Dollarama (DOL) Stock: Why Did It Fall After a Solid Quarter?

TLDR

• Dollarama Q4 profit rose to $392.5 million ($1.43/diluted share), up from $391.0 million ($1.40) a year ago
• Sales climbed to $2.10 billion from $1.88 billion, driven by new Canadian stores and the Australian acquisition
• Comparable store sales in Canada grew 1.5%, with average transaction size up 3.1%
• Transaction count fell 1.6%, with poor weather cited as a drag on foot traffic
• Quarterly dividend raised to 12 cents per share, up from 10.58 cents

Dollarama (DOL) delivered a solid Q4, with profit and sales both up year-over-year — and the market still sent the stock lower. That’s the situation the Canadian retailer found itself in on Tuesday after releasing its latest quarterly results.

Dollarama Inc., DOL.TO

For the 13-week period ended February 1, Dollarama reported net earnings of $392.5 million, or $1.43 per diluted share. That compares to $391.0 million, or $1.40 per diluted share, in the prior-year period — which, worth noting, was a 14-week quarter.

Sales for the quarter came in at $2.10 billion, up from $1.88 billion a year ago. Two factors drove that growth: an increase in the number of Canadian stores and the company’s acquisition of Australian retailer The Reject Shop.

Comparable store sales in Canada rose 1.5% during the period. Customers spent more per trip — average transaction size was up 3.1% — but fewer of them walked through the doors, with transaction count falling 1.6%.

DOL shares were down 7.56% on the day, trading lower despite the earnings beat.

Weather and Foot Traffic

Dollarama pointed to poor weather as a factor behind the dip in transaction volume. Cold or stormy conditions are a common headwind for retailers that rely on regular, habitual visits rather than destination shopping.

The comparable sales figure of 1.5% is positive, but the drop in transaction count suggests the weather impact was real. Higher basket sizes helped compensate, keeping the overall comp in the green.

Dividend Increase

The company raised its quarterly dividend to 12 cents per share, up from 10.58 cents — an increase of roughly 13%. That signals management confidence in the business even as the stock pulled back.

For the full quarter, the year-over-year profit comparison was nearly flat in dollar terms. But adjusting for the fact that the prior-year quarter had an extra week makes the result look a little stronger.

Sales growth was more clear-cut. The $220 million increase in quarterly revenue reflects both organic store expansion in Canada and the added revenue from the Australian business following the Reject Shop deal.

Dollarama has been steadily growing its store count in Canada for several years. The addition of an international footprint through Australia adds a new layer to the growth story.

The stock’s decline on Tuesday suggests investors may have had higher expectations coming in, or are weighing the softer foot traffic number more heavily than the top-line growth.

DOL.TO was down 7.56% as of Tuesday afternoon trading in Toronto

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