Dollarama to sell products priced up to $5 to shield margins from inflation

Discount stores have been bumping up prices and focusing on selling costlier items to offset shrinking margins

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Canada’s Dollarama Inc said on Wednesday it would roll out additional price points up to $5 this year, as the discount retailer, which typically sells everything from kitchen essentials to party supplies under $4, looks to shield its margins from heightened inflation.

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Discount stores, which have benefited from shoppers turning to off-price retailers to protect their pockets during the pandemic-led economic downturn, have been bumping up prices and focusing on selling costlier items to offset shrinking margins.

Dollarama’s U.S. counterpart Dollar Tree Inc also raised prices for most of its products to US$1.25 from the traditional US$1 price point last year, in a bid to protect its profits from spiralling freight costs.

Montreal-based Dollarama, which has over 1,400 stores across Canada, said it expects supply chain and other inflationary pressures to be more this year and projected a decline in gross margins for its fiscal year 2023.

The company said it expects annual gross margin to be between 42.9 per cent and 43.9 per cent. It reported a gross margin of 43.9 per cent in the fiscal year ended Jan. 30.