Dollarama Inc. (TSX: DOL) continues to demonstrate its resilience in the face of economic uncertainty, reporting a robust financial performance for the second quarter of fiscal 2025, which ended on July 28, 2024.
The retailer’s total sales increased by 7.4%, reaching $1.56 billion compared to $1.46 billion in the second quarter of fiscal 2024. This growth was driven by a combination of new store openings and strong comparable store sales, which rose by 4.7%.
However, this growth came against the backdrop of a significant 15.5% comparable store sales surge in the same period the year before, highlighting the retailer’s sustained momentum despite a slight cooling in consumer spending trends.
“Canadian consumers continue to recognize and rely on our compelling value as they deploy their discretionary spending prudently in a challenging economic environment. Our strong traffic trends quarter after quarter also confirm that the breadth of our product offering is allowing us to meet the needs of our consumers,” said CEO Neil Rossy in a statement.
A key driver of Dollarama’s growth has been the increase in the number of stores, with the company expanding its presence from 1,525 stores in July 2023 to 1,583 stores in July 2024. This expansion has been instrumental in driving higher sales, but the company also saw a notable shift in consumer behavior. While the number of transactions increased by 7%, the average transaction size fell by 2.2%, indicating that while more customers are shopping at Dollarama, they are spending less per visit.
The softening demand for non-essential seasonal products, such as the spring-summer assortment, reflects a shift in consumer priorities. Instead, consumables—everyday essential items—remained in high demand. This trend mirrors broader economic conditions where inflationary pressures have squeezed disposable incomes, prompting consumers to focus more on necessities.
One of the most significant takeaways from Dollarama’s Q2 report was its improved profitability. The company’s gross margin rose to 45.2%, up from 43.9% in the same period last year. This increase was attributed to more favorable contractual rates with carriers and reduced logistics costs, which helped Dollarama offset rising store operating expenses.
EBITDA, a key indicator of a company’s profitability, increased by 14.7% to $524.3 million, representing an EBITDA margin of 33.5%, up from 31.4% last year. Operating income also saw a double-digit rise, increasing by 15.3% to $422.9 million.
A notable financial decision was Dollarama’s continued focus on returning capital to shareholders. During the second quarter, the company repurchased 2.1 million common shares for $263.1 million as part of its ongoing normal course issuer bid. This share repurchase program, authorized in July 2024, allows the company to repurchase up to 6% of its public float by July 2025.
Additionally, Dollarama announced a quarterly cash dividend of $0.0920 per share, payable on November 1, 2024, to shareholders of record as of October 4, 2024. This marks an increase from the previous year’s dividend of $0.0708 per share, reflecting the company’s strong financial position and commitment to rewarding its investors.
Looking ahead, Dollarama reaffirmed its guidance for the full fiscal year 2025, expecting comparable store sales growth to be between 3.5% and 4.5%. The company also anticipates gross margins to be in the range of 44% to 45%, with capital expenditures projected to be between $175 million and $200 million as it continues to open new stores and invest in infrastructure.
The company’s planned store expansion for fiscal 2025 includes the opening of 60 to 70 new locations, reflecting its confidence in continued growth despite economic challenges.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
