By Adriano Marchese
Dollarama shares were lower Wednesday morning after the Canadian dollar-store chain reiterated its full-year guidance despite beating expectations in the fiscal second quarter.
Shares fell 4.1% to 184.08 Canadian dollars ($133.00).
The company reaffirmed its forecast for the full fiscal year for comparable store sales to rise between 3% and 4%, as well as the addition of 70 to 80 new stores. Gross margin expectations were also kept the same, to be between 44.2% and 45.2%, with sales, general and administrative costs pegged at 14.2% to 14.7%. Capital expenditures are forecast to be C$285 million to C$330 million.
Expectations for the quarter were lofty, said TD Cowen analyst Brian Morrison. "The slight second-quarter beat, while positive, may initially be overshadowed by the lack of upward revisions to full-year guidance," he said.
Still, Scotiabank analyst John Zamparo noted that the decision not to revise targets wasn't surprising. "This is a management team known for conservatism, and particularly given uncertainty in economic activity, this was always the likely outcome," he said. Zamparo estimated that same-store sales growth of 4.9% year-to-date means the company needs about 2% growth in the second half to hit the midpoint of its guidance.
In total, quarterly sales rose 10.3% to C$1.72 billion for the three months ended Aug. 3, beating analyst forecasts for an increase to C$1.69 billion. Net income climbed to C$321.5 million, or C$1.16 a share, compared with C$285.9 million, or C$1.02 a share, in the comparable quarter a year earlier.
International operations provided a notable lift. Dollarcity, the Latin American chain in which Dollarama boosted its stake last year to 60.1%, contributed C$38.3 million to earnings, up nearly 70% from a year earlier. The retailer also holds an 80.05% stake in its Mexico operations. The rise was also boosted by the newly acquired The Reject Shop in Australia, which contributed C$25.7 million in sales in the two weeks following the closing on July 22.
Its store count at the end of the quarter was 2,060, up from 1,583 a year earlier, of which 27 net new stores were added in Canada.
Write to Adriano Marchese at adriano.marchese@wsj.com
(END) Dow Jones Newswires
08-27-25 1023ET
