Shares of Dollarama Inc. rose on Wednesday following the retailer's first-quarter results, which showed sales increased by 12.4 per cent on a year-over-year basis. Comparable store sales rose by 7.3 per cent, the company said.
 
The retailer said it benefited from consumers gravitating to more affordable products amid rising inflation and the re-opening of stores following strict COVID-19 lockdowns that were in place this time last year. 
 
"With the lifting of COVID-19 restrictions across Canada early in the quarter, we were pleased to see a double-digit increase in customer traffic, coupled with strong demand for our affordable, everyday consumables and seasonal goods," Neil Rossy, president and chief executive officer of Dollarama, said in a press release. 
 
While customers were on the hunt for lower-priced goods to offset the rising cost of living, the company has also been grappling with surging inflation.
 
“Mindful of the challenging environment in which we are operating, we will continue to rely on the levers at our disposal to mitigate ongoing supply chain and cost pressures,” Rossy said.
 
Dollarama recently announced it will lift its top price point to $5 so it can expand its product mix.
 
The company reported customers were shopping more frequently at its stores but spending less during each visit. The number of transactions rose 14.4 per cent, while the average transaction size decreased by 6.2 per cent, it said.

Brian Morrison, an analyst at TD Securities, wrote in a note to clients Wednesday that Dollarama succeeded in growing its top line despite the challenging inflationary environment. 
 
"We see this continuing as consumers look to trade down, further price increases already implemented are realized, and Dollarama introduces a new price point in July," Morrison said. 
 
He added that new store openings, growth at Dollarcity and share buybacks should help it grow its earnings per share.
 
“This in our view should support Dollarama's premium valuation multiple as investors view its consistent [earnings per share] growth/[free cash flow] as a defensive growth name in the context of a volatile market,” he said.
 
Morrison has 12-month target price of $80.00 on Dollarama shares and a buy rating on the stock.