Dollarama takes hit from pandemic restrictions

Despite staying open as an essential business, public health measures still pulled the discount retailer's same store sales down.

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When COVID-19 struck, discounter Dollarama only had to shutter 104 of its 1,197 stores, but its Q1 earnings show that being included as an essential business has not prevented the pandemic from impacting its bottom line.

The discount retailer’s earnings for the quarter ended on May 3 show a same-store sales decrease of 2.4%. Excluding the impact of closed stores, same-store sales were nearly flat, increasing by only 0.7%. Operating income also decreased by 11.2% to $149.7 million.

Overall sales for Q1 increased by 2.0% to $844.8 million year-over-year, attributed to nearly 100 new locations opened over the last year.

After a solid start to the quarter, Dollarama says it experienced a surge in traffic in early March as customers purchased higher volumes of consumables – such as food, cleaning and health and beauty products – than they historically do during the same period. However, this was offset by lower in-store traffic, reduced demand for seasonal products for Easter and spring-summer goods, as well as party supplies and greeting cards.

This period was followed by a “sharp decline in in-store traffic as a result of increasingly strict measures imposed by public health authorities across Canada” to curb the spread of COVID, the result of which was consumers making 17.9% fewer trips to the store, although they did have 22.6% bigger baskets.

And as of early May, 1,097 of Dollarama’s open stores were operating with at least a 10% reduction in opening hours to allow more time for re-stocking and due to mandatory Sunday closures in Quebec, the province with the majority of the closures and the region hardest hit by COVID-19.

By June 8, 32 Dollarama stores were temporarily closed and 246 were operating with at least a 10% reduction in opening hours.

“Our first quarter results reflect the direct and indirect effects of COVID-19 while demonstrating that Dollarama adapted quickly to an unprecedented situation in order to serve Canadians from coast to coast,” said Dollarama president and CEO Neil Rossy.

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