Photo: The Canadian Press
People walk into a Dollarama store in Toronto, September 25, 2021. THE CANADIAN PRESS/Graeme Roy
Discount retailer Dollarama Inc. is gaining new customers as Canadian shoppers “step away” from more expensive stores and gravitate toward lower-priced dollar stores amid inflation.
The retail chain said on Friday it was attracting consumers from “all walks of life” – including higher-income households – as rising living costs take a toll on budgets.
“I believe there’s probably been some decline in trading because of the inflationary environment and the pressures on everybody’s wallet,” Dollarama President and CEO Neil Rossy said on a call with analysts on Friday.
“It’s a great opportunity for us to keep some of the customers who otherwise wouldn’t come to our store.”
The company’s solid sales and profit in the latest quarter reflect “particularly strong demand for everyday essentials” and good value, he added.
Dollarama chief financial officer JP Towner said the company had seen strong sales of “key consumables” such as groceries, seasonal goods such as beach toys and barbecue accessories and party items as people came together.
“We’re in an environment where we’re gaining market share as a result of (inflation),” Towner said, noting that the company’s sales are supported by an expanding network of stores.
The dollar store chain is also seeing its back-to-school and stationery categories perform well in the current quarter, he said.
The Montreal-based company raised its comparable-store sales estimates for the year when it reported second-quarter profit of $193.5 million, up from $146.2 million in the same quarter last year, as sales rose 18.2 percent .
The discount retailer said profit for the quarter ended July 31 was 66 cents a share, compared with 48 cents a share a year ago.
Total sales for the three-month period were $1.22 billion, up from $1.03 billion a year earlier, while comparable store sales, a key metric for retailers, rose 13.2 percent as transactions rose 20, 2 percent, but the average transaction size fell 5.8 percent.
Irene Nattel, an analyst at RBC Dominion Securities Inc., said in a report that the results beat the bank’s forecast on better-than-expected same-store sales.
Dollarama’s strong quarter underscores its “deep value positioning that is resonating increasingly strongly with consumers,” she said.
The smaller basket size coupled with an increase in store traffic reflects higher sales of consumables and strong seasonal demand, Nattel said.
Dollarama raised its comparable store sales growth assumption for its 2023 financial year to a range of 6.5 to 7.5 percent, compared with earlier expectations of between 4.0 and 5.0 percent.
Meanwhile, the company continues to add more items up to its new top price of $5.
Dollarama said the higher prices allow it to bring in new products and replenish inventory that has been driven out of business by inflation.
The $5 items will expand the company’s assortment, with new products expected in seasonal categories, decor, tableware and other areas of the store.
Looking ahead, Dollarama has focused on ordering inventory in time and has a strong inventory position for upcoming selling seasons such as Halloween and Christmas, Towner said.
The discount chain is experiencing a “reset” in logistics costs as container prices decline from highs seen earlier this year, he said.
“We’re seeing some normalization of the supply chain environment,” Towner said. “We’re never close to getting back to pre-pandemic levels, but we’re in a better position than probably six to nine months ago.”
#Dollarama #attracts #shoppers #walks #life #relief #high #prices #Business #News