Dollarama Inc. beat Bay Street profit forecasts yet again in its latest quarter as the value retailer said it will expand plans for its Montreal distribution centre and propose a three-for-one share split.
The shares climbed as high as 6 per cent in morning trading in Toronto, to $164.85, before levelling off.
Company founder Larry Rossy is stepping down from the board, to be replaced as chairman by lead director Stephen Gunn. He will be given the title chairman emeritus and provide advice to management as needed, the company said in a statement on Thursday. Mr. Rossy has led the family business since 1973. It became Dollarama in 1992 and went public in 2009 at a price of $17.50 a share.
“After a lifetime in the retail industry, it is time for me to step down from active duty,” Mr. Rossy, 75, said in a statement. “I am proud of all that we have accomplished and of the strong and dynamic team leading the company’s growth.”
That growth shows no sign of slowing under the leadership of Mr. Rossy’s son, Neil. While major swaths of the retail sector are getting clobbered by online competition and changing consumer behaviour, Dollarama has been on a remarkable run, deftly executing an expansion based on its best-value-in-town consumer proposition. It opened 65 new stores in its fiscal year just ended and plans to open another 60 to 70 this year.
The Montreal-based dollar-store chain reported a 17-per-cent increase in diluted profit for its latest quarter ended Jan. 28, 2018, to $1.45 a share. Revenue rose 10 per cent to $938.1-million and sales for stores open at least 12 months climbed 5.5 per cent. Analysts had forecast profit of $1.40 a share.
Profit for the full year came in at $519-million or $4.55 a share on sales of $3.27-billion. Products priced at more than $1.25 now make up 67 per cent of sales, the company said.
Dollarama said it has decided to increase the size of its new distribution centre planned for Montreal by about 50 per cent, to 500,000 square feet, and purchase its existing distribution centre, which was being leased. The decision will increase capital expenditure spending for fiscal 2019 to between $150-million and $160-million, the company said.
A larger facility will provide the infrastructure to support the company’s planned retail expansion to a maximum of 1,700 stores by 2027, Dollarama said. The retailer currently has 1,160 locations across Canada.
It will also facilitate Dollarama’s e-commerce push, which will start sometime this year. The company plans to offer a limited number of items to clients who want to purchase them in bulk without having to go from store to store. Items such as wine glasses likely won’t be offered for sale because they won’t be able to withstand transport by courier without breaking, management said on a conference call. Other items could be too expensive to ship, they said.
Directors of the company have approved a proposed split of Dollarama shares on a three-for-one basis, the company said. Investors will vote on the proposal at the annual meeting in June. The retailer also increased its quarterly dividend to 12 cents from 11 cents.
With his planned retirement, Mr. Rossy joins a clutch of high-profile Quebec business leaders who’ve stepped aside over the past year. They include billionaire Lino Saputo, who retired from his dairy producer last August, and Jean Coutu, the affable pharmacist who sold his company to grocer Metro in October.
Mr. Rossy remains one of Dollarama’s major shareholders, with a stake worth about $715-million, according to Bloomberg data.