Discount retailer Dollarama Inc. is winning over new customers as Canadian shoppers “trade down” from more expensive stores and gravitate toward the dollar store’s cheaper prices amid inflation.
The retail chain said Friday it’s attracting consumers from “all walks of life”—including higher income households—as the climbing cost of living takes a toll on budgets.
“I do believe that there’s probably some trading down because of the inflationary environment and the pressures on everybody’s wallet,” Dollarama president and CEO Neil Rossy said during a call with analysts on Friday.
“It’s a great opportunity for us to keep some of those customers that might not otherwise have come into our store.”
The company’s solid sales and profit in its recent quarter reflects “particularly strong demand for everyday essentials” and good value, he added.
Dollarama chief financial officer J.P. Towner said the company recorded robust sales of “key consumables” like food, seasonal goods like 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 that the company’s sales are supported by its expanding network of stores.
The dollar store chain is also seeing its back-to-school and stationery categories performing well in its current quarter and is in a strong in-stock position for upcoming sales seasons like Halloween and Christmas, he said.
The Montreal-based company raised its comparable store sales guidance for the year as it reported a 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 the profit amounted 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 three-month period totalled $1.22 billion, up from $1.03 billion a year earlier, while comparable store sales, a key metric for retailers, gained 13.2 percent as the number of transactions rose 20.2 percent, but the average transaction size fell 5.8 percent.
Irene Nattel, an analyst with RBC Dominion Securities Inc., said in a report that the results beat the bank’s forecast amid better-than-expected same-store sales.
Dollarama’s strong quarter underscores its “deep value positioning resonating ever more strongly with consumers,” she said.
The smaller basket size coupled with an increase in store traffic reflects higher sales of consumables and strong seasonal demand, Nattel said.
In its outlook, Dollarama raised its comparable store sales growth assumption for its 2023 financial year to a range of 6.5 to 7.5 percent compared with earlier expectations for between 4.0 and 5.0 percent.
By Brett Bundale