Grocers have reportedly intensified their offensive against Dollarama, which is experiencing renewed traffic in a context of high inflation, notes the boss of the Montreal retailer.
“In the consumer goods sector, we see that the market is more competitive,” President and CEO Neil Rossy said Wednesday during a conference call with financial analysts. I would even say: extremely competitive. »
At a time when household grocery bills continue to rise, the Montreal retailer is benefiting from strong customer traffic. The brand has even become a popular topic on social media, where influencers discuss the non-perishable food offering at Dollarama.
Even if grocery retailers have decided to “fight back” on the price front, there is a limit to what the industry can do to ease the burden on consumers, Mr. Rossy believes. “It’s really a difficult situation. Manufacturers continue to push prices upwards. Retailers are doing their best not to pass the bill on to consumers, but there is a limit to what they can absorb. »
These comments come at a time when large Canadian grocers are under pressure from the federal government to reduce their prices. Dollarama was not targeted by the government’s actions.
Food inflation has moderated in recent months in Canada, but price growth remains significantly higher than the recent average and adds to the record price surges of 2022 and early 2023.
In Canada, food inflation fell from 8.3% in June to 5.6% in October, according to Statistics Canada data.
Results above expectations
Dollarama stores are busier as consumers watch their spending and pay more attention to the prices of the products they purchase.
The Montreal company says that the number of in-store transactions jumped 10.4% in the third quarter, ending October 29. This revival allowed comparable sales, which exclude store openings and closings, to jump 11.1%.
Its net profit thus stood at $261.1 million, which represents an increase of 31.4%. Diluted earnings per share are 92 cents. Revenues, for their part, increased by 14.6%, to 1.5 billion.
Before the results were released, analysts had expected earnings per share of 86 cents and revenue relatively similar to those posted, according to financial data firm Refinitiv.
Analyst Irene Nattel of RBC Capital Markets believes the results support her optimistic thesis. “The results demonstrate that Dollarama’s proposal resonates, even more so in a context of high inflation. The results also demonstrate management’s attention to efficiency. »
A slowdown coming?
Analysts were surprised, however, not to see management revise its annual forecasts more upwards after nine months of vigorous growth.
The company expects comparable sales growth of 11% to 12% in the fiscal year ending at the end of January. After nine months of strong performance, the forecast suggests a “steep” deceleration, estimates analyst Martin Landry of Stifel. “This suggests comparable sales of between 0% and 4% in the fourth quarter. This is less than our forecast of 6% and the consensus forecast of 5%. »
Questioned on the subject, Neil Rossy remained evasive. “So far, business is continuing as normal. There is nothing unusual. For now, that’s all I can say. »
Vice-president of corporate finance and treasurer Jolyane Caron, however, added that demand remained vigorous, but that strong growth last year made the comparison more difficult.
Dollarama shares lost $1.12, or 1.13%, on the Toronto Stock Exchange Wednesday afternoon, to $97.96.