People walk into a Dollarama store in Toronto, September 25, 2021. Dollarama Inc. raised its dividend as it reported a fourth-quarter profit of $261.3 million, up from $220.0 million a year earlier. THE CANADIAN PRESS/Graeme Roy

Dollarama sales rise as consumers flock to lower prices amid high inflation

Discount chain Dollarama Inc. recorded an upsurge in sales in its latest quarter as its low prices on everyday household items attracted shoppers in search of relief from high inflation.

The Montreal-based company’s same-store sales — a key measure comparing sales at the same locations and excluding new stores — grew 15.9 per cent in the fourth quarter compared with the same period last year.

The result came as Canada endured inflation on record in nearly four decades, prompting consumers to shift shopping habits in search of deals and lower prices.

Overall, the dollar store’s sales for the quarter totalled $1.47 billion, up from $1.22 billion in the same quarter last year.

Dollarama also reported an uptick in the number of transactions, which rose 14.1 per cent compared to the same period of 2022, while the average transaction size increased 1.6 per cent.

The higher sales pushed the company’s fourth-quarter profit to $261.3 million, up from $220.0 million a year earlier, and prompted the company to raise its quarterly dividend to 7.08 cents per share, up from 5.53 cents per share.

Dollarama said it earned 91 cents per diluted share for the 13-week period ended Jan. 29, up from 74 cents per diluted share a year earlier.

The company’s strong performance “further reinforces the relevance of our value retail concept for consumers, the enduring strength of our unique business model and our disciplined execution,” Neil Rossy, president and CEO of Dollarama, said in a statement.

“In the context of continued macroeconomic uncertainty and inflationary pressures on consumers, our priority is to maintain our value promise to Canadians from all walks of life,” he said.

In its outlook for its 2024 financial year, the company said it expects 60 to 70 net new store openings and comparable store sales growth of 5.0 to 6.0 per cent. Dollarama says it expects gross margins of 43.5 to 44.5 per cent.

RBC Dominion Securities Inc. analyst Irene Nattel said Dollarama’s “exceptionally strong” same-store sales reflect the retailer’s strong value positioning for consumers, particularly in the current high-inflation environment.

The sales results beat expectations show consumers are continuing to turn to Dollarama for “consumables in addition to everyday household items and seasonal products,” she said.

The store rolled out a new $5 price point last year, allowing the store to stock new products and restock others that had been priced off the shelves due to inflation.

Dollarama has bulked up its shelves with everything from cleaning supplies and kitchen products to personal care items and clothing.

It’s also expanded its foods aisle in recent years, offering a greater selection of pantry items like instant noodles, cereal, tuna and olive oil.

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