Fiscal 2022 Third Quarter Highlights Compared to Fiscal 2021 Third Quarter Results
- Sales increased by 5.5% to
$1,122.3 million - Comparable store sales(1) increased by 0.8%, over and above 7.1% growth in the prior year, and averaged 3.9% per year over a two-year period
- Gross margin(1) was 44.4% of sales, compared to 44.0% of sales
- EBITDA(1) increased by 11.2% to
$347.0 million , or 30.9% of sales, compared to 29.3% of sales - Operating income increased by 11.4% to
$271.6 million , or 24.2% of sales, compared to 22.9% of sales - Diluted net earnings per common share increased by 17.3%, to
$0.61 from$0.52 - 16 net new stores were opened, compared to 19 net new stores, bringing total store count to 1,397 from 1,333 a year ago
- 5,266,219 common shares were repurchased for cancellation for
$294.5 million
"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," said President and CEO
"Our teams have worked nimbly to ensure that we entered the fourth quarter with well-stocked stores offering compelling value on everyday and seasonal goods to Canadians from all walks of life ahead of the holidays. Our ability to adapt in the second year of the pandemic in what continues to be a complex environment further reinforces the resilience of our unique business model, the relevance of our brand and strong value proposition to Canadian consumers," concluded
Fiscal 2022 Third Quarter Financial Results
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 2022 increased by 5.5% to
Comparable store sales for the third quarter of Fiscal 2022 increased by 0.8%, over and above 7.1% growth in the prior year. Comparable store sales consisted of a 2.8% decrease in average transaction size and a 3.7% increase in the number of transactions, reflecting a gradual reversal in consumer shopping patterns compared to the prior year. Over a two-year period, comparable store sales growth for the third quarter averages 3.9% per year.
Gross margin was 44.4% of sales in the third quarter of Fiscal 2022, compared to 44.0% of sales in the third quarter of Fiscal 2021. Gross margin was higher year over year primarily due to a higher proportion of sales of high-margin seasonal products.
General, administrative and store operating expenses ("SG&A") for the third quarter of Fiscal 2022 decreased by 1.1% to
Incremental direct costs related to COVID-19 measures for the third 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 third quarter ended
Dividend
On
Normal Course Issuer Bid
On
During the third quarter of Fiscal 2022, 5,266,219 common shares were repurchased for cancellation under the normal course issuer bid, for a total cash consideration of
Barring factors outside of its control due to the ongoing COVID-19 pandemic, the Corporation intends to continue share repurchases under its normal course issuer bid in Fiscal 2022 while maintaining its adjusted net-debt-to-EBITDA ratio within the 2.75 to 3.00 times range. 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 COVID-19 measures that may be taken by provincial governments, 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 three 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
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About
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Selected Consolidated Financial Information
13-Week Periods Ended | 39-Week Periods Ended | |||||||
(dollars and shares in thousands, except per share amounts) |
|
|
|
| ||||
$ | $ | $ | $ | |||||
Earnings Data | ||||||||
Sales | 1,122,267 | 1,064,201 | 3,105,861 | 2,922,591 | ||||
Cost of sales | 623,480 | 595,455 | 1,756,974 | 1,660,044 | ||||
Gross profit | 498,787 | 468,746 | 1,348,887 | 1,262,547 | ||||
SG&A | 159,076 | 160,904 | 474,841 | 467,979 | ||||
Depreciation and amortization | 75,375 | 68,291 | 219,962 | 198,773 | ||||
Share of net earnings of equity-accounted investment | (7,311) | (4,259) | (14,814) | (9,136) | ||||
Operating income | 271,647 | 243,810 | 668,898 | 604,931 | ||||
Financing costs | 23,054 | 23,048 | 68,056 | 72,854 | ||||
Earnings before income taxes | 248,593 | 220,762 | 600,842 | 532,077 | ||||
Income taxes | 65,192 | 58,891 | 157,639 | 141,631 | ||||
Net earnings | 183,401 | 161,871 | 443,203 | 390,446 | ||||
Basic net earnings per common share | ||||||||
Diluted net earnings per common share | ||||||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 301,135 | 311,146 | 305,105 | 310,725 | ||||
Diluted | 302,573 | 312,838 | 306,544 | 312,494 | ||||
Other Data | ||||||||
Year-over-year sales growth | 5.5% | 12.3% | 6.3% | 7.4% | ||||
Comparable store sales growth (2) | 0.8% | 7.1% | 0.2% | 4.6% | ||||
Gross margin (3) | 44.4% | 44.0% | 43.4% | 43.2% | ||||
SG&A as a % of sales (3) | 14.2% | 15.1% | 15.3% | 16.0% | ||||
EBITDA (1) | 347,022 | 312,101 | 888,860 | 803,704 | ||||
Operating margin (3) | 24.2% | 22.9% | 21.5% | 20.7% | ||||
Capital expenditures | 35,228 | 33,602 | 110,279 | 116,102 | ||||
Number of stores (4) | 1,397 | 1,333 | 1,397 | 1,333 | ||||
Average store size (gross square feet) (4) | 10,346 | 10,313 | 10,346 | 10,313 | ||||
Declared dividends per common share |
As at | |||
|
| ||
$ | $ | ||
Statement of Financial Position Data | |||
Cash | 96,999 | 439,144 | |
Inventories | 599,204 | 630,655 | |
Total current assets | 736,236 | 1,100,362 | |
Property, plant and equipment | 741,400 | 709,469 | |
Right-of-use assets | 1,443,260 | 1,344,639 | |
Total assets | 3,998,801 | 4,223,746 | |
Total current liabilities | 558,738 | 1,321,165 | |
Total non-current liabilities | 3,421,541 | 2,567,727 | |
Total debt (1) | 1,813,778 | 1,883,051 | |
Net debt (1) | 1,716,779 | 1,443,907 | |
Shareholders' equity | 18,522 | 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 | 39-Week Periods Ended | ||||||
(dollars in thousands) |
|
|
|
| |||
$ | $ | $ | $ | ||||
A reconciliation of operating income to | |||||||
EBITDA is included below: | |||||||
Operating income | 271,647 | 243,810 | 668,898 | 604,931 | |||
Add: Depreciation and amortization | 75,375 | 68,291 | 219,962 | 198,773 | |||
EBITDA | 347,022 | 312,101 | 888,860 | 803,704 | |||
EBITDA margin (3) | 30.9% | 29.3% | 28.6% | 27.5% |
A reconciliation of long-term debt to total debt is included below: | As at | ||
(dollars in thousands) |
|
| |
$ | $ | ||
Senior unsecured notes bearing interest at: | |||
Fixed annual rate of 2.443% payable in equal semi-annual instalments, | |||
maturing | 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 | - | |
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 | |
Fixed annual rate of 2.337% payable in equal semi-annual instalments, | |||
repaid on | - | 525,000 | |
Variable rate equal to 3-month bankers' acceptance rate (CDOR) plus 27 basis | |||
points payable quarterly, repaid on | - | 300,000 | |
Accrued interest on senior unsecured notes | 16,522 | 8,051 | |
Fair value hedge – basis adjustment on interest rate swap | (2,744) | - | |
Total debt | 1,813,778 | 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 | 1,813,778 | 1,883,051 | |
Cash | (96,999) | (439,144) | |
Net debt | 1,716,779 | 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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