Value retailer Dollarama is winning over new customers as Canadian shoppers increasingly shift away from more expensive stores to dollar stores amid high inflation.
Updated yesterday at 5:41 p.m.
The chain of stores said on Friday that it was attracting consumers from “all walks of life” – including among high-income households – because the rising cost of living is straining budgets.
“I think there’s probably [une migration] because of the inflationary environment and the pressures on everyone’s portfolio,” Dollarama President and CEO Neil Rossy said Friday during a conference call with analysts.
This is a great opportunity for us to retain some of those customers who otherwise might not have come to our store.
Neil Rossy, President and CEO of Dollarama
The company’s strong sales and earnings in the most recent quarter reflected “particularly strong demand for basic necessities” and good value, he added.
Dollarama Chief Financial Officer JP Towner said the retailer had strong sales of “key consumer products” like food, seasonal products like beach toys and barbecue accessories, and party supplies.
“We are in an environment where we are gaining market share due to [de l’inflation] said Towner, noting that the company’s sales were supported by its expanding store network.
The dollar store chain is also seeing its back-to-school and stationery categories perform well in the current quarter, he added.
The Montreal-based company raised its sales forecast for its stores open for at least a year for the fiscal year, when it posted a profit of 193.5 million in the second quarter, up from 146.2 million in the same quarter last year. Its sales increased by 18.2% over one year.
Dollarama’s earnings per share were 66 cents for the quarter ended July 31, compared to 48 cents for the same period last year.
Quarterly revenue totaled 1.22 billion, up from 1.03 billion a year earlier, while sales at stores open for at least a year, a key retail industry metric, rose 13.2 %. The number of transactions increased by 20.2%, but the average transaction value decreased by 5.8%.
$5 Items
Analyst Irene Nattel of RBC Dominion Securities said in a report that Dollarama’s results exceeded the bank’s forecasts, amid better-than-expected performance at stores open for at least a year.
Dollarama’s strong quarter is a testament to its “value positioning, which is increasingly resonating with consumers,” she said.
The smaller basket size coupled with increased in-store traffic reflects higher consumer product sales and strong seasonal demand, Ms.me Nattel.
Dollarama raised its forecast for same-store sales growth for its fiscal year 2023 to the range of 6.5% to 7.5%. It previously targeted the range between 4.0% and 5.0%.
In the meantime, the company continues to add more items to its new maximum price of $5. Dollarama said the higher prices allow it to offer new products and restock inventory that had to leave its stores due to inflation.
The $5 items will expand the company’s product line, with new items expected in seasonal categories, decorations, tableware and other store sections.
Dollarama intends to focus on ordering inventory early, Towner said, to be in a good position for the upcoming Halloween and Christmas sales periods.
The chain is seeing its logistics costs “readjust” as container prices decline from highs recorded earlier this year, Towner continued.
“We are seeing some normalization of the supply chain environment,” he said. We’re nowhere near back to pre-pandemic levels, but we’re in better shape than about six to nine months ago. »