Dollarama Inc. · TSX:DOL
Dollarama — Q4 FY2019 Earnings Presentation
30 slides from Dollarama's earnings presentation, Apr 9, 2019
Slide 1: Investor Presentation
Investor Presentation April 9, 2019
Slide 2: YAN <t =
\ St < ~~ Ch YAN <t = WH NE | ct ie all a al fo] a
Slide 3: Cautionary statement
Cautionary statement Forward-Looking Information This presentation contains forward-looking information about Dollarama’s results, levels of activity, performance, goals or achievements which is based on estimates and assumptions that management believes are appropriate and reasonable in the circums
Slide 4: Overview
Overview —— 1 4 2O]1SUE
Slide 5: Dollarama through the years
Dollarama through the years Foundation of single Introduction of price point dollar chain $2.50 and $3.00 by third generation Initial public offering price points Introduction retailer and general (TSX: DOL) – of $3.50 New long-term Launch of online store merchandiser 585 stores in ten Launch of Ope
Slide 6: Dollarama today
Dollarama today • Largest and only national dollar store chain in Canada • 1,225 corporate-owned and operated stores • Avg. of 10,217 sq. ft. per store • Avg. store annual sales of $2.9 million • Strong value proposition at select fixed price points up to $4(1) • Broad assortment of everyday goods •
Slide 7: A simple, growth-oriented business model
A simple, growth-oriented business model We build We focus We solidify on our growing on delivering our brand store network compelling reputation and and our value to our deliver superior low-cost direct customers financial sourcing platform results Backed by seasoned team and disciplined execution
Slide 8: Competitive Advantages
Competitive Advantages
Slide 9: Direct sourcing expertise
Direct sourcing expertise • Longstanding relationships with low-cost supplier network: • Overseas direct sourcing program initiated in 1992 • Well-diversified base of established suppliers • ~50% merchandise sourced directly from over 25 countries (primarily China) • Benefits of direct sourcing: • C
Slide 10: Large network with over 1,200 stores
Large network with over 1,200 stores Only dollar store chain with a significant presence in all ten provinces 102 107 37 31 101 503 344 2.4x more stores 1225 1160 than 4 largest pure 1095 3-yr Store Count Dollarama vs. play competitors Next 4 Pure Play Competitors combined 5.4x larger than 228 224 2
Slide 11: Compelling product offering
Compelling product offering • Broad assortment of products across 20+ departments at compelling value • Mix of store brands and General Merchandise Consumables name brands 46% 39% Seasonal • Multiple fixed price points 15% 11
Slide 12: Strong brand awareness and broad customer appeal
Strong brand awareness and broad customer appeal • Our value proposition is the key differentiator • Brand awareness across Canada is at 98% • We appeal to all demographics and 98% income ranges • Typical consumer profile: • Female • 25-54 years of age • Annual income of $20k-$80k Source: Leger surv
Slide 13: Offering convenience and value
Offering convenience and value • Strong brand recognition and reputation for delivering value • Unrivaled presence across Canada in convenient locations • Destination store appealing to broad customer base • Consistent in-store shopping experience 13
Slide 14: Operational Strategies
Operational Strategies
Slide 15: Strategies for driving growth and creating value
Strategies for driving growth and creating value • Grow store network in Canada in a disciplined manner • Leverage strengths to stimulate sales • Maintain low-cost operating model
Slide 16: Significant potential for additional growth
Significant potential for additional growth Thousands of People per Dollarama Store Average of 66 net new stores per year over last 43 10 fiscal years 29 24 24 Eastern Canadian market not saturated Western Ontario Quebec Atlantic Dollarama underpenetrated Provinces in Ontario and Western Canada Sour
Slide 17: Disciplined approach to growth
Disciplined approach to growth • Efficient capital model • $650K in leasehold improvement, fixtures and inventory • Quick sales ramp-up • Average sales ramp-up to $2.3M within 2 years • Rapid payback of about 2 years • Low maintenance capex Strong profitability, low capital intensity and high ROI 17
Slide 18: Leverage strengths to stimulate sales
Leverage strengths to stimulate sales • Effective and flexible Industry leading merchandising • Refresh 25-30% of same-store sales merchandise every year 10-year 10-year 10-year • Zonogram by department (vs. 3500 Store CAGR Sales CAGR SSS Average 11.0% fixed planogram) 8.1% 12.5% 5.8% 10.0% 3000 • N
Slide 19: Maintain low-cost operating model
Maintain low-cost operating model • Continuous in-store productivity improvements • POS systems • Kronos advanced scheduling • NCR point of sale terminals • WIFI and mobile-driven projects • Efficient supply chain • DC, warehouse and transportation logistics • Lean overhead operations 19
Slide 20: Financial Metrics
Financial Metrics
Slide 21: Robust financial performance
Robust financial performance FOURTH QUARTER ENDED Y-O-Y FISCAL YEAR ENDED Y-O-Y (in millions of dollars, except per share amounts) FEB. 3, 2019(1) JAN. 28, 2018 GROWTH FEB. 3, 2019(1) JAN. 28, 2018 GROWTH % OF % OF % OF % OF Sales $1,060 SALES $938 SALES 13.0% $3,549 SALES $3,266 SALES 8.6% Gross Ma
Slide 22: Balanced approach to operating margin
Balanced approach to operating margin 22.7 LTM EBIT Margin (%) 9.0 8.3 8.3 6.5 5.7 4.9 4.3 2.2 Dollarama Canadian Tire North West Metro Loblaw Couche-Tard Empire Dollar Dollar Tree General Canadian retailers with product offering US dollar overlap with Dollarama stores Source: Company websites; Walm
Slide 23: Strong organic growth with low capital requirements
Strong organic growth with low capital requirements 10% 8% Last Three Fiscal Years Store Count CAGR 6% 4% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Cash Flow After Capex(1) Source: Company websites; Walmart Canada figures not available (1) (EBITDA – CAPEX) / EBITDA 23
Slide 24: Strong key metrics growth since IPO
Strong key metrics growth since IPO 4,000 8-Year CAGR's: $3,549 Store Count: 8.2% 3,500 Sales ($M): 12.1% $3,266 EBITDA ($M): 18.1% Net Earnings ($M): 21.3% $2,963 3,000 $2,650 2,500 $2,331 $2,065 2,000 $1,859 $1,603 1,500 $1,420 1,225 1,095 1,160 1,030 955 $884 1,000 874 $826 785 704 $703 652 $597
Slide 25: Continuous margin improvement since IPO
Continuous margin improvement since IPO Cost structure, with 80-85% of operating costs being variable, allows for scaling benefits arising from top line growth 60.0% 8-Year Improvement: Gross Margin: 3.2% SG&A Margin: 5.2% 50.0% EBITDA Margin: 8.4% EBIT Margin: 8.2% 39.0% 39.2% 39.8% 39.3% 40.0% 37.
Slide 26: Balanced debt structure
Balanced debt structure 67% fixed rate debt, 33% floating rate debt(1) $525M available liquidity ($50M cash + $475M undrawn credit facility) (1,2) 2.74% weighted average cost of debt(1) 2.9 years weighted average time to maturity(1) 5-Year Fixed $600 2.337% 5-Year Fixed $525M 3.550% $500M $500 $400
Slide 27: Total shareholder return
Total shareholder return Performance Graph Since January 31, 2011 1250 1150 1050 Dollarama 950 (Total Cumulative Return of a $100 investment) TSX Capped Consumer Discretionary Index 850 750 650 550 450 350 250 150 50 31-Jan-11 31-Jan-12 31-Jan-13 31-Jan-14 31-Jan-15 31-Jan-16 31-Jan-17 31-Jan-18 31-
Slide 28: Priorities
Priorities • Open 60-70 stores in FY20 and then reach 1,700 stores by 2027 • Sustain attractive same-store sales growth • Maintain balanced operating margins • Maximize shareholder value Maintain and enhance our simple, growth-oriented business model 28
Slide 29: Thank you
Thank you Te i. aun” zien oY a. nan Bf _aiinined iv
Slide 30: A seasoned board and management team
A seasoned board and management team BOARD OF DIRECTORS OFFICERS Stephen Gunn Nicholas Nomicos Neil Rossy Chair of the Board Managing Director President & Chief Executive Corporate Director Nonantum Capital Partners Officer Joshua Bekenstein Neil Rossy Michael Ross, FCPA, FCA Managing Director Presi