Dollarama raises annual sales forecast as demand for essentials thrives

(Reuters) -Dollarama raised annual sales forecast on Wednesday after topping quarterly sales estimates, as Canadians lapped up the discount retailer’s cheaper offerings in response to higher prices of essentials.

Consumers in Canada, as in the United States, have been looking for cheaper deals on items ranging from cleaning supplies, groceries and clothes, as they fend off steeper costs of rentals and fuel.

Discount store operators have, as a result, seen steady demand, even as other retailers struggled with softer sales.

“…We expect this strong demand to persist through the second half of the year in the current macro-economic context,” said Dollarama CEO Neil Rossy.

Off-price retailers in the U.S. such as TJX (NYSE:) and Ross Stores (NASDAQ:) have also raised their forecasts after posting strong quarterly results, with demand for cheaper goods gathering steam from bargain-hunting shoppers.

Dollarama has also increased prices for some products in order to take the pinch out of higher costs of logistics and labor, which have persisted due to supply chain snags in Canada.

Data from Stifel Canada shows 15% of Dollarama’s products are currently priced above C$4.00, compared with 7% in September 2022.

The discount store operator said it now expects comparable store-sales growth of between 10% and 11% for fiscal 2024, compared with between 5% and 6% estimated previously.

The company’s sales rose to C$1.46 billion ($1.08 billion) in the second quarter, from C$1.22 billion a year earlier, compared with analysts’ average estimate of C$1.40 billion, according to data from LSEG.

Montreal-based Dollarama’s net income for the quarter ended July 30 rose to C$245.8 million, or 86 Canadian cents per share, topping market expectations of 77 Canadian cents.

($1 = 1.3569 Canadian dollars)