Dollarama management is still resisting the idea of introducing items at $ 4.50, but inflation in the supply chain could force its hand, admits the big boss of the Montreal retailer.
“I have long resisted the idea of introducing items at a price of $ 4.50, and I would like to wait even longer,” said Neil Rossy, President and CEO, at a conference call to discuss the results of the second quarter of fiscal 2022 (ended 1is August).
The last increase in the maximum price, to $ 4, was in 2015. “If the pressure on containers and shipping costs remains for any longer period, and it is still too early to tell, in this case it would be. a tool that we would have to navigate through a long inflationary period, ”he adds.
Mr. Rossy said the company has several tools at its disposal to manage its costs. He gave as an example the plastic chosen in the design of some unspecified items, which can be replaced by a cheaper plastic. “These are the kinds of things a consumer can’t tell the difference for. “
I resisted the idea of introducing items priced at $ 4.50 for a long time, and I would like to wait even longer
Dollarama is currently negotiating with container carriers, and the outcome of those negotiations could impact the decision to increase prices in FY2023, which takes place in calendar year 2022. Imports account for between 50% and 60% of items sold at Dollarama, according to Jean-Philippe Towner, chief financial officer.
The value of Dollarama’s inventories has declined since Jan. 31, from 630 million to 586 million as of 1is last august. “Inventories are down, but we don’t lose sales,” says Rossy. We go to great lengths to prioritize the items we need. “
The leader wanted to be reassuring about the holiday season. “These items are purchased months in advance and we put them aside. “
Ontario lockdown hurts
Health restrictions in Ontario have been a headwind for the retailer. The sale of non-essential products was banned in the province for five and a half weeks during the quarter. “It affected 40% of our network while we have nearly 550 stores in Ontario. “
Comparable store sales, a key metric for measuring organic growth, fell 5.1% as a result of the ban.
If the repercussions of the lockdown have been a little bigger than what analysts had anticipated, investors should not be too offended, believes Brian Morrison of TD Securities, who points out that comparable sales increased by 5 , 1% for the weeks when the restriction was lifted.
Adjusted net earnings per share, at $ 0.48, were up 4.7% from $ 0.46 recorded in the same period last year. Sales for the 13 week period ended 1is August totaled $ 1.03 billion, up from $ 1.01 billion last year.
Dollarama opened a net 13 new stores during the quarter, bringing its total number of stores to 1,381, up from 1,314 a year ago.
For the few weeks that have passed in the current quarter, Mr. Rossy notes that sales are stable, but he adds that Halloween will be decisive. He explains that Halloween 2020 sales have been particularly strong, and that the comparison will be difficult. “That being said, we’re happy to see people coming back to the store, and back-to-school sales, while not critical to us, have been strong. “
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