- Sales growth of 18.2%, including a 13.2% increase in comparable store sales growth(1)
- 25.8% growth in EBITDA(1) and 37.5% growth in diluted net earnings per common share
- Fiscal 2023 comparable store sales growth assumption increased to a range of 6.5% to 7.5%
- Sales increased by 18.2% to
$1,217.1 million - Comparable store sales(1) increased by 13.2%
- EBITDA increased by 25.8% to
$369.4 million , or 30.4% of sales, compared to 28.5% of sales - Operating income increased by 30.3% to
$287.4 million , or 23.6% of sales, compared to 21.4% of sales - Diluted net earnings per common share increased by 37.5% to
$0.66 from$0.48 - 13 net new stores opened, compared to 13 net new stores
- 3,690,894 common shares repurchased for cancellation for
$274.9 million
"Our strong performance in the first half of Fiscal 2023 reflects a sustained consumer response to our unique value proposition, especially for everyday essentials, as Canadians from all walks of life adapt to a high-inflation environment. As a result, we are increasing our assumption for annual comparable store sales growth to between 6.5% and 7.5%," said Neil Rossy, President and CEO.
"As we strive to provide Canadians with a wide variety of merchandise, I am pleased with our progress rebuilding our inventory, thereby ensuring that our conveniently located stores are well-stocked for our customers ahead of key seasons in the second half of the fiscal year,"
All comparative figures that follow are for the second 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 second quarter of Fiscal 2023 increased by 18.2% to
Comparable store sales for the second quarter of Fiscal 2023 increased by 13.2% consisting of a 20.2% increase in the number of transactions and a 5.8% decrease in average transaction size. The increase in comparable store sales is primarily attributable to higher sales of consumables, as well as seasonal products. Comparable store sales in the corresponding period of the prior fiscal year declined 5.1%, primarily as a result of the ban on the sale of non-essential goods in
EBITDA totalled
Gross margin(1) was 43.6% of sales in the second quarter of Fiscal 2023, compared to 43.4% of sales in the second quarter of Fiscal 2022. Gross margin was slightly higher due to lower logistics costs, partially offset by a change in the sales mix with stronger sales of consumables, and higher freight costs.
General, administrative and store operating expenses ("SG&A") for the second quarter of Fiscal 2023 increased by only 7.1% 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 second quarter ended
On
During the second quarter of Fiscal 2023, 3,690,894 common shares were repurchased for cancellation under the 2022-2023 NCIB and the normal course issuer bid previously in effect, for a total cash consideration of
On
In the second half of Fiscal 2023, the Corporation expects to continue to benefit from strong demand for its affordable, everyday items at compelling value in the context of inflation, including stronger demand than historically for lower-margin consumable products. In this context, the Corporation has increased its comparable store sales growth assumption for Fiscal 2023 from a range of 4.0% to 5.0% to the range of 6.5% to 7.5%. The Corporation's financial annual guidance ranges for Fiscal 2023 issued on
As previously disclosed, the Corporation expects the following for Fiscal 2023:
- To open 60 to 70 net new stores
- Gross margin as a percentage of sales to be in the range of 42.9% to 43.9%
- SG&A as a percentage of sales to be in the range of 13.8% to 14.3%
- To deploy
$160 million to$170 million in capital expenditures - To actively repurchase shares under its normal course issuer bid
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 4.0% to 5.0% to the range of 6.5% to 7.5%
- The gradual introduction of additional price points up to
$5.00 throughout 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, including through pricing strategies and refreshing some of the product offering
- The number of signed offers to lease and store pipeline for the next 6 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
(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. |
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 | 26-Week Periods Ended | ||||||||
(dollars and shares in thousands, except per | 2022 | 2021 | 2022 | 2021 | |||||
$ | $ | $ | $ | ||||||
Earnings Data | |||||||||
Sales | 1,217,060 | 1,029,348 | 2,289,944 | 1,983,594 | |||||
Cost of sales | 687,028 | 582,688 | 1,308,020 | 1,133,494 | |||||
Gross profit | 530,032 | 446,660 | 981,924 | 850,100 | |||||
SG&A | 168,324 | 157,093 | 328,949 | 315,765 | |||||
Depreciation and amortization | 81,979 | 73,185 | 161,951 | 144,587 | |||||
Share of net earnings of equity-accounted | (7,680) | (4,100) | (16,417) | (7,503) | |||||
Operating income | 287,409 | 220,482 | 507,441 | 397,251 | |||||
Financing costs | 26,668 | 22,856 | 51,023 | 45,002 | |||||
Earnings before income taxes | 260,741 | 197,626 | 456,418 | 352,249 | |||||
Income taxes | 67,262 | 51,398 | 117,437 | 92,447 | |||||
Net earnings | 193,479 | 146,228 | 338,981 | 259,802 | |||||
Basic net earnings per common share | |||||||||
Diluted net earnings per common share | |||||||||
Weighted average number of common shares | |||||||||
Basic | 290,482 | 304,779 | 291,602 | 307,090 | |||||
Diluted | 292,173 | 306,242 | 293,329 | 308,533 | |||||
Other Data | |||||||||
Year-over-year sales growth | 18.2 % | 1.6 % | 15.4 % | 6.7 % | |||||
Comparable store sales growth (1) | 13.2 % | (5.1 %) | 10.3 % | (0.1 %) | |||||
Gross margin (1) | 43.6 % | 43.4 % | 42.9 % | 42.9 % | |||||
SG&A as a % of sales (1) | 13.8 % | 15.3 % | 14.4 % | 15.9 % | |||||
Incremental direct costs related to COVID-19 (1) | - | 11,708 | 1,591 | 30,002 | |||||
EBITDA (1) | 369,388 | 293,667 | 669,392 | 541,838 | |||||
Operating margin (1) | 23.6 % | 21.4 % | 22.2 % | 20.0 % | |||||
Capital expenditures | 37,079 | 44,681 | 68,422 | 75,051 | |||||
Number of stores (2) | 1,444 | 1,381 | 1,444 | 1,381 | |||||
Average store size (gross square feet) (2) | 10,414 | 10,330 | 10,414 | 10,330 | |||||
Declared dividends per common share | |||||||||
As at | |||||||
| 2022 | ||||||
$ | $ | ||||||
Statement of Financial Position Data | |||||||
Cash | 70,865 | 71,058 | |||||
Inventories | 823,432 | 590,927 | |||||
Total current assets | 951,366 | 717,367 | |||||
Property, plant and equipment | 774,731 | 761,876 | |||||
Right-of-use assets | 1,549,724 | 1,480,255 | |||||
Total assets | 4,400,800 | 4,063,562 | |||||
Total current liabilities | 1,249,592 | 911,891 | |||||
Total non-current liabilities | 3,274,087 | 3,217,705 | |||||
Total debt (1) | 2,190,744 | 1,886,300 | |||||
Net debt (1) | 2,119,879 | 1,815,242 | |||||
Shareholders' deficit | (122,879) | (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.
(A) Non-GAAP Financial Measures
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 | 26-Week Periods Ended | |||||||
(dollars in thousands) |
|
|
|
| ||||
$ | $ | $ | $ | |||||
A reconciliation of operating income to EBITDA is included below: | ||||||||
Operating income | 287,409 | 220,482 | 507,441 | 397,251 | ||||
Add: Depreciation and amortization | 81,979 | 73,185 | 161,951 | 144,587 | ||||
EBITDA | 369,388 | 293,667 | 669,392 | 541,838 | ||||
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 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 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 | (7,564) | (8,009) | |
Accrued interest on senior unsecured notes | 8,456 | 7,850 | |
Fair value hedge – basis adjustment on interest rate swap | (6,706) | (2,927) | |
Total long-term debt | 1,794,186 | 1,796,914 | |
USCP Notes issued under US commercial paper program | 396,558 | 89,386 | |
Total debt | 2,190,744 | 1,886,300 |
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 | 2,190,744 | 1,886,300 | ||
Cash | (70,865) | (71,058) | ||
Net debt | 2,119,879 | 1,815,242 | ||
(B) Non-GAAP Ratios
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 | 2,119,879 | 1,815,242 | ||
Lease liabilities | 1,801,671 | 1,727,428 | ||
Unamortized debt issue costs | 7,564 | 8,009 | ||
Fair value hedge - basis adjustment on interest rate swap | 6,706 | 2,927 | ||
Adjusted net debt | 3,935,820 | 3,553,606 | ||
EBITDA for the last twelve-month period | 1,410,131 | 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 | 26-Week Periods Ended | ||||||||
(dollars in thousands) |
|
|
|
| |||||
$ | $ | $ | $ | ||||||
A reconciliation of EBITDA to EBITDA margin is included below: | |||||||||
EBITDA | 369,388 | 293,667 | 669,392 | 541,838 | |||||
Sales | 1,217,060 | 1,029,348 | 2,289,944 | 1,983,594 | |||||
EBITDA margin | 30.4 % | 28.5 % | 29.2 % | 27.3 % |
(C) Supplementary Financial Measures
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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