Inflation continues to push consumers into the arms of Dollarama, which increases its revenue by more than 20%. This positive momentum is even stronger than financial analysts had anticipated.
“While we continue to see strong demand for consumables [nourriture, produits ménagers] in the context of persistent inflation, we are also seeing good results for our seasonal items and general merchandise,” President and CEO Neil Rossy said in a conference call with financial analysts on Wednesday. .
Sales at the Montreal retailer rose 20.7% to $1.29 billion in the first quarter ended March 31. Comparable sales, a figure that excludes store openings and closings in the last 12 months, grew at a rate of 17.1%. The number of transactions, for its part, jumped by 15.5%.
Analyst Martin Landry of Stifel GMP calls the same-store sales growth “impressive”. “It’s the fastest pace in five years. This strong growth seems to be supported by volumes rather than prices, which is an excellent sign. This suggests that Dollarama continues to gain market share. »
There are several reasons why customers are more sensitive to bargains, notes Mr. Rossy. “There are several factors other than inflation that affect consumer behavior. There is wage growth or interest rates. »
No price war
Asked by an analyst if he’s seen an increase in price competition from other retailers, Dollarama’s big boss seemed unconcerned about what his competitors are doing. “We do not react to promotional activities, replies the leader. […] If they decide to have horrible margins on a loss leader, that’s their business decision. We have an everyday low price strategy. »
He even conceded that the price of school items could be lower at a competitor during back-to-school promotions. “For 11 and a half months, we are more affordable. That’s the approach we take, and I think our customers, for the most part, like it. »
In this context, the company recorded a net profit of 179.9 million, compared to 145.5 million in the same period last year. Diluted earnings per share are 63 cents. Prior to the earnings release, analysts had expected earnings per share of 59 cents and revenue of $1.25 billion, according to financial data firm Refinitiv.
Dollarama also opened 21 stores during the quarter. “That’s a particularly high number for the season,” said analyst Brian Morrison of TD Securities. Mr. Rossy explained that the company had decided to bring projects up to the beginning of the year “to take the pressure off” during periods when construction is traditionally more intense. “That doesn’t change our goal of opening between 60 and 70 stores by the end of the fiscal year. »
Despite the better than expected results, Dollarama did not improve its forecast for the rest of the year. Management still expects same-store sales to grow 5% to 6% during the year. “We prefer to remain cautious and see how consumers behave, while the results for the second quarter of last year were very strong,” said CFO Jean-Philippe Towner.