September 12, 2012 / 11:44 AM / in 5 years

Dollarama profit jumps 32 percent but shares fall

(Reuters) - Canadian dollar-store operator Dollarama Inc (DOL.TO) reported a 32 percent jump in quarterly profit on Wednesday, but its shares slipped as the results were only slightly ahead of market expectations and investors may have hoped for more.

Canaccord Genuity analyst Derek Dley said that given Dollarama’s tendency to surpass expectations, investors may have anticipated a bigger earnings beat.

“It does trade at a lofty multiple, but I think it’s justified, given that, in my view, Dollarama offers the most visible growth pipeline in the consumer products space,” he said. Dley said he thought results were strong across the board.

Second-quarter earnings came in at 66 Canadian cents a share, compared with analysts’ average estimate of 64 Canadian cents, according to Thomson Reuters I/B/E/S.

In the same quarter last year, earnings were 50 Canadian cents a share.

Dollarama’s stock is up more than 30 percent so far this year, and it is trading at about 22 times earnings.

Sales were boosted by 8 percent growth in Dollarama’s store count over the past year, and a 7.3 percent increase in same-store sales. The company said 56 percent of sales came from goods priced at more than C$1.00, compared with 48 percent in the same quarter last year.

Dollarama, which started selling some items for more than C$1.00 in 2009, said in June that it would gradually introduce some non-grocery products priced as high as C$3.00.

Gross profit margin increased slightly to 36.9 percent of sales from 36.7 percent, and operating margin rose to 16.3 percent from 15.3 percent.

The company opened 14 new stores in the second quarter.

Net income rose to C$49.8 million ($51.2 million) from C$37.7 million a year earlier. Sales rose 14 percent to C$441.0 million, compared with an average estimate of C$436.4 million.

Dollarama’s stock was down 1.2 percent at C$58.59 on Wednesday morning on the Toronto Stock Exchange.

Reporting by Bhaswati Mukhopadhyay in Bangalore and Allison Martell in Toronto; Editing by Supriya Kurane; and Peter Galloway

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