People walk by a Garage clothing retail store in Montreal, in November, 2024.Graham Hughes/The Canadian Press
Groupe Dynamite Inc. GRGD-T saw its stock price plummet by more than 32 per cent in Tuesday afternoon trading on concerns about potential for slowing growth, even as the fast-fashion retailer reported double-digit growth in both sales and profits for the first quarter.
The Montreal-based clothier, which operates the Dynamite and Garage chains, said its profit grew to $51.7-million or 45 cents a share on a diluted basis in the quarter ended May 2, compared with $27.3-million or 24 cents a share in the same period last year.
Revenues spiked by 37 per cent year-over-year, to $310.6-million. And comparable sales – an important metric that tracks sales increases while excluding the impact of new store openings – grew by 22.6 per cent, or 24.7 per cent on a constant-currency basis.
Still, that comparable sales growth was below analysts’ expectations of 25.2 per cent in the quarter, according to average estimates compiled by S&P Capital IQ.
Investors in the stock – which had seen rocketing momentum since its initial public offering in late 2024 – “had some sense” that comparable sales were beginning to moderate in the first quarter, Bank of Nova Scotia analyst John Zamparo wrote in a research note on Tuesday. “This was inevitable at some stage,” he added, noting that the company’s forecast for comparable growth of 11 to 14 per cent for this year remains unchanged.
As Groupe Dynamite executives faced questions about comparable sales trends during a conference call Tuesday to discuss the results, president and chief operating officer Stacie Beaver pointed to overall revenue growth as a sign of the success of its store expansions – which have been focused on the U.S. market.
“We’re opening aggressively, we’re seeing the U.S. perform exceptionally well,” Ms. Beaver said, adding that the difference between comparable growth in Canada versus the U.S. could be compressing the number slightly, but new stores are outperforming the company’s expectations.
“She’s coming back more, she’s spending more, her lifetime value is more to us – so we still think the customer is resonating with what we’re putting out there,” Ms. Beaver said.
The company also announced on Tuesday that it had increased its forecast for its profit margins based on earnings before interest, taxes, depreciation and amortization (EBITDA). The company now expects its EBITDA margins for this year to be between 38.25 to 39.5 per cent, compared with previous forecasts of 37.75 to 39.25 per cent.
While the forecast was up, that implies “slightly lower EBITDA through 2027,” compared with the consensus analysts’ estimates, Mr. Zamparo wrote.
Groupe Dynamite also lowered its store openings forecast for the year, saying it now expects eight to 10 net new openings compared with a previous guidance of 10 to 12 net new locations. That reflects the timing of two store closings that were already planned, but moved up to this year, chief financial officer Jean-Philippe D. Lachance told analysts on Tuesday’s call.
During the call, chief executive officer and board chair Andrew Lutfy also pointed out that the retailer has maintained its ability to sell its products at full price, rather than offering discounts to keep customers engaged, and that the state of the consumer seems to be strong.
“Listen, I very much believe in this K-shaped economy, and that top 20 per cent of consumers is still seemingly in a good place in terms of disposable income,” he said. “The U.S. is definitely on fire.”
At the end of the call, Mr. Lutfy noted a shift in tone in the questioning, but added that the team is expecting a strong year ahead.
“I can feel the energy on the line is certainly a little less enthusiastic than prior calls, but I just want to put it out there: We’re delivering on the guidance. As a matter of fact, we’re raising the guidance,” he said. “We’re very comfortable with our numbers, we’re very excited with the new store openings and our business.”
Groupe Dynamite shares were down $23.85 to $50.59 in early afternoon trading on the Toronto Stock Exchange.