The crisis afflicting much of the retail industry has spared dollar stores in Canada, where industry leader Dollarama keeps opening new locations and improving profit margins.
Canada’s largest dollar-store chain posted earnings that topped analysts’ estimates last quarter and raised its gross-margin forecast for the year. While the Montreal-based company added 17 net new locations, part of the boost came from a 6.1% increase in comparable-store sales.
Continued Expansion
Dollarama is growing faster than US dollar-store chains, helped by a Canadian market that’s less saturated than its southern neighbour and an longstanding policy to stay away from fresh food. The success of new items priced C$3.50 ($2.90) to C$4, efforts to boost productivity and a penny-pinching approach to business emboldened the company to ramp up its expansion plans earlier this year.
Dollarama was the top gainer on the S&P/TSX Composite Index, rising 5.2% to C$128.13 at 9:59 am in Toronto, its biggest gain in more than five months. The stock is up 30% this year.
The chain also is now accepting credit cards in all stores after trials that started more than five years ago, a testament to how the company proceeds with important decisions, Chief Financial Officer Michael Ross said in an April interview. The new payment method helps explain a 5.9% increase in the average transaction size from the earlier quarter.
Second-quarter earnings rose to C$1.15 a share, topping the C$1.04 average estimate. Total sales came in at C$812.5 million, above the C$808.2 million projected.
