Toronto Star

DOLLAR SIGNS

Dollarama says tariffs could force it to hike price of food and U.S.-imported goods,

- ROSS MAROWITS

Dollarama Inc. may be forced to raise prices on food and other goods imported from the U.S. because of Canada’s plans to impose tariffs in retaliatio­n for American duties on aluminum and steel, the company’s CEO said Thursday.

Neil Rossy said he’s not worried about the discount retailer losing its competitiv­e edge because other Canadian retailers will face the same pressures.

“It won’t be fun for any retailer in the country and I guess the saving grace is that it will affect all retailers in Canada the same way,” he told shareholde­rs at the company’s annual meeting.

“That being said, the customer may suffer if the changes are extreme, but they will suffer across all retailers because retailers can only do so much.”

Rossy later told reporters that it’s a complex task to assess the potential impact on hundreds of items, especially if consumer goods can’t be sourced from other countries.

“So if I’m buying plastic-moulded items I have options all around the world for them. If I’m buying a Mars bar or a Hershey bar made in Pennsylvan­ia, I don’t really have too many options.”

Dollarama can’t rule out raising prices, but wouldn’t do so on items that aren’t directly hit by higher costs in order to remain competitiv­e, Rossy said. It also has no plans to increase its maximum price of food items beyond $2 or add a higher category of prices beyond $4.

The retailer said it has also tried to absorb the cost from a rise in minimum wages and would welcome the Ontario Progressiv­e Conservati­ve party’s promise not to increase the level to $15 in January should it form the next government.

“I think it’s good for everyone. You never like to have inflation,” chief financial officer Michael Ross said.

Dollarama announced Thursday that it plans to test its e-commerce strategy to sell full boxes of select items to consumers in Quebec by Christmas before rolling out the program across the country.

Dollarama shares fell 6.4 per cent in Thursday trading after the discount retailer missed analyst expectatio­ns as cool spring weather hurt sales of seasonal goods that are a key driver of revenues in April.

Dollarama earned $101.6 million, or 92 cents per diluted share, in the first quarter. That compared with $94.7 million, or 82 cents per share, in last year’s fiscal first quarter. Sales for the 13 weeks ended April 29 were $756.1 million, up 7.3 per cent from $704.9 million in the comparable period a year earlier.

The company’s adjusted earnings also came in at 92 cents per share, just short of the 93 cents per share it was expected to earn on $776.6 million of revenues, according to analysts polled by Thomson Reuters Eikon.

Comparable store sales grew 2.6 per cent from last year, while the number of stores grew by 62 locations to 1,170. Excluding the impact on seasonal goods such as gardening items, same-store sales were within its forecast of 4 to 5 per cent.

Many retailers would be happy with those numbers, but investors have become accustomed to higher comparable sales from Dollarama that have ranged from 5.2 to 7.3 per cent over the past three years.

Analyst Irene Nattel of RBC Capital Markets said the results are best viewed as a blip on Dollarama’s consistent trajectory of 15 to 20 per cent earnings per share increases.

Shareholde­rs on Thursday approved a three-for-one stock split effective June 19, designed to make the company’s shares more accessible to retail investors.

The annual meeting saw Dollarama founder Larry Rossy step down as executive chairman, although he is expected to remain a mentor and continue showing up at the company’s headquarte­rs, said his son Neil, who is chief executive.

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 ?? PAUL CHIASSON/THE CANADIAN PRESS FILE PHOTO ?? Dollarama’s CEO says it has no plans to increase its maximum price of food items beyond $2 or add a higher category of prices beyond $4.
PAUL CHIASSON/THE CANADIAN PRESS FILE PHOTO Dollarama’s CEO says it has no plans to increase its maximum price of food items beyond $2 or add a higher category of prices beyond $4.

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