Dollarama testing self-checkout to offset impending wage hike

Dollarama is considering adding self-checkout terminals at its stores as it looks for new ways to become more efficient and offset costs from higher minimum wages in several provinces.

The discount retailer said it was testing the concept at one of its stores before deciding whether to roll it out across the country.

"Typical to our culture we just take a lot of time to test things to make sure we understand this correctly before implementing it," chief financial officer Michael Ross said Thursday during a conference call.

Dollarama is joining several retailers who have said they are looking to automation to combat the projected hit to their bottom lines from provincial pushes to raise the minimum wage.

Metro estimated the wage increase would cost about $45 million to $50 million next year and is accelerating its study of automation. Loblaw Companies Limited had estimated a $190-million hit next year from higher minimum wages in Ontario and Alberta.

Dollarama is advancing $10 million of capital spending to address store cost-cutting initiatives.

It has already looked at labour scheduling, reducing waste costs, adding LED lighting, improving loss prevention initiatives and enhancing its in-store mobile applications.

"We are doing everything to offset that (wage increase) as much as possible," he told analysts.

Analyst Brittany Weissman of Edward Jones said self-checkout was becoming more common in the retail industry to get customers through the store more quickly and save labour costs.

"It's good to see that they're trying to be forward thinking," she said in an interview. "We all know that the retail environment is getting more competitive so anything that they can do to maintain that position is a positive."

Dollarama also said it would be introducing more higher priced seasonal products because the store's buyers have found items with better value.

Dollarama's profit rose 24% to $131.8 million in its second quarter, prompting it to increase its full-year forecast by 3%.

Sales were up 11.5% to $812.5 million compared with the same time last year. Sales from stores open at least a year increased 6.1% as customers bought more during visits.

The company's decision to accept credit cards has helped since customers spend more than twice what they typically would with debit and even more than when paying with cash.

Several analyst increased their target price for Dollarama after the company marked the 11th consecutive quarter of better-than-expected results.

"We think that this is one of the best retail growth stories in Canada and at this point maybe even in North America," added Weissman.

At the end of the quarter, Dollarama had 1,125 stores that sell a wide range of merchandise at prices ranging from $1 to $4 per item.