The number of items selling for more than $3 on Dollarama is increasing. (Photo: 123RF)
What to do with titles from Dollarama, Microsoft and Gap? Here are some analyst recommendations that are likely to move prices soon. Note: The author may have a completely different opinion than that expressed.
Dollarama (DOL, $98.57): encouraging preliminary data
More than three weeks before Dollarama’s quarterly earnings release, National Bank Financial’s Vishal Shreedhar notes that its consumers continue to shop there despite the retailer’s price hikes.
In fact, the number of items selling for more than $3 is up compared to last May and July. Among the 3,000 different items, the number of items selling for less than $3 decreased by 23, while the number of items priced above $3 increased by 54.
However, the analyst reports that, according to his findings, consumers remain cautious and are reducing some of their discretionary spending.
According to him, the sales growth rate of the same store that Dollarama will open on December 13, 2023 will be 10.1%, while it reached 10.8% last year. However, the basket size is likely to have increased by 1% over the same period.
The analyst is more cautious than the rest of the consensus and is betting on sales of $1.475 billion. Last year they totaled $1.290 billion. However, earnings before interest, taxes, depreciation and amortization are expected to be $452 million, above the consensus of $450 million. It’s also more than last year’s $386 million.
Thanks to the more efficient supply chain, the company also expects its margin growth rate to increase and selling, general and administrative expenses to decrease.
Vishal Shreedhar expects the company to revise its fiscal year targets upward, including same-store sales growth rate, and believes sales should remain “solid.” In the first and second quarters, Dollarama far exceeded its target range of 10% to 11%, he recalls.
The analyst maintains his Sector Outperformance recommendation and $104 price target. The stock currently trades at 27.3 times expected next-twelve-month earnings per share, compared to an average of closer to 24.9 times over the last five years.