Dollarama says China's soft economy helping to offset currency challenge

Dollarama says China's soft economy is helping the discount retailer offset the challenges of a weakened Canadian dollar and higher freight costs.

"The Chinese economy does remain soft from our perspective, which provides us with some opportunities to purchase goods at favourable prices to offset some of these headwinds,'' CEO Neil Rossy said Wednesday in a conference call to discuss the company's third-quarter results.

The Montreal-based company said expects to maintain high margins over the coming year as it continues to introduce more items priced at $3.50 and $4.

The initial flow of higher priced goods since the summer focused on holiday items and toys, but Rossy said Dollarama buyers are on the hunt for deals in other categories.

Meanwhile, Dollarama defended its decision to hike the price of chocolate bars, saying it could no longer absorb the higher cost of raw materials.

"The cost of those goods went up for North America as a whole and so we can't escape raw material costs or industry costs as they rise,'' he said.

Dollarama increased the price of the popular snack by five cents to 82 cents in September following a sharp increase in the prices of key ingredients.

Lower production in Africa have pushed up cocoa prices 10 per cent since January, reaching a new four-year high, according to Mintec, a commodities data company.

"We like to push as long as we can and be the last to move but at some point, you have to move in order to still be a productive company,'' Rossy said.

Dollarama beat expectations as its third-quarter profit grew to $110.1 million or 92 cents per share compared with $100.1 million or 78 cents per share in the same quarter a year ago.

Analysts had expected a profit of 86 cents per share, according to Thomson Reuters.

Revenue for the quarter for the quarter ended Oct. 30 totalled $738.7 million, up from $664.5 million.

The growth came as the company reported comparable store sales grew 5.1 per cent.

The retailer added 18 net new stores during its third quarter to reach 1,089 locations across the country.