Fiscal 2022 Second Quarter Highlights Compared to Fiscal 2021 Second Quarter Results
- Sales increased by 1.6% to
$1,029.3 million ; - Comparable store sales(1)(2) decreased by 5.1%, driven by the ban on the sale of non-essential products in
Ontario in place for the first 5.5 weeks of the quarter (May 3 to June 10, 2021 , inclusively); - For the 7.5-week period following the lifting of the
Ontario ban (June 11 to August 1, 2021 , inclusively), comparable store sales increased by 5.1% year over year - Gross margin(1) was 43.4% of sales, compared to 43.9% of sales;
- EBITDA(1) increased by 5.7% to
$293.7 million , or 28.5% of sales, compared to 27.4% of sales; - Operating income increased by 4.3% to
$220.5 million , or 21.4% of sales, compared to 20.9% of sales; - Direct COVID-19 costs amounted to
$11.7 million , compared to$34.3 million ; - Diluted net earnings per common share increased by 4.3% to
$0.48 from$0.46 ; - The Corporation opened 13 net new stores, same as in prior year comparable period, bringing its total store count to 1,381 from 1,314 a year ago;
- The Corporation was active on its normal course issuer bid, with 2,884,381 common shares repurchased for cancellation during the quarter for
$163.6 million .
"Our top-line performance in the second quarter of Fiscal 2022 reflects the impact of COVID-19 restrictions in place throughout the quarter, most notably a 5.5-week ban on the sale of non-essential products in our largest Canadian market during peak spring sales season," said President and CEO
"We nonetheless delivered positive EPS growth in a challenging landscape for value retailers, and we were pleased to see a notable uptick in customer traffic in our stores, a trend we continue to see today. Over 18 months into the pandemic, our fundamentals and value proposition are strong, and we are well-positioned to continue serving Canadians from all walks of life as the economy reopens."
____________________________ |
(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. |
(2) Excludes temporarily closed stores. |
Fiscal 2022 Second Quarter Financial Results
All comparative figures that follow are for the second quarter ended
The ongoing COVID-19 pandemic and various measures taken by provincial governments to curb its spread impacted
Sales for the second quarter of Fiscal 2022 increased by 1.6% to
Comparable store sales (excluding temporarily closed stores) decreased 5.1% year over year. The decrease is primarily attributable to the length and timing of the ban on the sale of non-essential products in
Following the lifting of the ban in
Gross margin was 43.4% of sales in the second quarter of Fiscal 2022, compared to 43.9% of sales in the second quarter of Fiscal 2021. Gross margin was lower year over year primarily due to lower sales of higher-margin spring and garden products.
General, administrative and store operating expenses ("SG&A") for the second quarter of Fiscal 2022 decreased by 7.2% to
Incremental direct costs related to COVID-19 measures for the second quarter of Fiscal 2022, all recorded in SG&A, totalled
The Corporation's 50.1% share of Dollarcity's net earnings for the period from
Financing costs increased by
Net earnings were
Dollarcity Store Growth
During its second quarter ended
Dividend
On
Normal Course Issuer Bid
On
During the second quarter of Fiscal 2022, 2,884,381 common shares were repurchased for cancellation under the 2021-2022 NCIB and the normal course issuer bid previously in effect, for a total cash consideration of
As at
Outlook and COVID-19 Impact
The future impact of the ongoing COVID-19 pandemic on consumer shopping patterns and the Corporation's results, including potential additional measures that may be taken by provincial governments in response to a fourth wave as well as the pandemic's disruptive effect on international freight among other external factors, remain difficult to quantify or forecast. As a result, guidance for Fiscal 2022 remains limited to the following key metrics:
Fiscal 2022 | |
Net new store openings | 60 to 70 |
Capital expenditures(i) |
(i) Includes additions to property, plant and equipment, computer hardware and software. |
These guidance ranges for Fiscal 2022 are based on a number of assumptions, including the following:
- the number of signed offers to lease and store pipeline for the next 6 months;
- the absence of COVID-related restrictions on construction activities in the provinces where new store openings are planned; and
- the capital budget for Fiscal 2022 for new store openings, maintenance capital expenditures, and transformational capital expenditures (the latter being mainly related to information technology projects).
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, including, but not limited to, risks related to the ongoing COVID-19 pandemic, which may slow down store openings or which may prompt the Corporation to hold off on planned capital expenditures in order to preserve liquidity. This guidance, including the various underlying assumptions, is forward-looking and should be read in conjunction with the cautionary statement on forward-looking statements.
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 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
Conference Call
About
Selected Consolidated Financial Information
13-Week Periods Ended | 26-Week Periods Ended | ||||||
(dollars and shares in thousands, | 2021 $ |
$ | 2021 $ | 2020 $ | |||
Earnings Data | |||||||
Sales | 1,029,348 | 1,013,592 | 1,983,594 | 1,858,390 | |||
Cost of sales | 582,688 | 568,842 | 1,133,494 | 1,064,589 | |||
Gross profit | 446,660 | 444,750 | 850,100 | 793,801 | |||
SG&A | 157,093 | 169,337 | 315,765 | 307,075 | |||
Depreciation and amortization | 73,185 | 66,507 | 144,587 | 130,482 | |||
Share of net earnings of equity-accounted investment | (4,100) | (2,503) | (7,503) | (4,877) | |||
Operating income | 220,482 | 211,409 | 397,251 | 361,121 | |||
Financing costs | 22,856 | 22,604 | 45,002 | 49,806 | |||
Earnings before income taxes | 197,626 | 188,805 | 352,249 | 311,315 | |||
Income taxes | 51,398 | 46,309 | 92,447 | 82,740 | |||
Net earnings | 146,228 | 142,496 | 259,802 | 228,575 | |||
Basic net earnings per common share | |||||||
Diluted net earnings per common share | |||||||
Weighted average number of common shares outstanding: | |||||||
Basic | 304,779 | 310,748 | 307,090 | 310,515 | |||
Diluted | 306,242 | 312,527 | 308,533 | 312,299 | |||
Other Data | |||||||
Year-over-year sales growth | 1.6% | 7.1% | 6.7% | 4.7% | |||
Comparable store sales growth (2) | (5.1%) | 5.4% | (0.1%) | 3.2% | |||
Gross margin (3) | 43.4% | 43.9% | 42.9% | 42.7% | |||
SG&A as a % of sales (3) | 15.3% | 16.7% | 15.9% | 16.5% | |||
EBITDA (1) | 293,667 | 277,916 | 541,838 | 491,603 | |||
Operating margin (3) | 21.4% | 20.9% | 20.0% | 19.4% | |||
Capital expenditures | 44,681 | 34,502 | 75,051 | 82,500 | |||
Number of stores (4) | 1,381 | 1,314 | 1,381 | 1,314 | |||
Average store size (gross square feet) (4) | 10,330 | 10,289 | 10,330 | 10,289 | |||
Declared dividends per common share |
As at | ||||
$ | 2021 $ | |||
Statement of Financial Position Data | ||||
Cash | 131,480 | 439,144 | ||
Inventories | 586,302 | 630,655 | ||
Total current assets | 758,832 | 1,100,362 | ||
Property, plant and equipment | 732,733 | 709,469 | ||
Right-of-use assets | 1,384,362 | 1,344,639 | ||
Total assets | 3,948,800 | 4,223,746 | ||
Total current liabilities | 474,291 | 1,321,165 | ||
Total non-current liabilities | 3,337,450 | 2,567,727 | ||
Total debt (1) | 1,808,031 | 1,883,051 | ||
Net debt (1) | 1,676,551 | 1,443,907 | ||
Shareholders' equity | 137,059 | 334,854 | ||
(1) | In this press release, EBITDA, EBITDA margin, total debt, net debt and adjusted net-debt-to-EBITDA ratio are referred to as "non-GAAP measures". Non-GAAP measures are not generally accepted measures under GAAP and do not have a standardized meaning under GAAP. EBITDA, EBITDA margin, total debt and net debt are reconciled below, and the formula for the calculation of the adjusted net-debt-to-EBITDA ratio is set out in note 5 below. The non-GAAP measures, as calculated by the Corporation, may not be comparable to those of 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. |
We have included non-GAAP measures to provide investors with supplemental measures of our operating and financial performance. We believe that non-GAAP 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 measures in the evaluation of issuers, many of which present non-GAAP measures when reporting their results. Our management also uses non-GAAP 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. |
13-Week Periods Ended | 26-Week Periods Ended | |||||||||||
(dollars in thousands) |
$ |
$ |
$ |
$ | ||||||||
A reconciliation of operating income to EBITDA is included below: | ||||||||||||
Operating income | 220,482 | 211,409 | 397,251 | 361,121 | ||||||||
Add: Depreciation and amortization | 73,185 | 66,507 | 144,587 | 130,482 | ||||||||
EBITDA | 293,667 | 277,916 | 541,838 | 491,603 | ||||||||
EBITDA margin (3) | 28.5% | 27.4% | 27.3% | 26.5% |
A reconciliation of long-term debt to total debt is included below: | As at | ||
(dollars in thousands) |
$ | 2021 $ | |
Senior unsecured notes bearing interest at: | |||
Fixed annual rate of 2.443% payable in equal semi-annual instalments, | 375,000 | - | |
Fixed annual rate of 1.505% payable in equal semi-annual instalments, | 300,000 | 300,000 | |
Fixed annual rate of 1.871% payable in equal semi-annual instalments, | 375,000 | - | |
Fixed annual rate of 3.55% payable in equal semi-annual instalments, | 500,000 | 500,000 | |
Fixed annual rate of 2.203% payable in equal semi-annual instalments, | 250,000 | 250,000 | |
Fixed annual rate of 2.337% payable in equal semi-annual instalments, | - | 525,000 | |
Variable rate equal to 3-month bankers' acceptance rate (CDOR) plus 27 basis | - | 300,000 | |
Accrued interest on senior unsecured notes | 8,021 | 8,051 | |
Fair value hedge – basis adjustment on interest rate swap | 10 | - | |
Total debt | 1,808,031 | 1,883,051 | |
Adjusted net-debt-to-EBITDA ratio (4)(5) | 2.80x | 2.68x | |
A reconciliation of total debt to net debt is included below: | |||
Total debt | 1,808,031 | 1,883,051 | |
Cash | (131,480) | (439,144) | |
Net debt | 1,676,551 | 1,443,907 | |
(2) | Comparable store sales growth is a measure of the percentage increase or decrease, as applicable, of the sales of stores, including relocated and expanded stores, open for at least 13 complete fiscal months relative to the same period in the prior fiscal year. For the first and second quarters of Fiscal 2021 and Fiscal 2022, comparable store sales growth excludes temporarily closed stores in the context of the COVID-19 pandemic. |
(3) | Gross margin represents gross profit divided by sales. SG&A as a percentage of sales represents SG&A divided by sales. Operating margin represents operating income divided by sales. EBITDA margin represents EBITDA divided by sales. |
(4) | At the end of the period. |
(5) | This ratio is calculated as adjusted net debt (sum of total long-term debt, short-term borrowings and total lease liabilities, less cash) over last twelve months consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization). |
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