In an excellent week for the market, the Toronto Stock Exchange 300 Composite Index (^GSPTSE) gained 1.6% as investors around the world were enthused by the monetary stimulus provided by the European Central Bank and positive employment statistics from the U.S.
The overall Canadian index has now gained 9% so far this year and 20% over the past year. The bull market is in full swing. Air Canada (TSX: AC.B) once again caught investors’ eyes as a top performer with a gain of 18% for the week, bringing the total gain to 41% for the year so far. WestJet (TSX: WJA) was not far behind its bigger rival with an 8% gain for the week. A number of gold mining companies also appeared among the top performers, as well as the automotive parts producer Linamar (TSX: LNR), which gained 10% for the week.
This week will bring the results of Dollarama (TSX: DOL), the fast-growing low-price retailer, and the rural food and general merchandise retailer North West Company (TSE:NWC). Here’s what to watch.
Dollarama, the operator of more than 800 dollar stores in Canada, will report results for the first quarter of the 2015 financial year on Thursday. The market consensus expects a solid increase of 23% in quarterly profit per share, from $0.62 a year ago to $0.76.
The first quarter of 2014 delivered a fairly soft result with profits per share increasing only by 7%. The main reasons provided for this slow growth were the costs associated with opening more new stores, the implementation of productivity enhancement initiatives, and the poor weather. As a result, profit margins declined substantially. However, the situation changed during the course of 2014, with margins returning to normal levels.
The strong growth expected for the current quarter is expected to come about as a result of the addition of a further 89 stores during the previous year, the maintenance of improved profit margins, and the fairly weak comparable quarter a year ago.
The Dollarama share price has had a good run over the past year, with an increase of 25%. Investors are looking for strong results, which would ideally be ahead of the consensus forecast, to justify the company’s current price and valuation levels.
North West Company
Reporting its first quarter 2015 results on Wednesday, North West Company is expected to announce a profit per share of $0.30 for the quarter compared $0.27 a year ago. North West is a retailer of food and general products in mainly the rural parts of northern and western Canada, Alaska, and the Caribbean. It operates under the trade names of Northern, NorthMart, Giant Tiger, AC Value Centres, and Cost-U-Less.
Should consensus expectations prove to be accurate, the growth rate of 11% will be its best for some time. Although sales are not expected to grow by much, the start-up costs at the new Barbados store will not be repeated and margin enhancement initiatives, including the stemming of abnormally high shrinkage levels, should contribute to improved margins.
The first quarter is seasonally the weakest quarter for the company, but it has been a very stable performer over many years. The share price has gone nowhere for the past two years, underperforming its peers in a rising market. Good results supported by improving prospects can get the stock moving again.