Higher prices boost Dollarama profits

Discount retailer Dollarama says solid sales driven by new, higher-priced products and the opening of 42 stores last year helped boost its profit in the latest quarter.

Montreal-based Dollarama's third-quarter revenues were $312.8 million, up from $272.4 million in the comparable period last year. It's a vindication of sorts for the company's controversial plan last February to abandon its flat-rate loonie pricing and add three new price levels.

"Consumers continue to respond favourably to our expanding assortment of items priced at over $1 and the exciting new values they offer," Larry Rossy, Dollarama's chief executive officer, said in a news release Thursday.

"We are extremely satisfied with the strong performance of the business during the third quarter."

Store management justified the new price levels of $1.25, $1.50 and $2, saying they would allow stores to carry products that could be sold at a deep discount but not so low as $1.

Many consumers complained the chain was abandoning the very thing that made it rise above the competition in selling discount wares.

"That sucks," wrote one commenter on the shopping website smartcanucks.ca shortly after the increases were brought in. "When I can go into Dollarama and buy something like a tea towel for $1 vs. $1.50 or $2 at Walmart, I am saving money. However, if they are going to be essentially the same prices, I’ll shop at Walmart."

Subsequent quarterly profits, however, have not borne out any decline in the number of consumers shopping at Dollarama.

The number of transactions rose one per cent in the third quarter from a year ago, and, more importantly, the average transaction size increased by six per cent as consumers spent more, thanks to items being priced at more than a loonie.