Montreal retailer prices reportedly increased by an average of 6 % since last November.
Dollarama has reportedly raised the price of many items in recent months, similar to competitors who raised prices amid high inflation, according to a financial analyst's report.
The Montreal retailer's prices have risen an average of 6% since last November, estimates Chris Li of Desjardins Capital Markets, who tracked a sample of about 280 items sold in stores.
Mr. Li believes the retailer is playing catch-up because it let competitors raise prices first.
“Dollarama has been more active "lately" in order to catch up with the price increases of competitors at the beginning of the year.
—Chris Li, Desjardins Capital Markets
In the sample of 280 products, Mr. Li listed 97 items whose prices increased by report in April. As of April, the analyst had only found 25.
These adjustments would have been made when inflation reached its highest level since January 1983. The consumer price index (CPI) in Canada increased by 7.7% annually in May, based on Statistics Canada data.
A Dollarama spokeswoman said via email that the company has a policy of not commenting on financial analyst reports .
Back in June, Chairman and CEO Neil Rossy reiterated that the company's strategy was to let competitors take the lead as rising transportation and labor costs ;work forced all retailers to revise their prices. Our job is to make sure our value to the market remains what it always has been or improves.
Excluding food, Li estimates that items at Dollarama are 40% to 50% cheaper than at Walmart or Amazon. However, he finds that the gap for food is narrowing. In February, food was 6.3% cheaper there. The gap closed to 2.4% in July.
In light of this data, the analyst believes that competition between retailers remains rational, which which means that the big chains manage to pass on the increased costs to their customers by raising prices and that they do not have to eat into their margins to attract customers to the store.
The analyst recognizes that the exercise he is doing has its limits.
“Our comparison is not perfect because several products are not exactly identical. We have done our best to find comparable products with similar characteristics (perceived quality, size, brand, etc.). »
— Chris Li, Desjardins Capital Markets Analyst
The catch-up exercise at Dollarama bodes well for comparable sales, a metric that is used to measure growth without factoring in store openings and acquisitions. The analyst believes Dollarama could exceed its forecast for comparable sales growth of 4% to 5% in fiscal 2023 (ending January).
We expect sales [to be] on a roll with strong traffic as consumers seek bargains in a high inflation environment, which will be offset by higher spending due to wage pressure.
The Desjardins Capital Markets review was also an opportunity to provide an update on the introduction of $5 priced items. The new price range was announced in March and the first $5 items hit the shelves at Dollarama in June.
This was the first time that Dollarama was introducing a new price range since the maximum threshold of $4 in 2015.
The supply of $5 products is still very limited and it is too early to tell. draw conclusions, comments the analyst. We only found a few items in the $4.25-$5 range, mostly in the health and cosmetics sector, such as shampoo and body soap.