Dollarama lifts sales forecast on steady demand for discounted goods

(Reuters) -Dollarama lifted its annual sales forecast on Wednesday, encouraged by strong demand for its household essentials and groceries as inflation-hit consumers turned to discount stores.

Consumers grappling with high interest rates and rental costs are swarming dollar stores in search of affordable holiday decorations and cheaper consumables including chocolates, snack bars and beverages.

Montreal-based Dollarama has also benefited from price hikes that were undertaken to offset higher costs resulting from persistent supply-chain challenges in logistics and labor.

The discount store operator now expects comparable store sales growth of 11% to 12% for fiscal 2024, up from the 10% to 11% it had estimated previously.

Dollarama's sales rose nearly 15% to C$1.48 billion ($1.09 billion) in the third quarter, in line with analysts' average estimates, according to LSEG data.

Excluding items, the company posted adjusted profit of 92 Canadian cents per share, above expectations of 86 cents.

Its gross margin was 45.4% of sales, compared with 43.3% a year ago, helped by lower inbound shipping and logistics costs.

($1 = 1.3587 Canadian dollars)

(Reporting by Annett Mary Manoj in Bengaluru; Editing by Devika Syamnath)