People enter a Dollarama store in Toronto, September 25, 2021. THE CANADIAN PRESS/Graeme Roy Discount retailer Dollarama Inc. is gaining new customers as Canadian shoppers “trade up” from more expensive stores and turn to the dollar store’s cheaper prices amid inflation. The retail chain said on Friday it was attracting consumers from “all walks of life” – including higher-income households – as the rising cost of living takes a toll on budgets. “I think there’s probably some downside 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 those customers who otherwise wouldn’t have come to our store.” The company’s steady sales and profits 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 saw strong sales of “staple consumables” such as food, seasonal items such as beach toys and barbecue accessories and party items as people gathered. “We’re in an environment where we’re gaining market share as a result (of inflation),” Towner said, noting the company’s sales are 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 said. The Montreal-based company increased its comparable-store sales for the year as 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 came to 66 cents per diluted share for the quarter ended July 31, compared with a profit of 48 cents per diluted share a year ago. Total sales for the quarter came in at $1.22 billion, up from $1.03 billion last year, while comparable-store sales, a key metric for retailers, gained 13.2 percent as the number of transactions rose 20, 2%, but average transaction size fell 5.8%. Irene Nattel, an analyst at RBC Dominion Securities Inc., said in a report that the results beat the bank’s forecasts amid better-than-expected same-store sales. Dollarama’s strong quarter underscores its “deep value that is increasingly resonating with consumers,” he said. The smaller basket size combined with increased store traffic reflects higher sales of consumables and strong seasonal demand, Nattel said. Dollarama raised its assumption of comparable store sales growth for fiscal 2023 to a range of 6.5 to 7.5 percent compared with previous expectations of between 4.0 and 5.0 percent. Meanwhile, the company continues to add more items up to the new top price of $5. Dollarama said the higher prices allow it to introduce new products and replenish inventory pushed out of its store by inflation. The $5 items will expand the company’s lineup, 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 is in a strong position in inventory for upcoming sales seasons such as Halloween and Christmas, Towner said. The discount chain is seeing logistics costs “adjusting” as container prices decline from highs recorded earlier this year, he said. “We’re seeing some normalization of the supply chain environment,” Towner said. “We’re nowhere close to being back to pre-pandemic levels, but we’re in better shape than we were probably six to nine months ago.”
