A shopping cart at a Dollarama store in Montreal, on June 7, 2023.Christinne Muschi/The Canadian Press
As inflation-weary shoppers consistently look for deals on everyday essential purchases, discount stores are attracting a different type of customer: those with more money in the bank.
On Wednesday, Dollarama Inc. DOL-T once again reported growth in sales and profit in its latest quarter, as traffic to its stores continues to grow. That includes more visits from higher-income customers “who might not have to, or want to, shop at Dollarama generally,” chief executive officer Neil Rossy said on a conference call Wednesday to discuss the results.
“When times are tougher, they’ll consider the extra five minutes to go to the store next door,” Mr. Rossy said, noting that the shift in buying patterns is not as pronounced among lower-income shoppers who are always price-sensitive.
The Montreal-based discount retailer reported that comparable sales – an important metric that tracks sales growth not tied to new store openings – grew by 4.7 per cent in the second quarter ended July 28. That increase built on growth in the same period last year, when comparable sales were up 15.5 per cent.
While growth is slowing, Dollarama is still benefiting from strong demand for “consumables” such as food and household products.
By contrast, demand for the stores’ seasonal spring-summer products fell compared with last year. That was partly the result of consumers being more cautious with their discretionary spending, Mr. Rossy said, and partly because of bad weather that made for a “horrible” start to the season in many parts of the country.
Over all, the stores saw a 7-per-cent increase in the number of transactions, while people are buying slightly less during each visit. The average transaction decreased by 2.2 per cent in the quarter.
On a per-share basis, Dollarama’s profits grew by 18.6 per cent in the second quarter. The company’s net earnings increased to $285.9-million, or $1.02 per share, compared with $245.8-million, or 86 cents per share, in the second quarter last year.
Total sales grew by 7.4 per cent compared with the same period the previous year, reaching $1.56-billion.
The company opened 14 net new stores in the quarter, for a total of 1,583 locations as of July 28.
The company’s gross profit margin improved, at 45.2 per cent of sales in the second quarter compared with 43.9 per cent in the prior year, largely because of lower shipping rates and logistics costs.