Dollarama adjusts product lines as stores set to introduce $5 maximum price

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MONTREAL — Discount retailer Dollarama Inc. has started rolling out new price pointsup to $5 as it adds new products and restocks others amid a shift in consumer spending patterns.

The dollar store will now stock goods from under $1 to $5, the company said Wednesday as it reported quarterly earnings.

The retailer reported higher sales and profit in the quarter ended May 1 as pandemic restrictions lifted and the hunt for bargains increased as shoppers continue to face soaring inflation.

Stores saw an increase in shoppers and high demand for everyday consumables and seasonal products, said Dollarama president and CEO Neil Rossy.

"The first quarter reaffirms the relevance of our business model," he said during a call to discuss the company's latest financial results. "It also echoes the positive consumer response to our value proposition in a high inflation environment."

Dollarama announced plans to raise its maximum price to $5 earlier this year, but customers haven't yet seen those prices in stores. Still, Rossy noted that the higher price point has enabled the company to return to selling popular products that had been moved off shelves amid rising costs and to introduce new products.

The company posted a profit of $145.5 million, up from $113.6 million in the same quarter last year, as its sales rose 12.4 per cent.

The result came as spending patterns appeared to shift in the quarter as customers shopped more often, but bought less with each visit compared with a year ago.

The trend was reflected in a 14.4 per cent increase in the number of transactions while the transaction size dropped 6.2 per cent.

The company will continue to work to mitigate ongoing supply chain and cost pressures to provide consumers with the best relative value on the market, Rossy added.

The company is continuing to face shipping delays of six to eight weeks, and is pre-ordering its merchandise much earlier than usual, he said.

However, unlike in the U.S., where some retailers are marking down excess inventory as consumer demand softens, the Canadian dollar store's goods "remain relevant over the course of time," Dollarama chief financial officer J.P. Towner said.

"We have the ability -- and we've done it for years -- to pack away inventory at the end of the season that sold less than ... expected," he said. "Our goods don't go out of fashion."

Meanwhile, wage inflation has emerged as an issue for the retailer, particularly in regions with less immigration, Towner said.

Dollarama's profit amounted to 49 cents per diluted share for the quarter, up from a profit of 37 cents per diluted share in the same quarter a year earlier.

Sales in the first quarter of the company's 2023 financial year totalled $1.07 billion, up from $954.2 million. Comparable store sales rose 7.3 per cent.

The Montreal-based retailer has 1,431 stores in Canada, including 10 net new stores that opened in its most recent quarter.

The company also owns a 50.1 per cent equity stake in Dollarcity, a Latin American discount retailer with 358 stores in Colombia, Guatemala, El Salvador and Peru,

This report by The Canadian Press was first published June 8, 2022.