The pain of inflation continues to drive shoppers to discount stores in search of some relief, a trend that is boosting sales at Dollarama and contributed to a 23.6% increase in the retailer’s profits in the first quarter. The Montreal-based discounter reported that its net earnings grew to $179.9-million, or 63 cents per share, in the quarter ended April 30, compared with $145.5-million, or 50 cents per share, in the same quarter in 2022.
With food price increases outpacing the rate of general inflation for months, shoppers have been turning to discount stores in an attempt to cut down on their grocery bills – including Dollarama, which sells grocery items such as cereal, canned tuna, condiments and snacks. The retailer has also seen strong demand in “consumables” such as cleaning products and other categories.
“While we continue to experience strong demand for consumables in the context of persistent inflationary pressures, we are also seeing strength across our seasonal and general merchandise categories,” chief executive officer Neil Rossy said on a conference call with analysts. “I am particularly pleased with the performance of our Easter season this year, demonstrating our strong fundamentals and the fact that the full mix is continuing to drive traffic to our stores.”
Dollarama’s earnings and expansion shines a light on changing shopping habits, says Walid Hejazi, professor or economic analysis and policy at the University of Toronto’s Rotman School of Management. Consumers increasingly feel as though Canada’s supermarkets are “price gouging,” and more shoppers are turning to discount stores for relief, he added. A recent survey, conducted by Agri-Food Analytics Lab at Dalhousie University, found that consumer trust in big grocery chains is deteriorating as 30% of Canadians believe price gouging is the main reason food prices have been rising in Canada.
Visits to Dollarama stores increased in the quarter, with the overall number of transactions up 15.5%. Comparable store sales grew 17% year-over-year. That is an important metric in retail because it measures sales growth that excludes the impact of new store openings.
Dollarama has been expanding its store count significantly, opening 21 new locations in the quarter. The company had 1,507 stores across Canada as of April 30 and plans to reach 2,000 by 2031. That expansion, along with the growth in comparable sales, boosted the company’s overall sales by 20.7% to $1.29-billion in the quarter.
To read the full results, visit the Dollarama website.