Dollarama raises annual sales forecast in Canada as cost-conscious shoppers trade down

Dollarama, a Canadian discount retailer, has increased its sales forecast for the year as cost-conscious shoppers flock to its affordable products in the face of rising living costs and trade uncertainties. The company's management attributes the shift in consumer behavior to their search for ways to make their budgets stretch further, with many turning to cost-effective alternatives across various product categories, including pantry staples and personal-care items.

Dollarama's CEO, Neil Rossy, indicated on a post-earnings call that consumers are expected to remain cautious about their spending. The retailer's shares rose by 3.5% following the announcement. The U.S. imposed tariffs on Canadian goods, leading to retaliatory measures from Canada, adding to the economic uncertainty and potential impact on consumer spending.

Dollarama sources 54% of its Canadian products from North American vendors and the remaining 46% from overseas suppliers, mainly in China. The company aims to offset the effects of higher fuel costs in the second half of the year by optimizing its sourcing, merchandising, and operations. It is only expected to raise prices as a last resort.

The discount retailer expects annual comparable sales growth in Canada to be between 4% and 4.5%, up from its previous forecast of 3% to 4%. Comparable sales at its Canadian locations grew by 5.4% in the second quarter, driven by a 3.7% increase in customer traffic. Analysts from TD Cowen maintain that Dollarama's Canadian business is a stable growth engine, with the company also starting to recover from the losses incurred during its peak expansion in Mexico and Australia during the fiscal year 2028.

The retailer reported a quarterly earnings per share of C$1.29, exceeding analysts' expectations, while its sales of C$2.03 billion ($1.46 billion) were largely in line with forecasts.