Dollarama boosts outlook as inflation drives bargain-hunters to its stores

Dollarama increased its sales forecast for the rest of the fiscal year as consumers flock to discount stores to find bargains.

The Canadian retail chain on Friday hiked its full-year store sales growth to between 6.5 and 7.5 per cent from its previous expectation of four to five per cent.

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Neil Rossy said during Friday's earnings call that Canadians from all walks of life adapt to high inflation.

The CEO of Dollarama attributed the company's sales growth to strong demand for "everyday essentials" since the beginning of the year. Over the past year, the company's total number of stores has grown.

After a decline last year due to Ontario banning the sale of non-essential items during the COVID-19 lock down, the retailer recorded strong seasonal sales for both spring and summer products.

Canadians from all walks of life continue to adapt to the high-inflation environment

Neil Rossy

Over 40% of our total store network couldn't sell non-essential items. Customer traffic and overall sales were negatively impacted during the peak spring seasonal sales period.

With no direct costs related to COVID-19 measures during the second quarter, its expenses were less than the previous year, which had an additional $11.7 million in such costs.

Higher average debt levels and a slightly higher average borrowing rate caused financing costs to jump by $3.8 million.

In the three months ending July 31, Dollarama reported net earnings of $193.5 million and said they increased by 37 per cent.

Due to global supply chain disruptions, the company is increasing inventory by purchasing fall and winter goods earlier than usual.

It's important that our stores are well-stocked. According to Rossy, Dollarama's inventory is now up to 40% compared to last year.

He said that the company is in a good position because of the high volume of goods that are being processed.

Dollarama expects to open between 60 to 70 new stores by the end of its fiscal year.

In Toronto, shares were up 1.27 per cent. So far this year, its stock is up 26 percent.

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