UPDATE 2-Retailer Dollarama's quarterly profit tops estimates

Wed Apr 9, 2014 10:44am EDT

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(Updates with market reaction, analyst comment, additional details)

By Solarina Ho

April 9 (Reuters) - Canada's Dollarama Inc reported a higher-than-expected rise in quarterly earnings on Wednesday even though it had warned earlier this year that temporary store closures from an ice storm had hurt results in December.

The Montreal-based discount retailer, whose shares jumped more than 7 percent, also raised its quarterly dividend.

Net income rose nearly 8 percent to C$83 million ($76 million), or C$1.17 per share, in the fourth quarter ended Feb. 2 from C$77.1 million, or C$1.04 per share, a year earlier.

Analysts on average had expected earnings of C$1.10 per share, according to Thomson Reuters I/B/E/S.

Sales increased 4 percent to C$582.3 million, mainly because of the addition of 27 net new stores. The quarter had one fewer week than the year-earlier period.

The analysts' average estimate was C$575.8 million.

BMO Capital Markets analyst Peter Sklar said in a research note that analysts had lowered their estimates following the warning early in the year.

Dollarama said in January it had to temporarily close some 80 stores in the days leading up to Christmas, when an ice storm blanketed large swathes of central and eastern Canada. The deep freeze had resulted in week-long power outages in Ontario, Quebec and New Brunswick, where many of the company's stores are located.

Dollarama, which sells goods for up to C$3 in about 874 stores across Canada, said sales at established stores rose 1.1 percent during the quarter, despite a 7.5 percent drop in December, typically one of its highest sales periods.

The average amount customers spent per trip rose 4.4 percent during the quarter as the company sold more items priced higher than C$1.00. The number of transactions fell 3.1 percent, however, as a result of the storm.

The company raised its quarterly dividend to 16 Canadian cents per share from 14 Canadian cents, for payment on May 7 to shareholders of record on April 29.

The stock was up 7.3 percent at C$92.06 on the Toronto Stock Exchange in morning trading.

($1 = 1.0930 Canadian dollars) (With additional reporting by Ashutosh Pandey in Bangalore; Editing by Prateek Chatterjee and Lisa Von Ahn)

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