Dollarama Q1 profit down year over year, but sales rise

Dollarama Inc. reported its first-quarter profit fell compared with a year ago as it closed more than 100 stores and increased spending to help keep its employees and customers safe from the pandemic.

The retailer said Wednesday it earned nearly $86.1 million for the quarter ended May 3 compared with a profit of $103.5 million in the same quarter a year earlier.

Sales totalled $844.8 million, up from $828 million a year ago.

The company said the rise in sales was attributable to an increase in its total number of stores compared with a year ago and modest comparable store sales growth in the stores that were open, driven by things like cleaning products, health and hygiene essentials and food.

Excluding temporarily closed stores, Dollarama said comparable store sales grew 0.7%. Including the temporarily closed stores, comparable store sales fell 2.4%.

The retailer said the growth at the stores that were open consisted of a 22.6% increase in average transaction size, but a 17.9% drop in the number of transactions as shoppers reduced how often they shopped, but bought more when they did go out.

Dollarama said it spent $15 million in the second half of the quarter to protect the health and safety of employees and customers, and to support employees.

"Our first quarter results reflect the direct and indirect effects of COVID-19 while demonstrating that Dollarama adapted quickly to an unprecedented situation in order to serve Canadians from coast to coast," Dollarama chief executive Neil Rossy said in statement.

"As provinces across Canada carefully and gradually resume economic activity, we will continue to maintain and enhance our COVID-19 operating procedures and preventive measures."

The retailer said it has implemented strict protocols to minimize risk to employees and customers in any proven or probable case of COVID-19, including cleaning protocols, self-isolation directions and financial support for directly or indirectly impacted employees.

It said it has had a total of 20 COVID-19 store employee cases up to Monday.

The company anticipates a slow and careful resumption of activities throughout Canada during its second quarter, he said. Currently, 32 of Dollarama's 1,301 stores remain temporarily closed. The company was deemed an essential service by some provinces and allowed to keep its stores open in many areas.

While several categories, such as party and greeting cards, remain down, others are higher than normal, said Ross, such as summer and pool toys, and gardening supplies.

The company is taking educated guesses for how much stock it purchases for the future, Rossy said.

For the upcoming Halloween and Christmas holiday season, it is continuing with a business-as-usual approach for the most part, while being more conservative about purchasing consumable goods, such as candy and chocolate.

"But for the other stuff, it can last another year, it's not time sensitive," said Rossy.

"And so we're going to take the risk of having too much holiday season goods in order to be sure that we have the goods should things get back to normal."