Dollarama Misses on Sales Growth From Weak Consumer Spending

(Bloomberg) -- Canadian discount retailer Dollarama Inc. reported lower-than-expected sales growth as consumer demand begins to level off.

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The Montreal-based dollar store chain reported revenue of C$1.4 billion ($1 billion) for the fiscal first quarter ended April 28. Same-store sales growth for the quarter reached 5.6%, falling slightly below the average analyst estimate of 5.7%.

Earnings of 77 Canadian cents a share were a little better than analyst forecasts of 74 cents. The company has set a goal of adding as many as 70 new stores this fiscal year, and it opened 18 stores in the first quarter.

Dollarama has also been trying to solidify its place for Canadian shoppers amid changing economic conditions. It saw a bump in sales as consumers turned to its inexpensive goods when they were pinched by rising inflation and interest rates. Now the company is looking to hold onto those customers even as the inflation outlook gets better.

“As anticipated, we are seeing a progressive normalization in comparable store sales, with growth primarily driven by persistent higher than historical demand for core consumables and other everyday essentials,” Chief Executive Officer Neil Rossy said in a news release. “As Canadian consumers continue to seek out compelling value for their hard-earned money, we will remain focused on executing on our value and convenience promise.”

Dollarama shares briefly fell 8.5% at the market open on Wednesday, but bounced back immediately and were down 0.5% to C$125.03 as of 10:20 a.m. in Toronto.

(Updates with chart and stock price move.)

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