- 10.8% increase in comparable store sales(1) and 14.8% increase in diluted net earnings per share
- Fiscal 2023 comparable store sales growth assumption increased to between 9.5% and 10.5% and gross margin guidance narrowed to between 43.1% and 43.6% of sales
- New long-term store target for Dollarcity increased from 600 to 850 stores by 2029
- Sales increased by 14.9% to
$1,289.6 million - Comparable store sales increased by 10.8%
- EBITDA(1) increased by 11.3% to
$386.2 million , or 29.9% of sales, compared to 30.9% - Operating income increased by 11.5% to
$302.7 million , or 23.5% of sales, compared to 24.2% - Diluted net earnings per common share increased by 14.8% to
$0.70 from$0.61 - 18 net new stores opened, compared to 16 net new stores
- 972,847 common shares repurchased for cancellation for
$76.3 million
"Our strong performance across our key metrics year to date speaks to our commitment to providing the best year-round value on the everyday products we offer, combined with a convenient and consistent shopping experience. As inflationary pressure on the consumer persists, we expect strong demand for consumable products to continue stimulating topline growth through to the end of the fiscal year. We aim to stay true to our compelling value proposition and to meet and exceed the expectations of our customers from coast to coast," said Neil Rossy, President and CEO.
"Subsequent to quarter end, we were pleased to enter into an agreement for the purchase of industrial properties adjacent to our existing centralized logistics operations. This will provide us with additional flexibility to support our long-term logistics needs as we pursue our target of 2,000
"Growing Latin American value retailer Dollarcity, in which we have a 50.1% equity interest, also continues to deliver a strong financial and operational performance. With 395 stores to date, Dollarcity has increased its long-term store target from 600 to 850 by 2029 in its four markets of operation," concluded Mr.
Explanatory Notes |
All comparative figures that follow are for the third quarter ended |
(1) We refer the reader to the notes in the section entitled "Selected Consolidated Financial Information" of this press release for the definition of these items and, when applicable, their reconciliation with the most directly comparable GAAP measure. |
Sales for the third quarter of Fiscal 2023 increased by 14.9% to
Comparable store sales for the third quarter of Fiscal 2023 increased by 10.8%, consisting of a 10.3% increase in the number of transactions and a 0.4% increase in average transaction size, compared to comparable store sales growth of 0.8% in the corresponding period of the previous fiscal year. The year-over-year increase in comparable store sales is primarily attributable to higher sales of consumable products.
EBITDA totalled
Gross margin(1) was 43.3% of sales in the third quarter of Fiscal 2023, compared to 44.4% of sales in the third quarter of Fiscal 2022. Gross margin was lower due to a change in the sales mix with stronger sales of lower margin consumable products and higher logistics and freight costs.
General, administrative and store operating expenses ("SG&A") for the third quarter of Fiscal 2023 increased by 14.3% to
The Corporation's 50.1% share of Dollarcity's net earnings for the period from
Financing costs increased by
Net earnings were
Inventory increased to
During its third quarter ended
Following a careful evaluation of the market potential for Dollarcity stores in its current markets of operation, comprised of
(1) We refer the reader to the notes in the section entitled "Selected Consolidated Financial Information" of this press release for the definition of these items and, when applicable, their reconciliation with the most directly comparable GAAP measure |
The Corporation has entered into an agreement to acquire three contiguous industrial properties in the
On
During the third quarter of Fiscal 2023, 972,847 common shares were repurchased for cancellation under the 2022-2023 NCIB, for a total cash consideration of
On
In the fourth quarter of Fiscal 2023, the Corporation expects to continue to benefit from strong demand for its affordable, everyday items in the context of inflation, including stronger than historical demand for lower-margin consumable products. As a result, the Corporation has increased its comparable store sales growth assumption for Fiscal 2023 from a range of 6.5% to 7.5% to the range of 9.5% and 10.5%. Based on gross margin performance to date and management's visibility on open orders and product margins through the remainder of the fiscal year, the Corporation has narrowed its previously disclosed annual gross margin as a percentage of sales from a range of 42.9% to 43.9% to a range of 43.1% to 43.6%. The remainder of the Corporation's annual guidance and previously disclosed assumptions on which guidance is based for Fiscal 2023 and issued on
As of this date, the Corporation expects the following for Fiscal 2023:
- To open 60 to 70 net new stores
- Gross margin as a percentage of sales of between 43.1% and 43.6%
- SG&A as a percentage of sales of between 13.8% and 14.3%
- To deploy
$160 million to$170 million in capital expenditures - To actively repurchase shares under its normal course issuer bid
(1) We refer the reader to the notes in the section entitled "Selected Consolidated Financial Information" of this press release for the definition of these items and, when applicable, their reconciliation with the most directly comparable GAAP measure. |
These guidance ranges are based on several assumptions, including the following:
- The absence of COVID-related restrictions impacting retailers and consumer shopping patterns
- Comparable store sales growth for Fiscal 2023 increased from a range of 6.5% and 7.5% to a range of 9.5% and 10.5%
- The continued introduction of additional price points up to
$5.00 throughout the remainder of Fiscal 2023 - Minimal to nil incremental direct costs related to COVID-19 health and safety measures in stores in Fiscal 2023
- The absence of a significant shift in economic and geopolitical conditions or material changes in the retail competitive environment
- Approximately three months of visibility on open orders and product margins
- The active management of product margins through pricing strategies and refreshing some of the product offering
- The number of signed offers to lease and store pipeline for the next three months and the absence of COVID-related impacts on construction activities in the provinces where new store openings are planned
- The inclusion of the Corporation's share of net earnings of its equity-accounted investment
- Positive customer response to our product offering, value proposition and in-store merchandising
- The entering into of foreign exchange forward contracts to hedge the majority of forecasted purchases of merchandise in
U.S. dollars against fluctuations of the Canadian dollar against theU.S. dollar - The continued execution of in-store productivity initiatives and the realization of cost savings and benefits aimed at improving operating expense
- Ongoing cost monitoring
- The capital budget for Fiscal 2023 for new store openings, maintenance capital expenditures and transformational capital expenditures (the latter being mainly related to information technology projects)
- The successful execution of our business strategy
- The absence of unusually adverse weather, especially in peak seasons around major holidays and celebrations
Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the cautionary statement on forward-looking statements.
Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements.
Forward-looking statements are based on information currently available to management and on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions and the competitive environment within the retail industry in
These factors are not intended to represent a complete list of the factors that could affect the Corporation or Dollarcity; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's and Dollarcity's financial performance and may not be appropriate for other purposes. Readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as at
Selected Consolidated Financial Information
13-Week Periods Ended | 39-Week Periods Ended | ||||||||
(dollars and shares in thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||
$ | $ | $ | $ | ||||||
Earnings Data | |||||||||
Sales | 1,289,574 | 1,122,267 | 3,579,518 | 3,105,861 | |||||
Cost of sales | 730,812 | 623,480 | 2,038,832 | 1,756,974 | |||||
Gross profit | 558,762 | 498,787 | 1,540,686 | 1,348,887 | |||||
SG&A | 181,754 | 159,076 | 510,703 | 474,841 | |||||
Depreciation and amortization | 83,563 | 75,375 | 245,514 | 219,962 | |||||
Share of net earnings of equity-accounted investment | (9,210) | (7,311) | (25,627) | (14,814) | |||||
Operating income | 302,655 | 271,647 | 810,096 | 668,898 | |||||
Financing costs | 30,357 | 23,054 | 81,380 | 68,056 | |||||
Earnings before income taxes | 272,298 | 248,593 | 728,716 | 600,842 | |||||
Income taxes | 70,704 | 65,192 | 188,141 | 157,639 | |||||
Net earnings | 201,594 | 183,401 | 540,575 | 443,203 | |||||
Basic net earnings per common share | |||||||||
Diluted net earnings per common share | |||||||||
Weighted average number of common shares outstanding: | |||||||||
Basic | 287,837 | 301,135 | 290,347 | 305,105 | |||||
Diluted | 289,636 | 302,573 | 292,105 | 306,544 | |||||
Other Data | |||||||||
Year-over-year sales growth | 14.9 % | 5.5 % | 15.3 % | 6.3 % | |||||
Comparable store sales growth (1) | 10.8 % | 0.8 % | 10.5 % | 0.2 % | |||||
Gross margin (1) | 43.3 % | 44.4 % | 43.0 % | 43.4 % | |||||
SG&A as a % of sales (1) | 14.1 % | 14.2 % | 14.3 % | 15.3 % | |||||
Incremental direct costs related to COVID-19 (1) | - | 1,080 | 1,591 | 31,082 | |||||
EBITDA (1) | 386,218 | 347,022 | 1,055,610 | 888,860 | |||||
Operating margin (1) | 23.5 % | 24.2 % | 22.6 % | 21.5 % | |||||
Capital expenditures | 35,847 | 35,228 | 104,269 | 110,279 | |||||
Number of stores (2) | 1,462 | 1,397 | 1,462 | 1,397 | |||||
Average store size (gross square feet) (2) | 10,443 | 10,346 | 10,443 | 10,346 | |||||
Declared dividends per common share | |||||||||
As at | |||||||
| 2022 | ||||||
$ | $ | ||||||
Statement of Financial Position Data | |||||||
Cash | 559,159 | 71,058 | |||||
Inventories | 1,007,108 | 590,927 | |||||
Total current assets | 1,657,392 | 717,367 | |||||
Property, plant and equipment | 782,540 | 761,876 | |||||
Right-of-use assets | 1,588,828 | 1,480,255 | |||||
Total assets | 5,179,200 | 4,063,562 | |||||
Total current liabilities | 1,119,213 | 911,891 | |||||
Total non-current liabilities | 4,019,168 | 3,217,705 | |||||
Total debt (1) | 2,745,711 | 1,886,300 | |||||
Net debt (1) | 2,186,552 | 1,815,242 | |||||
Shareholders' equity (deficit) | 40,819 | (66,034) | |||||
(1) | Refer to the section below entitled "Non-GAAP and Other Financial Measures" for the definition of these items and, when applicable, their reconciliation with the most directly comparable GAAP measure. |
(2) | At the end of the period. |
The Corporation prepares its financial information in accordance with GAAP. We have included non-GAAP and other financial measures to provide investors with supplemental measures of our operating and financial performance. We believe that those measures are important supplemental metrics of operating and financial performance because they eliminate items that have less bearing on our operating and financial performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP measures. We also believe that securities analysts, investors and other interested parties frequently use non-GAAP and other financial measures in the evaluation of issuers. Our management also uses non-GAAP and other financial measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.
The below-described non-GAAP and other financial measures do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers and should be considered as a supplement to, not a substitute for, or superior to, the comparable measures calculated in accordance with GAAP.
EBITDA
EBITDA represents operating income plus depreciation and amortization and includes the Corporation's share of net earnings of its equity-accounted investment.
13-Week Periods Ended | 39-Week Periods Ended | ||||||||
(dollars in thousands) |
|
|
|
| |||||
$ | $ | $ | $ | ||||||
A reconciliation of operating income to EBITDA is included below: | |||||||||
Operating income | 302,655 | 271,647 | 810,096 | 668,898 | |||||
Add: Depreciation and amortization | 83,563 | 75,375 | 245,514 | 219,962 | |||||
EBITDA | 386,218 | 347,022 | 1,055,610 | 888,860 | |||||
Total debt
Total debt represents the sum of long-term debt (including unamortized debt issue costs, accrued interest and fair value hedge – basis adjustment), short-term borrowings under the US commercial paper program and other bank indebtedness (if any).
(dollars in thousands) | As at | ||
A reconciliation of long-term debt to total debt is included below: |
| 2022 | |
Senior unsecured notes bearing interest at: | $ | $ | |
Fixed annual rate of 5.165% payable in equal semi-annual instalments, maturing | 450,000 | - | |
Fixed annual rate of 2.443% payable in equal semi-annual instalments, maturing | 375,000 | 375,000 | |
Fixed annual rate of 1.505% payable in equal semi-annual instalments, maturing | 300,000 | 300,000 | |
Fixed annual rate of 1.871% payable in equal semi-annual instalments, maturing | 375,000 | 375,000 | |
Fixed annual rate of 5.084% payable in equal semi-annual instalments, maturing | 250,000 | - | |
Fixed annual rate of 3.55% payable in equal semi-annual instalments, maturing | 500,000 | 500,000 | |
Fixed annual rate of 2.203% payable in equal semi-annual instalments, maturing | 250,000 | 250,000 | |
Unamortized debt issue costs, including | (9,940) | (8,009) | |
Accrued interest on senior unsecured notes | 18,815 | 7,850 | |
Fair value hedge – basis adjustment on interest rate swap | (7,444) | (2,927) | |
Total long-term debt | 2,501,431 | 1,796,914 | |
USCP Notes issued under US commercial paper program | 244,280 | 89,386 | |
Total debt | 2,745,711 | 1,886,300 |
Net debt
Net debt represents total debt minus cash.
(dollars in thousands) | As at | |||
|
| |||
$ | $ | |||
A reconciliation of total debt to net debt is included below: | ||||
Total debt | 2,745,711 | 1,886,300 | ||
Cash | (559,159) | (71,058) | ||
Net debt | 2,186,552 | 1,815,242 |
Adjusted net debt to EBITDA ratio
Adjusted net debt to EBITDA ratio is a ratio calculated using adjusted net debt over consolidated EBITDA for the last twelve months.
(dollars in thousands) | As at | |||
|
| |||
$ | $ | |||
A calculation of adjusted net debt to EBITDA ratio is included below: | ||||
Net debt | 2,186,552 | 1,815,242 | ||
Lease liabilities | 1,843,142 | 1,727,428 | ||
Unamortized debt issue costs, including | 9,940 | 8,009 | ||
Fair value hedge - basis adjustment on interest rate swap | 7,444 | 2,927 | ||
Adjusted net debt | 4,047,078 | 3,553,606 | ||
EBITDA for the last twelve-month period | 1,449,327 | 1,282,577 | ||
Adjusted net debt to EBITDA ratio | 2.79x | 2.77x | ||
EBITDA margin
EBITDA margin represents EBITDA divided by sales.
13-Week Periods Ended | 39-Week Periods Ended | ||||||||||
(dollars in thousands) |
|
|
|
| |||||||
$ | $ | $ | $ | ||||||||
A reconciliation of EBITDA to | |||||||||||
EBITDA | 386,218 | 347,022 | 1,055,610 | 888,860 | |||||||
Sales | 1,289,574 | 1,122,267 | 3,579,518 | 3,105,861 | |||||||
EBITDA margin | 29.9 % | 30.9 % | 29.5 % | 28.6 % | |||||||
Gross margin | Represents gross profit divided by sales. |
Operating margin | Represents operating income divided by sales. |
SG&A as a % of sales | Represents SG&A divided by sales. |
Comparable store sales | Represent sales of |
Comparable store sales growth | Represents the percentage increase or decrease, as applicable, of comparable store sales relative to the same period in the prior fiscal year. For the first and second quarter of Fiscal 2022, the calculation of comparable store sales growth excludes stores that were temporarily closed, either in Fiscal 2022 or in the same period in the prior fiscal year, in the context of the COVID-19 pandemic. |
Incremental direct costs related to COVID-19 | Represents costs incurred for the implementation and execution of health and safety measures in stores and in logistic operations in response to the pandemic, including costs associated with additional labor hours for the execution of sanitization and crowd control protocols and with the procurement of personal protection equipment for employees and cleaning supplies and equipment. |
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