Dollarama focuses on lower-prices strategy
Dollarama Inc. is closely monitoring prices in its stores as it looks to boost foot traffic and generate growth in an increasingly competitive retail environment.
The company is boosting its lower-priced items to generate that traffic after putting too much emphasis on higher priced items up to $4, said CEO Neil Rossy on a conference call Thursday.
“I think you know quite honestly, that we did lose sight of it, on making sure we had all the traffic drivers needed to balance our higher price points.
“When you take a business from a pure $1 store, and you evolve over the years to multi-price points, while being very successful in doing so, you’ll learn things,” he said.
The company is also constantly assessing prices on merchandise, with item prices assessed at least every three weeks during restocking, said Rossy. He said the rebalance of price levels and items would help drive sales going forward.
“We have to refocus on traffic generating and unit sales, because at the end of the day, in bricks and mortar, that’s the bread and butter.”
The attention on prices come as the retail sector is in a very competitive retail environment with rising operating costs, noted RBC Dominion Securities analyst Irene Nattel. She said the company delivered “solid” results despite the challenges.
Canaccord Genuity analyst Derek Dley, however, downgraded his rating on the company from buy to hold and lowered his price target after the company released lower-than-expected growth expectations for fiscal 2020.
The company said it expects same-store sales growth of 2.5 to 3.5 per cent for the year, which is below its historical average samestores sales growth target of four to five per cent.
“In our view, the next few quarters are likely to represent a ‘showme-story’ to many investors and as a result we are comfortable moving to the sidelines for the time being, as we await a more positive pricing environment and samestore sales acceleration.”
For the fourth quarter, the company reported a profit of $172 million, up from $162.8 million a year earlier. It also said Thursday it would raise its dividend to pay out 4.4 cents per share quarterly, up from four cents. Sales for the 13-week period totalled $1.06 billion, up from $938.1 million, while comparable store sales grew 2.6 per cent.
We have to refocus on traffic generating and unit sales.