Yahoo Finance Dollarama sales up as Canadians turn to value retailer for groceries amid higher inflation
Dollarama Inc. shares jumped six per cent on Sept. 13 as profits topped analyst expectations.
The increase was primarily due to “higher than historical demand for consumables,” or food, and other household products, the discount retailer said in a press release. Same-store sales — sales at stores that have been open for at least a year — rose 15.5 per cent as Canadians increasingly turned to the value retailer for their grocery needs amid higher inflation.
Total sales amounted to $1.46 billion, jumping 19.6 per cent from last year.
“We are seeing robust performance across the board in terms of our three main product categories and their departments,” chief executive Neil Rossy told analysts on a Sept. 13 call.
The sales increase enabled management to pay shareholders a dividend of seven cents a share, in line with previous quarters.
The spike in sales had little to do with a change in the product mix, Rossy said, and “more to do with volume.”
In other words, consumers are simply more receptive now to Dollarama’s existing product offering, and are making more frequent — and bigger — transactions at the value retailer.
“I know the flavour of the day is all of these YouTube things about grocery, and food, and Dollarama,” Rossy said, referring to the Dollarama Budget Grocery Shopping Trend, where vloggers showcase low-cost food hauls from the retailer, “but the reality is, we haven’t grown our food section or grocery sections. It still remains a small piece of our offering, one of the many things we offer.”
The profit increase was also due to an increase in the number of Dollarama stores, which rose to 1,525 from 1,444.
The value retailer beat analyst estimates. Same-store sales were five per cent higher than Stifel analysts Martin Landry and Mathieu Deneault Gauthier anticipated, they said in a Sept. 13 note. Similarly, Bank of Nova Scotia analysts’ estimates were “handily (beat),” they said in a note the same day.
Inflation partly caused an increase in sales at the retailer, but it also caused an increase in theft, or shrinkage, as desperate consumers fill their pockets with Dollarama goods.
Shrinkage has worsened in the past 12 to 18 months, Rossy said, but the company had expected this, and have included it in their guidance.
“We’re comfortable with the shrink position that we have,” he said.
Dollarama updated its outlook for the second half of the fiscal year, bumping sales growth estimates to 10 per cent to 11 per cent, up from five per cent to six per cent previously.
“In the second half of fiscal 2024, the corporation expects to continue to benefit from strong demand for its affordable, everyday items in the current macroeconomic and inflationary context,” management said.
• Email: mcoulton@postmedia.com
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