After “resisting for a long time” making this decision, Dollarama will “gradually” start selling items at a fixed price of $5, the Montreal retailer announced on Wednesday during the unveiling of its most recent quarterly results.
This first increase in seven years should begin around “June or July”.
“Our strategy has always been to proceed gradually and cautiously,” President and CEO Neil Rossy said in a phone call with analysts.
Dollarama began selling items at fixed prices higher than $1 in 2009 to increase product selection and quality. Maximum prizes increased from $2 to $3 in 2012, then to $4 in 2015.
The announced increase, however, takes place in an inflationary context that is very different from previous increases, explained Mr. Rossy. “In the past, the introduction of a new price threshold had only one role, it was to bring novelty and excitement to the shelves. [avec de nouveaux produits]. Now that will always be the case, but we are also in an inflationary period. It won’t just be price adjustments, there will be new products. »
Anticipated by investors, the decision to introduce higher prices had been pushed back by Dollarama, whose strategy is to increase its prices after its competitors. “I resisted the idea of introducing items at a price of $4.50 for a long time and I would like to wait even longer,” Mr. Rossy said last September.
The decision adds a tool to the retailer’s arsenal, said Brian Morrison of TD Securities. “The introduction of a $5 price provides financial flexibility for both revenues and margins,” comments the financial analyst in a note.
However, the effect should not be significant in the results of the next financial year (early February to the end of January) since the introduction is “gradual”, warned Jean-Philippe Towner, the chief financial officer. “It’s factored into our comparable sales growth forecast, but it’s not something material. »
The company anticipates that comparable sales [qui ne tiennent pas compte des magasins ouverts depuis moins de 12 mois] are expected to grow by 4% to 5% during the year.
Results above expectations
Dollarama reported better-than-expected earnings earlier on Wednesday as the retailer increased sales by 11%.
The company posted net earnings of $219.9 million during the quarter that ended January 30, compared to $173.9 million for the corresponding quarter of the previous year.
Total revenues are up 11% to $1.22 billion. Comparable sales, for their part, increased by 5.7%.
Adjusted net earnings per share rose 32.1% to 74 cents. Prior to the earnings release, analysts had expected adjusted earnings per share of 71 cents, according to data from financial firm Refinitiv.
Around noon, Dollarama shares gained $2.06, or 3%, to $70.78 on the Toronto Stock Exchange.