Dollarama forecast annual and quarterly sales above estimates, betting on consistent demand for its discounted groceries and essentials.
Discount store operators have seen steady demand, even as other retailers struggled with softer sales as cost-conscious consumers increasingly stick to a budget when shopping.
Consumers in Canada and the United States have been looking for cheaper deals on items, ranging from cleaning supplies to groceries and apparel as they fend off steeper costs of rentals and fuel.
Quarterly Performance
The Montreal-based discount store operator reported quarterly sales of C$1.63 billion (€1.1 billion), up from C$1.47 billion (€1 billion) a year earlier, while analysts on average estimated C$1.61 billion (€1.1 billion), as per LSEG data.
Excluding items, Dollarama posted an adjusted profit of C$1.15 per share for the quarter, above expectations of C$1.06 per share.
Its gross margin was 44.5% of sales, compared with 43.5% in a year-ago quarter, due to lower inbound shipping costs.
Discount retailers are effectively tapping into consumer preferences for cost-effective shopping, seizing market share from traditional department stores, in the face of soaring interest rates, analysts note.
Off-price retailers in the US such as TJX exceeded quarterly results as thrifty shoppers hunt cheaper apparel, cosmetics and gift deals.
Outlook
The company expects annual comparable store sales growth in the range of 3.5% to 4.5%, largely above analysts' estimates of 3.73%.
Neil Rossy, president and CEO of Dollarama stated, "In fiscal 2024, we met or exceeded our guidance for all our key performance metrics, including higher than expected comparable store sales, translating into a 29% increase in EPS.
"Our strong financial and operational performance demonstrates the enduring strength of our business model and that our compelling value proposition continues to resonate with consumers, including in an uncertain economic context."
In full-year 2024, Dollarama reported 16.1% increase in sales to C$5.9 billion (€4 billion), while comparable store sales grew 12.8%.
News by Reuters, additional reporting by ESM.
