A Dollarama store in Montreal, June 7, 2023.Christinne Muschi/The Canadian Press
Dollarama Inc. DOL-T has benefitted from a challenging economic environment in recent years, as cautious consumers have visited its stores more often in pursuit of lower prices.
But the company’s chief executive officer believes the trade war with the U.S. will have an impact on consumer spending across the retail industry – including discount stores.
“We think that consumer confidence will be a major challenge with these tariff discussions, while they continue,” Neil Rossy said during a conference call Thursday to discuss Dollarama’s fourth-quarter results.
“And while our concept may be more resilient than most, when consumers spend less, they tend to spend less everywhere. So tariff wars are not good for anyone.”
Still, Dollarama is expanding. On Thursday, the Montreal-based retailer announced plans to accelerate its pace of new store openings in Canada in the coming year, as it reported a nearly 21-per-cent jump in profits in its fourth quarter and raised its quarterly dividend by 15 per cent.
Dollarama will manage trade pressures by substituting tariffed products on its shelves with other items, Mr. Rossy said. The company imports many of its products from overseas, but Canada’s counter-tariffs on American imports could put pressure on prices for some items Dollarama buys from the U.S.
However, the tariffs will have a “not inconsequential” impact on the company, Mr. Rossy said.
American products in Dollarama stores are largely in the category of “consumables” such as food and household products. Those include brand-name items that are not easily replaced with merchandise from Canada or elsewhere, Mr. Rossy said.
Many Canadians have reacted to the trade war by shopping at domestic retailers and buying Canadian products more often. Dollarama has not seen a significant impact from that movement, however. And Mr. Rossy noted that while he believes consumers should be proud that Dollarama is Canadian, the company is not trying to “maple-glaze the Dollarama brand too much.”
Dollarama expects to open between 70 and 80 net new locations by early 2026. The company has been steadily opening new locations in recent years, generally at a pace of 60 to 70 locations per year. It had 1,616 stores across Canada, as of Feb. 2.
The expansion will include moving into some soon-to-be empty spaces “from certain retailers exiting the market,” according to a press release issued by the company.
Dollarama spokesperson Lyla Radmanovich declined to specify which store spaces the retailer is taking over. However, she confirmed that the company is not considering taking over any of the leases of Hudson’s Bay Co., which is in the process of liquidating most of its department stores across Canada.
Those vacancies may be difficult to fill without sizable renovations, because the stores are much larger than many retailers – including Dollarama – typically occupy.
A number of retailers have noted cautious spending by Canadians who have been severely affected by years of inflation and higher interest rates, and who have grown even warier amid the current trade war. But Dollarama has seen sales increase, including in its most recent quarter.
Comparable sales – an important metric that looks at sales growth not caused by new store openings – increased by 4.9 per cent in the fourth quarter. That was on top of another strong period last year, when Dollarama saw comparable growth of 8.7 per cent.
Strong sales of consumables, as well as seasonal products, helped drive the increases. (The fourth quarter this year included an extra week compared with the prior year, but comparable numbers are reported on an equivalent 13-week basis.)
“While customer behaviour remains difficult to forecast, our assumption is that consumers will remain cautious on discretionary spending, and continue to seek value in this context,” Mr. Rossy said during Thursday’s call.
In total, sales grew by 14.8 per cent in the 14 weeks ended Feb. 2, to nearly $1.9-billion.
Net earnings grew to $391-million or $1.40 per diluted common share in the fourth quarter, compared with $323.8-million or $1.15 per diluted common share in the same period the prior year.
The company announced on Thursday that it will now pay a quarterly dividend of 10.58 cents per share, up from 9.2 cents per share.
Dollarama’s plans for expansion are not limited to Canada. Last month, the retailer announced a deal to buy Australian discount store chain The Reject Shop Ltd. The company also also owns a majority stake in Latin American retailer Dollarcity, which has also been expanding its store network and plans to expand into Mexico this year.