Dollarama to only pass on price increases from war where 'absolutely necessary': CEO
As conflict in the Middle East drives up the cost of many daily essentials, the head of Dollarama Inc. says the company will try to resist hiking its own prices as much as possible.
"We will only pass on price increases where absolutely necessary," CEO Neil Rossy told analysts on a Tuesday call.
The declaration comes weeks after the U.S. and Israel launched attacks on Iran, subsequently hindering the flow of fuel and other goods through one of the world's key shipping passageways.
The conflict almost immediately pushed up gas prices and stands to spark increases on a whole myriad of consumer goods that require fuel for manufacturing or shipping.
"It's still early days and unfortunately, higher energy costs will permeate throughout the supply chain for all retailers and for consumers over the next few months to a year," Rossy said.
"The duration of the conflict will decide the scale of the effect, but certainly, inbound costs, outbound costs, production costs, raw material costs are all being affected by the increased cost of oil and that will eventually make its way down the supply chain."
Rossy wants the conflict to end as quickly as possible, but suspects no retailer will be able to escape its ramifications.
He said Dollarama will stick to its strategy of being a "price follower"—a company that lets competitors set the tone for whether prices should increase or decrease—to ensure it keeps luring in value-focused shoppers despite the challenges of the war.
Rossy's remarks came as Dollarama revealed its fourth-quarter profit and sales rose compared with a year ago even as harsh winter weather hurt store traffic.
The Montreal-based dollar store owner earned $392.5 million or $1.43 per diluted share for the 13-week period ended Feb. 1. The result compared with a profit of $391 million or $1.40 per diluted share in the 14-week period a year earlier.
Sales for the quarter totalled $2.10 billion, up from $1.88 billion in the same quarter a year ago.
Comparable-store sales in Canada for the quarter were up 1.5%, as the average transaction size rose 3.1%, offset in part by a 1.6% drop in the number of transactions.
The results were boosted by Dollarama's acquisition of Australia-based Reject Shop and an increase in the number of stores in Canada.
The company will spend this year opening more locations—it expects its net new store openings for its current fiscal year to land somewhere between 60 and 70—and shaking up the Reject Shop.
It is taking a close look at every product sold across the acquired chain to see where it can deliver more value and has plans to renovate up to 80 locations this year.
Once a Reject Shop location feels more like a Dollarama, Rossy said the company will change the store's branding.
"This work will be both gradual and disruptive, but it is a prerequisite to setting up our Australian operations for future success," Rossy said.
After he spoke, the company's share price sank about 7% or $13.56 to $173.02 in late-morning trading.
The retailer also announced Tuesday that it had raised its quarterly dividend to 12 cents per share, up from 10.58 cents per share.
