarter of the establishments of the company.

At the end of April, he continued, the situation has begun to stabilize and some provinces have begun to announce their intention to re-open their economies and customers have begun to move further.

“However, the store traffic has continued to be affected by the measures of distancing physical put in place. “

The company expects a slow recovery and cautious of its activities across Canada during the second quarter, he said. Currently, 32 of the 1301 stores Dollarama remain temporarily closed. The company has been regarded as an essential service by some of the provinces, which allowed him to keep its stores open in many regions.

While several categories, such as birthday cards and greeting cards, will remain in decline, others are higher than normal, said Mr Ross, as the toys of summer, and pool and gardening supplies.

The company makes decisions based on estimates informed as to what is the amount of stock it buys for the future, ” said Mr. Rossy.

For the coming holiday season of Halloween and Christmas, his approach is essentially based on the status quo, while being more conservative for the purchase of consumable products, such as candy and chocolate.

“But for the other stuff, it can last even another year, it is not time-sensitive,” said Mr. Rossy.

So we’re going to take the risk of having too many goods for the Holiday season in order to be certain of having the goods needed, if things get back to normal. “

Dollarama has indicated that they have spent $ 15.0 million during the second half of the quarter to protect the health and safety of employees and customers, and to support the employees.

The retailer said to have put in place strict protocols to minimise the risks to employees and clients in all cases proved or probable COVID-19, including cleaning protocols, instructions for self-isolation, and financial support to the employees affected-directly or indirectly.

It was indicated that a total of 20 employees of its stores had been with the COVID-19-in date of Monday.