Dollarama beats quarterly profit view on lower costs, stable demand

(Reuters) -Dollarama beat second-quarter profit estimates on Wednesday, helped by lower costs and stable demand for low-priced essentials like groceries.

Consumers grappling with rising living costs have relentlessly bargain-hunted and traded down to cheaper alternatives.

In addition, lower costs of inbound shipping and logistics helped the dollar-store company counter lingering challenges related to shrink, in which inventory is either lost, stolen or damaged.

The Montreal, Quebec-based company's gross margin rose to 45.2% in the quarter ended July 28 from 43.9%, a year ago.

The company also reiterated its fiscal 2025 comparable sales forecast of a rise in the 3.5%-4.5% range.

U.S. dollar stores like Dollar General and Dollar Tree have been trying to lift demand as larger rivals such as Target, Walmart and PDD Holding's e-commerce platform Temu competed for customer dollar.

This also meant off-price retailers such as TJX and Ross Stores reported a sequential rise in customer traffic at the cost of higher-end department store operators like Macy's.

Dollarama's net sales rose 7.4% to C$1.56 billion ($1.15 billion) compared to a year ago. Analysts estimated net sales of C$1.57 billion, according to LSEG data.

The company posted net earnings per share of C$1.02 compared with 86 Canadian cents a year ago. Analysts, on average, expected a profit of 97 Canadian cents.

($1 = 1.3577 Canadian dollars)

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Janane Venkatraman)