It has been interesting to watch the share prices in our SINS Index over the past year. The three best performing stocks of the year include Dollarama, Jean Coutu and Big Lots. The three worst performing stocks of the year are Indigo Books, Sears Canada and Staples. Highlights are listed below.
Dollarama takes this year’s top honour for best performing stock. It ended 2011 up a whopping 54.6% to settle at $44.50 per share. Sales during 2011 consistently increased. Not bad for a company who went public as recently as 2009. Dollarama grew quickly over the last few years as Canadians went searching for bargains during the economic downturn. The company was also successful at introducing various price points up to $2. The company, which begun in 1992, currently operates 690 locations across the country. It is Canada’s largest dollar store chain.
Our next top performer title went to Jean Coutu Group Inc. The company’s share price ended the year at $12.75, up 32.4%. Government drug reforms required generic drug prescription prices to be reduced. The company reduced these prices to 30% of brand name drugs. In spite of this, financial results in 2011 were better than expected. This was due to overall market growth and expansion in the store network. The company also signaled the exit as a big player in the US drug store business by selling a 10% interest in the Rite Aid Corporation, a leading US drugstore chain with over 4,700 stores.
The third top performer of the year was Big Lots. It’s share price ended the year up 24% to $37.76. This US based company operates 1,405 stores in 48 states. It is the nations largest broadline closeout retailer that offers extreme value retailing. Big Lots made its first foray into the international marketplace this year with the purchase of Calgary, Alberta based Liquidation World. Troubled Liquidation World had seen recent success by adopting the Big Lots business model, but it was too little too late as the company fell into a liquidity crunch and could not refresh inventory which hurt sales. Big Lots purchased 89 Liquidation World stores for $1.8 million.
Chapters Indigo closed out 2011 down 50.5%. During the year, the company launched a new loyalty program called plum rewards. It also launched the new Kobo eReader touch edition. Sales of Kobo skyrocketed during the year as the company continued to invest in Kobo and transition to become a lifestyle retailer. Then, in November, it was announced that Tokyo based Rakuten Inc. was going to acquire all outstanding Kobo shares. Chapters Indigo received US$140-$150 million proceeds from the sale. The company’s share price moderately recovered, but never recaptured the whole price decline seen during 2011.
Sears Canada’s share price ended the year down 45.5%. The company’s quarterly sales continuously declined throughout the year. New President & CEO Calvin McDonald stated that the company was not pleased with the results and had begun to implement new initiatives. A few highlights this year included the new shoppable iPad application for the Wishbook and a new Mastercard Paypass payment option for customers. After holiday sales slumped, Sears Corp. announced it would be closing up to 120 Kmart and Sears stores in the United States. Sears Canada stores were not on this closure list.
The last stock that was a worst performer this year was Staples Inc. It closed the year down 39%. Q1 sales and profits were weaker than expected as demand in Canada and Europe weakened and higher gas prices increased delivery costs leading to decreased sales. The company is exposed to foreign exchange risk and a highly competitive industry. The rest of the year was marked by lacklustre performance as the share price continued to decline.