Dollarama Inc. · TSX:DOL
Dollarama — Investor Presentation (April 2020)
38 slides from Dollarama's investor presentation, Apr 2, 2020
Slide 1: Investor Presentation Q4-FY2020
Investor Presentation Q4-FY2020
Slide 2: Cautionary statement
Cautionary statement Forward-Looking Information This presentation contains forward-looking information about results, levels of activity, performance, goals or achievements of Dollarama and Dollarcity or other future events or developments that may affect Dollarama and Dollarcity which are based on
Slide 3: Cautionary statement
Cautionary statement Dollarcity The financial outlook for Dollarcity for the 12-month period ending June 30, 2020, used specifically to calculate the estimated purchase price for the Dollarcity transaction, constitutes forward-looking statements. It is based on financial projections and is subject t
Slide 4: Dollarama Overview
Dollarama Overview MEGA
Slide 5: Dollarama through the years
Dollarama through the years Initial public Introduction offering of $2.50 and Long-term (TSX: DOL) $3.00 price store target Dollarama points Opening of Introduction of 1,700 founded as single- 585 Dollarama 1000th of $3.50 and across Launch of price point retail stores in Launch of Dollarama $4.00 p
Slide 6: Dollarama today
Dollarama today • Largest and only national dollar store chain in Canada • 1,291 corporate-owned and operated stores • Avg. of 10,277 sq. ft. per store • Avg. store annual sales of $3.0 million • Strong value proposition at select fixed price points up to $4 • Broad assortment of everyday goods • ~5
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 almost 1,300 stores across Canada
Large network with almost 1,300 stores across Canada Only dollar store chain with a significant presence in all ten provinces 108 119 38 39 361 519 107 ~2.5x more stores 1291 than 4 largest pure 1160 1225 3-yr Store Count(1) play competitors Dollarama vs. combined Next 4 Pure Play Competitors ~5.5x
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 43% 41% Seasonal • Multiple fixed price points 16% 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: Growth Strategies
Growth Strategies — > e LETTER SIZE } FORMAT LETTRE | MONUMENTS DOG >) 4
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 • Target of 1,700 Dollarama stores by 2027 • Leverage strengths to stimulate sales • Maintain low-cost operating model • Develop second growth • platform in Latin America • Acquisition of 50.1% in
Slide 16: Significant potential for additional growth in Canada
Significant potential for additional growth in Canada Thousands of People per Dollarama Store Average of 69 net new stores per year over last 40 10 fiscal years 28 24 23 Eastern Canadian market not saturated Western Ontario Quebec Atlantic Dollarama underpenetrated Provinces in Ontario and Western C
Slide 17: Disciplined approach to growth
Disciplined approach to growth • Efficient capital model • $650K in leasehold improvements, fixtures and inventory for new Dollarama store • 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
Slide 18: Leverage strengths to stimulate Dollarama sales
Leverage strengths to stimulate Dollarama sales • Effective and flexible Industry leading merchandising • Refresh 25-30% of same-store sales merchandise every year 11-year 11-year 11-year • Zonogram by department (vs. 4000 Store CAGR Sales CAGR SSS Average 11.0% fixed planogram) 3500 7.8% 12.0% 5.6%
Slide 19: Maintain low-cost operating model
Maintain low-cost operating model • Continuous in-store • Efficient supply chain productivity improvements • DC, warehouse and • POS systems transportation logistics • Kronos advanced scheduling • NCR point of sale terminals • Lean overhead • WIFI and mobile-driven • operations projects • LED retrof
Slide 20: Dollarcity transaction overview
Dollarcity transaction overview Acquisition of 50.1% interest in Dollarcity ▪ 20181 sales of US$236M, EBITDA2 of US$36.6M (16% EBITDA margin) ▪ Estimated purchase price of ~US$93M3; payment of US$40M made upon closing on August 14, 2019 ▪ Immediately accretive to DOL EPS (+CA$0.03 per share in F2020
Slide 21: Dollarcity, a 'localized' Dollarama
Dollarcity, a ‘localized’ Dollarama MERCHANDISE MIX1 (As at respective year ends) Dec. 31, 20183 Feb. 3, 2019 (based on annual retail value) NUMBER 169 1,225 35% 41% OF STORES 47% 43% CA$309 million SALES CA$3,549 million (US$236 million) 18% 16% PRICE POINT US$0.69-$3.00 General or equivalents in C
Slide 22: Dollarcity's growth trajectory
Dollarcity’s growth trajectory ▪ ‘Localized’ Dollarama concept initially tested and established in Target of El Salvador and Guatemala 600 Dollarcity stores ▪ Since 2017, network expansion has Guatemala been mainly focused on Colombia, ▪ 61 Dollarcity stores(2) a compelling retail market with ▪ Loca
Slide 23: Dollarama Financial Metrics
Dollarama Financial Metrics
Slide 24: Robust financial performance
Robust financial performance FOURTH QUARTER ENDED(1) Y-O-Y FISCAL YEAR ENDED(1) Y-O-Y (in millions of dollars, except per share amounts) FEB. 2, 2020 FEB. 3, 2019(2) GROWTH(2) FEB. 2, 2020 FEB. 3, 2019(3) GROWTH(3) % OF % OF % OF % OF Sales $1,065 SALES $1,060 SALES 0.5% $3,787 SALES $3,549 SALES 6.
Slide 25: Balanced approach to operating margin
Balanced approach to operating margin 22.9 21.7 LTM EBIT Margin (%) 9.8 8.4 6.5 6.8 6.1 5.0 4.8 3.7 DOL(1) DOL(2) Canadian Tire Metro North West Loblaw Couche-Tard Empire Dollar Dollar General Tree Canadian retailers with product offering US dollar overlap with Dollarama stores Source: Company websi
Slide 26: 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% 100% Cash Flow After Capex(1) Source: Company websites; Walmart Canada figures not available (1) (EBITDA – CAPEX) / EBITDA 26 (2) Reflects the adoption
Slide 27: Strong key metrics growth since IPO
Strong key metrics growth since IPO IAS 17(1) (1) These figures do not reflect the adoption of IFRS 16 - Leases 27
Slide 28: Continuous margin improvement since IPO
Continuous margin improvement since IPO Variable cost structure allows for scaling benefits with top line growth IAS 17(1) (1) These figures do not reflect the adoption of IFRS 16 - Leases 28
Slide 29: Debt structure as at Q4-FY2020
Debt structure as at Q4-FY2020 68% fixed rate debt, 32% floating rate debt(1) $590M available liquidity ($90M cash + $500M undrawn credit facility) (1,2) ~2.65% weighted average cost of debt(1) ~2.0 years weighted average time to maturity(1) 5-Year Fixed $600 2.337% 5-Year Fixed $525M 3.550% $500M $
Slide 30: U.S. Commercial Paper Program
U.S. Commercial Paper Program Issuer: Dollarama Inc. - Bloomberg Ticker ("DOL") We intend to shift a portion of borrowings to commercial paper Dollarama L.P. and Dollarama GP Inc., both Guarantors: wholly-owned subsidiaries of the Issuer and utilize the revolving credit facility as a backstop to the
Slide 31: 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 32: Disciplined execution of our growth plan
Disciplined execution of our growth plan Disciplined execution of our Canadian growth plan ▪ Target of 1,700 stores in Canada by 2027 ▪ Sustain attractive same-store sales growth ▪ Maintain balanced operating margins Development of our LATAM growth platform ▪ Target of 600 stores in three countries
Slide 33: ESG
ESG
Slide 34: Dollarama's ESG framework
Dollarama’s ESG framework PRIORITY AREAS OUR PEOPLE OUR PRODUCTS OUR SUPPLY CHAIN OUR OPERATIONS ▪ Fair labour ▪ Product safety ▪ Product sourcing ▪ Energy practices and quality management ▪ Human rights and climate change ▪ Diversity and inclusion ▪ Fair labour ▪ Waste management practices ▪ Data s
Slide 35: ESG priorities overview
ESG priorities overview KEY 2019-2020 ESG PRIORITIES OUR PEOPLE OUR PRODUCTS Promoting a dynamic and inclusive Providing customers with compelling workforce value and a consistent shopping experience ▪ Successfully recruit in support of expanding store network ▪ Maintain a diverse supplier base and
Slide 36: ESG priorities overview
ESG priorities overview KEY 2019-2020 ESG PRIORITIES OUR SUPPLY CHAIN OUR OPERATIONS A three-pronged approach to vendor Minimizing the environmental footprint compliance and engagement of our operations ▪ Maintain vendor adherence and ▪ Continue to measure Scope 1 and 2 GHG compliance with Vendor Co
Slide 37: Thank you
Thank you Te i, ume” Te laand ff a. | nan Bi _ anne” iv
Slide 38: 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