Dollarama Sees Surge in Sales as Economic Pressures Draw New Customers

Dollarama (DOL.TO) shares surged over 8% on Wednesday, driven by a boost in sales from budget-conscious shoppers purchasing household essentials. CEO Neil Rossy noted that the challenging economic climate is also attracting wealthier customers who typically wouldn’t shop at the discount retailer’s stores.

Montreal-based company reported a 4.7% increase in comparable store sales in the latest quarter. While the average transaction value declined, a rise in store visits led to a 7.4% increase in revenue, reaching $1.56 billion compared to $1.46 billion in the same period last year. Profits for the 13 weeks ending July 28 rose to $285.9 million, marking a 13% year-over-year increase.

Dollarama shares, listed on the Toronto Stock Exchange, closed up 8.18% on Wednesday at $135.53. The stock has gained more than 43% over the past year as consumers look for more affordable options amidst high living costs.

Rossy explained that in difficult economic times, consumers are more inclined to explore lower-cost alternatives, but they might ignore them when conditions are better.

Dollarama reported that sales growth in the second quarter was driven mainly by “consumables” like food and household goods, while general merchandise remained stable, and sales of seasonal products weakened. The company reiterated its guidance for 3.5% to 4.5% comparable-store sales growth for fiscal 2025, expecting stronger performance in the fourth quarter, aligned with Halloween and Christmas shopping periods.

During the call, Rossy was asked about the potential impact of competition from Loblaw’s (L.TO) new small-store format under the “No Name” banner. Loblaw recently announced plans to open three Ontario locations with discounts of up to 20% on groceries and household essentials, featuring a smaller product range and excluding fresh produce and dairy to cut costs.

“As we’ve mentioned before, we don’t operate in the grocery business—it’s just a small component of our stores. But like all retailers, we keep a close watch on the competition,” Rossy responded, declining to specify how much of Dollarama’s revenue comes from food sales.

He emphasized that Dollarama’s strategy is to offer a broad range of products to draw customers, stating, “We focus on a wide variety of goods far beyond just food, which is certainly not our main focus.”

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