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Dec 8, 2021

Dollarama well-stocked for holidays but faces supply chain, inflation pressures

Brian Madden discusses Dollarama

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Dollarama Inc. says it's well-stocked for the busy holiday shopping period despite facing ongoing supply chain issues, inflationary pressure and a tight labour market across Canada.

"We entered the fourth quarter in a solid inventory position with well-stocked stores ahead of the important holiday season," Dollarama president and CEO Neil Rossy told analysts during a conference call on Wednesday.

"This is despite the various headwinds which continue impacting the retail sector, namely supply chain pressures and cost inflation."

The retailer beat estimates with its third-quarter profit on Wednesday, posting a profit of $183.4 million up from $161.9 million in the same quarter last year. The profit amounted to 61 cents per diluted share, up from 52 cents per diluted share a year earlier.

Rossy said the retailer's financial performance in the quarter ended Oct. 31 represents a "return to a more normalized situation."

"There were fewer restrictions in place, and no restrictions on the sale of goods or on specific retail channels," he told analysts during a conference call.

The reduction in restrictions led to a shift in shopping habits, he said.

Customers shopped more often but bought less at one time -- a reversal of the pandemic trend of shoppers stocking up but making fewer trips to the store.

Dollarama said the average transaction size fell 2.8 per cent, but the number of transactions rose 3.7 per cent.

Sales in the quarter totalled $1.12 billion, up from $1.06 billion in the same quarter last year.

Meanwhile, despite ongoing inflation and logistics challenges, Rossy said Dollarama is avoiding price increases -- for now.

"There are a number of strategies on the table to address the inflation question," he said. "One of those strategies is adding a new price point. But for the moment, we have nothing to announce on adding a new price point."

The retailer is also facing a challenging labour market across the country, and has ramped up its usual hiring practices to attract workers.

"We've put more effort into our HR initiatives for job fairs and other like-practices to help us garner the attention we need to get the employees we need," he said. "It's a greater challenge than it's been in the past ...  it's more difficult, no question about it."

Dollarama chief financial officer J.P. Towner added that from a wage perspective, the company hasn't yet seen any "material increases in wages" as a result of the labour market issues.