Bargain-hunting consumers drive Dollarama past profit estimates in Q2
Consumers grappling with rising living costs have relentlessly bargain-hunted and traded down to cheaper alternatives.
Dollarama exceeded second-quarter profit expectations on Wednesday, benefiting from reduced costs and steady demand for affordable essentials like groceries.
As consumers continue to face rising living expenses, many have sought out bargains and shifted to more economical alternatives.
Lower costs associated with inbound shipping and logistics also helped the dollar-store chain offset ongoing challenges related to shrinkage, which involves inventory loss due to theft, damage, or misplacement.
The Montreal-based company’s gross margin increased to 45.2 percent for the quarter ending July 28, up from 43.9 percent in the same period last year.
Dollarama reaffirmed its fiscal 2025 forecast for comparable sales growth, expecting a rise in the range of 3.5 percent to 4.5 percent.
In the U.S., dollar stores like Dollar General and Dollar Tree have been working to boost demand while facing competition from larger retailers such as Target, Walmart, and PDD Holding’s e-commerce platform, Temu.
As a result, off-price retailers like TJX and Ross Stores have reported a rise in customer traffic, drawing shoppers away from higher-end department stores such as Macy’s.
Dollarama’s net sales increased by 7.4 percent to $1.56 billion compared to last year, slightly below analysts' estimates of $1.57 billion, according to LSEG data.
The company reported net earnings per share of $1.02, up from 86 cents a year earlier, surpassing the analysts' average expectation of 97 cents per share.
