Dollarama says new $5 price tag will help offset inflation

Canada's largest dollar store is introducing a new $5 price tag as it looks to recoup higher costs and bring in new products.

Dollarama Inc. said Wednesday the roll out of additional price points up to $5 will help the retail chain maintain and enhance its product assortment and value.

"There will be a gradual ramp up starting mid-year and becoming more noticeable through the second half of the year," Neil Rossy, Dollarama president and CEO, said during a call with analysts.

"This brings additional flexibility to manage cost pressures in a heightened inflationary environment."

But the store is "extremely sensitive to this not simply being a markup tool," he added.

"It enables us to deepen our broad and compelling product assortment," Rossy said. "It allows us to bring in goods that we've never been able to buy because they weren't in our price range."

His comments came as the retailer reported a profit of $220 million or 74 cents per diluted share for the quarter ended Jan. 30 compared with a profit of $173.9 million or 56 cents per diluted share a year earlier.

Sales totalled $1.22 billion, up from $1.1 billion in the same quarter last year, helped by an increase in the number of stores and a 5.7% uptick in comparable store sales.

Looking forward, Dollarama said it expected to benefit from a more upbeat sales environment in the coming months compared with the same period last year when pandemic restrictions limited non-essential shopping.

However, the company cautioned that supply chain and other inflationary pressures are expected to be felt more this year.

"Our procurement and logistics teams have been working relentlessly to ensure that stores are well-stocked, especially from a seasonal perspective," Rossy said.

The challenge isn't supply but rather getting goods into Dollarama's warehouses and on store shelves, he said.

"The supply is really very stable," Rossy said. "It's more a question of logistics challenges between the supply and the store and that involves mostly overseas challenges and port challenges (and) a little bit of trucking challenges."

Dollarama said it expected its new warehouse in Laval, Que., to open by the end of its current fiscal year, increasing its storage capacity and supporting its long-term target of 2,000 stores in Canada by 2031.

Dollarama opened 24 net new stores in the quarter, for a total of 1,421 stores at the end of January.