Shares of Dollarama (TSX:DOL) surged on Thursday as the stock announced its fourth quarter and full-year 2024 results. Dollarama stock jumped by up to 8% in early trading as the company exceeded its 2024 guidance on all key metrics.
What happened
The fourth quarter and full-year was a strong one for Dollarama, with the discount retailer reporting store sales growth of 8.7% year over year in the fourth quarter. Furthermore, it saw a 12.8% climb compared to full-year 2023 levels.
Diluted earnings per share (EPS) hit $3.56 for the year, up 29%, with the quarter up 26.4% to $1.15 EPS. Sales increased 11.3% in the fourth quarter to $1.6 billion, and 16.1% for the year to $5.9 billion. Such strength also allowed Dollarama stock to increase its dividend. And not by a little, but by a whopping 30%!
“In Fiscal 2024, we met or exceeded our guidance for all our key performance metrics, including higher than expected comparable store sales, translating into a 29% increase in EPS. Our strong financial and operational performance demonstrates the enduring strength of our business model and that our compelling value proposition continues to resonate with consumers, including in an uncertain economic context,” said Neil Rossy, President and CEO of Dollarama.
Looking ahead
Now Dollarama is looking ahead, and it looks as though for the next year things will remain fairly status quo. The company expects to continue to benefit from consumers looking for “convenience and compelling value” offered by the company.
Furthermore, the value retailer expects to generate continued comparable store sales growth, over and above two years of double-digit comparable store sales growth. All which was in part fuelled by inflationary pressures on consumers.
As for more hard numbers, Dollarama excepts to hit between 60 and 70 new net store openings. Furthermore, as of now it expects comparable store sales between 3.5% to 4.5%, which would be far lower than the 12.8% seen this year. Even so, its gross margin should remain similar, achieving between 44% and 45%.
Other news?
Another piece of news may come down the pipeline in the next year or two. Though nothing has been hinted at by Dollarama and its management, there are rumours that the company might expand. And this time, into Australia.
After seeing such success with its Dollar City locations in Latin America, there have been rumblings the company may acquire another low cost retailer in Australia. Given the success it’s seen on an international scale, it seems likely that this could happen. Especially in an economy similar to Canada’s.
However, that’s unlikely to happen while we remain in this inflationary and volatile environment. Anything could happen in the near term. So Dollarama stock is right to reward its investors with a 30% increase in the dividend rather than risk an acquisition at these levels. Even so, I would continue to keep an eye out for such a move in the not too distant future. For now, with shares up as they’ve been the last year, Dollarama stock remains a strong buy on the TSX today.
