Dollarama, a dollar-store company based in Montreal, Quebec, exceeded second-quarter profit estimates with the help of lower costs and stable demand for low-priced essentials such as groceries. The company’s gross margin increased to 45.2 per cent from 43.9 per cent the previous year, thanks in part to lower inbound shipping and logistics costs. Dollarama also reaffirmed its fiscal 2025 comparable sales forecast, expecting a rise in the 3.5 per cent-4.5 per cent range.
While consumers are facing rising living costs, they have turned to bargain-hunting and trading down to cheaper alternatives, benefiting dollar-store companies like Dollarama. In the competitive retail landscape, U.S. dollar stores like Dollar General and Dollar Tree are working to increase demand as larger retailers like Target, Walmart, and PDD Holding’s e-commerce platform Temu vie for customer dollars. This shift has also led to off-price retailers like TJX and Ross Stores experiencing a rise in customer traffic at the expense of higher-end department store operators like Macy’s.
Dollarama reported a 7.4 per cent increase in net sales to $1.56 billion compared to the previous year, slightly below analysts’ estimates of $1.57 billion as per LSEG data. The company’s net earnings per share were $1.02, up from 86 cents the previous year, exceeding average analyst expectations of 97 cents. The company’s ability to manage costs and benefit from stable demand for affordable items contributed to its strong performance during the quarter.
The challenges related to shrink, where inventory is lost, stolen, or damaged, remain for dollar-store companies like Dollarama. However, the company’s ability to mitigate these challenges through cost management has helped it maintain profitability. Dollarama’s focus on providing low-priced essentials and managing costs has allowed it to compete effectively in the retail market and attract budget-conscious consumers who are seeking value for their money.
Looking ahead, Dollarama remains optimistic about its future performance, reiterating its fiscal 2025 comparable sales forecast and continuing to focus on meeting consumer demand for affordable goods. The company’s strong second-quarter results indicate its resilience in the face of economic challenges and its ability to adapt to changing consumer preferences. With a strategic approach to cost management and a commitment to offering low-priced essentials, Dollarama is well-positioned to continue its growth and success in the retail industry.
