Everyday essentials drive earnings boost for Dollarama

The increase was also spurred by growth in the total number of stores over the past 12 months.
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More Canadians are turning to discount stores for their “everyday essentials,” something that drove big quarterly earnings growth at Dollarama.

The discount retail chain reported second-quarter profit of $193.5 million, up from $146.2 million in the same quarter last year, with sales growth of 18.2% and a 13.2% increase in comparable store sales growth. That came with a 20.2% increase in the number of transactions and a 5.8% decrease in average transaction size.

These increases were partially driven by growth in the total number of stores over the past 12 months (from 1,381 to 1,444 stores), as well as more sales in consumables and seasonal products.

But Neil Rossy, president and CEO, attributes the strong performance to “sustained consumer response to our unique value proposition, especially for everyday essentials,” as Canadians across all demos cope with high inflation.

“As we strive to provide Canadians with a wide variety of merchandise, I am pleased with our progress rebuilding our inventory, thereby ensuring that our conveniently located stores are well-stocked for our customers ahead of key seasons in the second half of the fiscal year,” Rossy added.

SG&A for the second quarter increased 7.1% to $168.3 million, compared to $157.1 million for Q2 of Fiscal 2022. However, the company points out that SG&A represented 13.8% of sales for Q2 of Fiscal 2023, compared to 15.3% of sales for Q2 of Fiscal 2022.

The company moved its annual comparable store sales growth guidance up, to between 6.5% and 7.5%.

And while other retailers are leaning heavily into omnichannel, that is not the case for Dollarama as the company reports in this morning’s earnings call.

Ccomm can attract a customer that does not physically visit its stores, but the company says it is not a significant percentage of its business, “but a very nice way to complete the service level.”

“The reason we don’t believe it will be consequential, is that Dollarama’s strength, aside form having a powerful assortment and offerings and value, is the fact it’s conveniently located close to most Canadians,” Rossy says.

In August, Dollarama products became available through UberEats, with over 200 stores participating across Greater Toronto Area.

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