The pandemic of COVID-19 will weigh on the results of Dollarama

La pandémie de COVID-19 pèsera sur les résultats de Dollarama

Photo: Olivier Zuida The Duty
If Dollarama has obtained the status of an essential service, it nevertheless had to close 54 of 1291 institutions of its network.

If the outbreak of the COVID-19 has led to a surge in the number of transactions in the stores Dollarama while some wanted to make the full product, this soon gave way to a decline in ridership as the authorities intensified the measures of social distancing.

Calling the situation ” unprecedented “, the direction of retailer articles at $ 1 and most preferred, for the moment, refrain from providing forecasts on Wednesday, unveiling its results for the fourth quarter and for the year, which, in both cases, have been on the rise.

For the three-month period that began on February 3 and ends on may 3, the company established in Montréal anticipates a decline in sales in its stores open for at least a year — a key indicator in the retail sector.

The current quarter had started well, since the momentum of the comparable sales and the goodwill recognized at the end of the fourth quarter continued. From late February to mid-march, Dollarama has seen consumers rush to products such as hand sanitizer, wipes, cleaning and food in the wake of the fears caused by the spread of the coronavirus.

“After this period, the number of transactions has started to ease,” commented president and chief executive officer of the corporation Neil Rossy, during a conference call with analysts attributing this to the numerous decisions of the authorities which are translated by closures of companies.

If the retailer has obtained the status of an essential service, it nevertheless had to close 54 of 1291 institutions of its network. It is basically stores that are in shopping centres quebecers who have temporarily stopped their activities.

Elsewhere in the country, the decrease of the traffic has been of the order of 50 % during the last week in the Dollarama located in shopping centres. The decline was not as marked in the institutions with an external entrance — which represent 75 % of the network.

Since the beginning of the pandemic, consumers are opting more for goods of basic consumption of limiting other discretionary spending, which applies pressure on the margins.

“People don’t think of eggs [Easter] at the present time “, highlighted Mr. Rossy.

The coronavirus also translates into higher costs for Dollarama, which has enhanced by 10 %, until 1 July, the remuneration of the employees of its stores, warehouses and distribution centre’s. In the points of sale, a shift has been added to disinfect the shelves and baskets, as well as to control the number of clients that can simultaneously be found on the inside.

For the moment, the company does not expect to raise its prices, but the weakness of the canadian dollar and raw materials more expensive, could force its hand in the longer term. For example, the price of ethyl alcohol, used in the manufacture of disinfectant for the hands, it jumped from 10 % to 15 % over the last week due to the demand, pointed out the boss of the retailer.

“We’re going to do our best to push (increases) as long as possible,” replied Mr. Rossy, when asked by an analyst.

For the 13-week period ended February 2, Dollarama reported net earnings of $ 178.7 million, or 57 cents per share, up 4.5 %, while sales were 1.07 billion dollars. The fourth quarter of the previous fiscal year had an extra week accounted for sales of approximately 57 million.

With respect to the fiscal year, net profits were $ 564 million, or $ 1.78 per share, on revenue of about $3.8 billion.

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