Dollarama Hikes Sales Forecast as High Inflation Drives Shoppers to Seek Cheaper Groceries, Household Goods

Dollarama Inc. recorded another strong quarter as inflationary pressures continue to drive consumer demand for consumable products at the discount retailer. The Montreal-based retailer raised its comparable-store sales growth guidance as it reported that its third-quarter profit and sales were up compared with 2021.

During a call with analysts, Dollarama’s chief financial officer J.P. Towner said the retailer saw a third consecutive quarter of “higher than historical demand” for consumable products, a category that includes food as well as items such as laundry detergent that can only be used once. The company cited current economic conditions as a significant factor in the demand from new customers as food prices have increased faster than overall price growth figures through much of the year.

During the call, Dollarama’s chief executive officer Neil Rossy said convenient store locations and low costs will retain the discount retailer’s new customer base. “Our value promise and a high inflation environment is even more relevant as consumers juggle the pressure on their wallets and adjust their spending strategies,” said Rossy.

As Dollarama continues to stock additional items up to $5, Rossy said the rollout has gone as planned and the company has yet to receive negative feedback regarding the higher prices. Rossy said while the company would like to have a $1 offering for each category, in some cases it is not possible due to the cost of raw materials and higher prices from domestic vendors.

The chief executive said the company will continue “fighting the fight” in regard to purchasing and managing the cost, especially that of domestically purchased goods. The financial pressures placed on Dollarama are the same as every other Canadian retailer, said Rossy.

The discount retailer opened 18 new store locations in its third quarter for a year-to-date total of 41 net new stores. “We expect a busy Q4 on the real estate front and remain on track to reach our full-year target of 60 to 70 net new stores,” said Rossy.

Dollarama announced on December 7 that it had signed a deal to buy three contiguous industrial properties in Mount Royal, Que., near its centralized logistics operations and next to its distribution centre for $87.3 million. The company plans to redevelop the site to support its future logistics and warehousing needs. “This will provide us with additional flexibility to support our long-term logistics needs as we pursue our target of 2,000 Dollarama stores in Canada by 2031,” Rossy said.

RBC Dominion Securities Inc. analyst Irene Nattel said in a report that the company’s third-quarter results reflect Dollarama’s “strong value positioning for consumers, particularly sought after in the current high inflation environment.”

Dollarama reported earnings of $201.6 million or 70 cents per diluted share for the 13-week period ended Oct. 30, compared with a profit of $183.4 million or 61 cents per share in the same quarter last year.

In its guidance for the year, Dollarama says it now expects comparable-store sales growth for its current financial year to be in a range of 9.5% to 10.5% compared with earlier expectations for a range of 6.5% to 7.5%.

The company also narrowed its guidance for its annual gross margin as a percentage of sales to a range of 43.1% to 43.6% compared with earlier expectations for a range of 42.9% to 43.9%.

Sales for the quarter totalled $1.29 billion, up from $1.12 billion a year earlier.

Comparable-store sales rose 10.8% as the number of transactions climbed 10.3% and the average transaction size gained 0.4%.

To view the full financial results, visit the Dollarama website. 

Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: Dollarama



Costco Wholesale Corporation Reports First Quarter Fiscal Year 2023 Operating Results

Costco Wholesale Corp reported first-quarter results on December 8 that missed analysts’ estimates, with surging inflation pushing consumers to cut back spending and as operating expenses increased for the company. 

Costco’s total revenue for the first quarter was $54.44 billion, compared with estimates of $54.64 billion, according to Refinitiv IBES data. The warehouse club operator’s merchandise costs rose about 9% to $47.77 billion as it grapples with higher freight and labor costs. 

Net sales for the first quarter increased 8.1%, to $53.44 billion from $49.42 billion last year. On an adjusted basis, the company earned $3.10 per share, missing estimates of $3.11.

The company’s quarterly revenue from memberships, priced between $60 and $120 per year and which accounts for most of Costco’s gross margin, rose to $1 billion from $946 million.

To view the full financial results, visit the Costco website. 

Source: Costco
Source: Reuters