Dollarama (DOL) sales and profits increased in the third quarter of 2022, as the company reported strong performance across all key indicators.
The dollar-store chain offers a wide variety of consumer goods, general merchandise, and seasonal items at prices of C$1 to C$4. (See Analysts’ Top Stocks on TipRanks)
Sales & Earnings
Sales came in at C$1.12 billion in Q3 2021, up 5.5% from C$1.06 billion in Q3 2021. Comparable store sales decreased by 0.8%.
Gross margin was 44.4% of sales in the quarter ended October 31, compared to 44% of sales a year earlier.
Net earnings amounted to C$183.4 million (C$0.61 per diluted share), up from C$161.9 million (C$0.52 per diluted share) in the prior-year quarter. It beats estimates by C$0.04.
The discount store operator enjoyed strong demand for its higher-margin seasonal products, such as Halloween decorations and candy.
Dollarama opened 16 net new stores during the quarter, bringing its total number of stores to 1,397 from 1,333 a year ago.
Dollarama president and CEO Neil Rossy said, “We delivered a solid performance across key metrics in the third quarter of Fiscal 2022. We are pleased with our comparable store sales growth, both year-over-year following exceptionally strong seasonal sales in the same quarter last year, and on a two-year average basis.
“We also generated strong EPS growth and an industry-leading gross margin despite the various headwinds impacting the retail sector.”
Rossy added that his teams have worked nimbly to ensure Dollarama entered the fourth quarter with well-stocked stores.
Wall Street’s Take
On December 6, Desjardins analyst Chris Li reiterated a Hold rating on DOL with a C$61 price target. This implies 6.1% upside potential.
The rest of the Street is cautiously optimistic on DOL with a Moderate Buy consensus rating, based on five Buys and three Holds.
The average Dollarama price target of C$62.75 implies 9.1% upside potential to current levels.