Dollarama has typically opened 60 to 70 new locations a year and sales have grown as consumers feeling the sting of inflation have flocked to discount retailers.Christinne Muschi/The Canadian Press
Dollarama Inc. DOL-T plans to build even more stores in Canada, hiking its long-term growth target to 2,200 locations by 2034.
The Montreal-based discount retailer, which currently operates 1,601 stores across the country, had previously set a goal of 2,000 locations by 2031. The new plan, announced Wednesday, follows “a thorough revaluation of the market potential for Dollarama stores,” chief financial officer Patrick Bui said on a conference call to discuss Dollarama’s third-quarter results.
In recent years, Dollarama has typically opened 60 to 70 new locations a year. And sales have been growing, as consumers feeling the sting of inflation have flocked to discount retailers.
Third-quarter sales grew 5.7 per cent year-over-year, to nearly $1.6-billion, driven by the opening of 60 new stores in the previous 12 months and rising sales at existing stores.
“Our performance in the context of careful discretionary spending by consumers only strengthens our conviction in the relevance of our value model within the Canadian retail landscape, across geographies and demographics, and through the economic cycle,” chief executive officer Neil Rossy said during Wednesday’s call.
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To support its expanded operations, the company is also planning to build a new warehouse and distribution centre in Calgary. Dollarama currently has a centralized distribution centre in the Montreal area; the new facility will handle logistics closer to its stores in Western Canada.
The company has agreed to purchase land for the project for $46.7-million, and construction is expected to cost roughly $450-million. Dollarama plans to commission the new facility by the end of 2027. Once it is up and running, it will generate savings for the company, including on transportation costs, Mr. Bui told analysts.
Cautious consumers are shopping at Dollarama stores more often, although they are buying slightly less on average during each visit. On Wednesday the company reported a 5.1-per-cent increase in transactions during the third quarter ended Oct. 27, but a 1.7-per-cent decrease in the average size of those purchases.
Comparable sales – an important industry metric that tracks sales growth not tied to new store openings – rose 3.3 per cent, compared with an 11.1-per-cent rise in the same quarter last year.
Sales grew even though people splurged less on Halloween than they did last year. Sales of seasonal products were down, according to the company, while shoppers continued to buy more “consumable” items such as food and household products. Seasonal results were also affected by a calendar shift, with the final days leading up to Halloween occurring during the company’s fourth quarter.
“We are seeing what the market is seeing, and that is that conservative approach to discretionary spending. The consumer is focused on everyday essentials,” Mr. Rossy said. “And it’s completely to be expected, when people worry about the economy in general.”
Consumables come with tighter profit margins than other merchandise. Combined with higher logistics costs, that led to a slight decrease in the company’s gross profit margin, which fell to 44.7 per cent of sales in the quarter, compared with 45.4 per cent in the same period last year.
Dollarama’s net earnings grew to $275.8-million, or 98 cents per share, in the quarter, up 5.6 per cent from $261.1-million, or 92 cents per share, in the same period last year.