Dollarama (DOL.TO) reached into Milli Vanilli’s back catalogue to explain a disappointing first quarter: blame it on the rain.
The dollar store operator said unseasonably glum spring weather reduced foot traffic at its stores, sending it to a modest miss on the profit line. Sales growth at stores open at least a year slowed to 2.6 per cent in its fiscal first quarter, down from 4.6 per cent in the same quarter last year.
“Sales for the first quarter of Fiscal 2019 were affected by poor weather conditions in April 2018 that delayed customer demand for our summer seasonal product assortment by several weeks,” the company said in a release.
Shares of Dollarama trading six per cent lower shortly after 12 p.m. Eastern Time, putting it on pace for the biggest single-day drop since December 9, 2015.
In spite of the weak start to the year, Dollarama said there are signs some of those sales lost to the poor spring weather have materialized in the start of the second quarter. The company reaffirmed its full-year margin forecast, but did note capital expenditures for fiscal 2019 could be as much as $50 million higher than earlier expected.
Though the company has by and large been a stock market darling since debuting on public markets in 2009, this year has proven less than stellar for investors. Shares of the company were modestly lower year-to-date before the earnings release weighed on the stock.
The analyst community, however, still sees further upside for investors. Of the 17 analysts that cover the company, 13 rate it with the equivalent of a buy rating, four with a hold, and not a single analyst recommends investors sell. The average 12-month target price is $166.75 per share, indicating a further 13.2 per cent upside.
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