By Adriano Marchese
Dollarama expects slower sales growth in the second half of the year as shoppers pull back on discretionary spending and show uneven buying patterns.
Chief Financial Officer Patrick Bui said consumer behavior in the first half was mixed, with periods of strength but also signs of vulnerability, noting in an earnings call that seasonal performance was essentially flat.
"We expect unpredictability to continue in the back half of the year," he told analysts.
To help mitigate the softer demand trend, Dollarama said it has maintained its pricing on its merchandise as much as possible to keep frugal customers coming back amid the volatile trade environment.
The retailer's shares fell 3.4%, to 185.37 Canadian dollars (US$133.93), midday Wednesday after management reiterated its fiscal-year guidance.
Dollarama continues to forecast same-store-sales growth of 3% to 4% and the addition of 70 to 80 new stores for its Canadian segment. Gross margin in Canada is projected between 44.2% to 45.2%, with sales, general and administrative costs at 14.2% and 14.7% of sales and capital expenditures of C$285 million to C$330 million.
Analysts said the outlook reflects expected conservatism from management. Scotiabank analyst John Zamparo estimated that same-store-sales growth of 4.9% year-to-date means the company needs about 2% growth in the second half to hit the midpoint of its guidance. "This is a management team known for conservatism, and particularly given uncertainty in economic activity, this was always the likely outcome," he said.
On the tariff front, Chief Executive Neil Rossy said the company has been adapting to U.S. levy-related price pressures by sourcing more goods from elsewhere, especially from Canada.
"While we looked at other markets, you have to be realistic that the importation of goods into Canada is a six-month project," he said on the earnings call. Some national brands continue to come from the U.S., but "the 25% tariff was highly prohibitive," for others, pushing the retailer to replace certain non-national brands with Canadian alternatives.
For the quarter ended Aug. 3, sales rose 10%, to C$1.72 billion, topping analyst expectations of C$1.69 billion. Net income climbed to C$321.5 million from C$285.9 million, or to C$1.16 from C$1.02 on a per-share basis.
International operations provided an extra lift to results. Dollarcity, the Latin American chain in which Dollarama boosted its stake last year to 60.1%, contributed C$38.3 million to earnings, up nearly 70% from a year earlier. The retailer also holds an 80.05% stake in its Mexico operations. The increase was also bolstered by the newly acquired The Reject Shop in Australia, which contributed C$25.7 million in sales in the two weeks following the closing on July 22.
In Canada, comparable-store sales rose 4.9%, driven by demand for consumables such as food and household essentials. Dollarama added 27 net new stores domestically during the quarter, ending with 2,060 globally, up from 1,583 a year earlier.
Write to Adriano Marchese at adriano.marchese@wsj.com
(END) Dow Jones Newswires
08-27-25 1251ET
