Copy of Dollarama4

Assets

01

Business Model

Introduction

Business Model

02

06

• Pricing strategy:

$0.87-$5.00 merchandise sold at low fixed price points

• Wide customer segment:

Value-conscious shoppers, families, and middle to high-income demographics

• Product assortment:

Wide range of products at low, fixed prices.

Plans to introduce a full grocery selection in a quarter of their stores by 2025

Dollarama Inc.,

• Headquarters: Mount Royal, Quebec, Canada
• Founded: 1992
• Sector: Broadline retail
• Employees: 25,840+
• No. of stores: 1550+
• Geographical location: Canada and LATAM
• Ticker: DOL

Assumtions:

• Q4 Statements of Net Earnings and Comprehensive Income consider the year-to-date accumulation (Q1 to Q4)

• This is the source for the financial statements:

https://www.dollarama.com/en-CA/corp/financial-reporting#report-table-2

Balance Sheet Overview

Competitive & Attractive

BALANCE SHEET

Equity /

Goodwill /

Current Ratio

Company

Asset Ratio

0.99%

0.15%

0.01%

Dollarama

HISTORICAL VALUE CREATION

0.49%

Metro

1.23%

0.24%

Q4-2023

• Growth: A strong trend of rising revenue - Strategy is robust, targeting 2,000 Dollarama stores by 203
• 98% brand awareness across Canada
• Top 10 2023 "Top 10 Most Reputable Brands" in Canada
• Accessibilty: ~ 85% of Canadians live 10 km or less from a Dollarama store, up from 80% in FY21
• Affordability: $0.87- $5.00 merchandise sold at low fixed price points
• Pricing Power: Strong direct-sourcing capabilities and purchasing power - secures lower costs and bargaining power with suppliers
• ~6.4x larger than next largest pure play competitor in Canada and ~3.0x larger than 4 largest pure play competitors combined
• High ROIC and EBIT margin - Efficient use of capital and highly profitable relative to its sales

Debt

• In 2022, Dollarama expanded its warehousing capacity by securing a long-term lease for a seventh warehouse in Laval, Quebec

Goodwill

• Positive indicators of shareholder value creation, there was a 31.4% increase in diluted net earnings per common share to $0.92, compared to $0.70 in the prior year

• A CAGR of 24.74% is substantially higher than the historical average annual return of the broader stock market, which is often cited around 7-10%

Risks

Capability of Management

• Online store since 2019 mainly for big quantities buys
• Mobile Application since 2020 to pay in-store

Capital Structure

• Currency Risks: Exposure to CAD/USD and USD/RMB rates

• Competitive Landscape: Rivalry with dollar stores and mass merchants

• Seasonality Dependence: Peak sales in Q4 (December)

• Supply Chain Volatility: Higher shipping costs and longer lead times in Fiscal 2023

• Lease-related Costs: Rising occupancy costs from long-term leases

• Wage Regulation Impact: Sensitive to minimum wage hikes.

• Number of Common Shares: January 29, 2023: 284,505,648 common shares
• Dividend History: The first quarterly dividend was in 2011. There have been 12 successive increases in the quarterly dividend
• Dividend Increase: On March 28, 2023, to $0.0708 (10%) per common share

• Report indicates a strong track record in creating shareholder value through various metrics. Notably, there was a 31.4% increase in diluted net earnings per common share to $0.92, compared to $0.70 in the previous year

• The quarterly cash dividend was raised to $0.0708 per common share, up from $0.0553 per common share in the prior year, indicating a commitment to returning value to shareholders

• Dollarama's strategy involves decreasing outstanding shares while boosting investment in employees and management through Share-Based Compensation (SBC) ratios. This move likely aims to retain talent and align employee interests with shareholder value

Long-Term Debt to Assets

2019

2022

2020

2021

2023

Return over Assets

03

05

PROFITABILITY

04

Dollarama's ability to convert earnings into free cash has improved over the years, with a notable increase in gross margin from 43.5% in 2023 to 47% in 2024, marking a 3.5% rise. This surpasses the industry benchmark of 41.79%, showcasing Dollarama's adeptness in cost management and profit generation from sales

Thank You

Analyzing the net income and the free cash flow margin shows that as net income grows, it results in a higher cash inflow. With a high correlation (0.95), this showcases a healthy and sustainable financial performance for Dollarama, indicating that the company’s profitability is being translated into cash flow.

HISTORICAL GROWTH

Chiamaka Ogugua

Siphiwe Hlabano

Antonella Aguilar Curay

Jennifer George Frank

Milagros Vasquez Fernandez

VALUATION RATIOS

Trend of Bottom Line

Trend of Top Line

Seasonality of Sales

• Sales increase during major holidays and the fourth quarter
• Lowest sales during the first quarter
• Elevated shipping and payroll costs in anticipation of Q4 sales surge

Operating

Margin

Net Earning

Growth

Comprehensive

Income (MM)

Cost of goods Margin

Company

24%

21%

840.78

Dollarama

56%

Dollarama’s price to earnings ratio is at 29.77 in 2024 from 26.74 (2023 fiscal year), It’s price to sales ratio also shows and increase from the 2023 fiscal year (4.25 to 4.94). These are significantly higher than the industry benchmark of 7.48 and 0.24 respectively, suggesting that Dollarama stocks may be trading at a premium(overvalued) compared to the average valuation of companies in its industry.

80%

Metro

20%

10%

1,054.30

Q4-2023