April 11, 2012 / 12:06 PM / in 6 years

Dollarama sales, profit jump; shares rise

(Reuters) - Dollarama Inc (DOL.TO) posted a surge in quarterly profit on Wednesday as warmer-than-usual weather during the holiday season and a drive to sell more expensive merchandise helped the Canadian dollar-store chain beat analyst expectations.

Shares of the Montreal-based company rose more than 7 percent after it showed solid sales growth in the quarter ended January 29 and boosted its dividend by 22 percent.

Sales at established stores, a key measure for retailers, rose 7.9 percent, while about half of total sales came from items priced above a dollar, compared with 42 percent last year.

The increase is part of a strategy to introduce more products at higher price points, Chief Operating Officer Stephane Gonthier said during a conference call. Dollarama was still expanding its chain’s selection of items priced at C$1.25, C$1.50 and C$2, he said.

Net income for the fiscal fourth quarter rose to C$63.6 million ($63.43 million), or 84 Canadian cents per share, from C$42.0 million, or 56 Canadian cents, a year ago.

Analysts, on average, were expecting the company to earn 69 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Sales rose 15 percent to a higher-than-expected C$468.7 million, thanks to the addition of a net 52 stores during the fiscal year and growth at existing outlets.

Dollarama, which went public in 2009, has more than 700 locations across Canada, and opened 14 new stores during the quarter.

Gross profit margin improved to 39.8 percent in the quarter, from 38.2 percent a year ago.

Dollarama raised its quarterly dividend to 11 Canadian cents per share, citing strong cash flow and earnings.

“The increase was in line with our expectations of a 20 percent increase,” Barclays analyst Jim Durran wrote in note.

Dollarama shares rose 7.4 percent to C$51.95 on Wednesday morning on the Toronto Stock Exchange.

Reporting by Aftab Ahmed in Bangalore and Allison Martell in Toronto; Editing by Joyjeet Das

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