Dollarama Enters Unfamiliar Territory: A Sales Slowdown

(Bloomberg) -- Dollarama Inc. is hitting a slow patch.

The Montreal-based dollar store, which has gotten investors used to a regular stream of good news, lowered its forecast for comparable store sales this year after a second-straight quarter of below-expectations growth. It now expects sales to rise about 2.5 percent to 3.5 percent, down from a previous range of 4 percent to 5 percent.

The sales forecast cut is “problematic,” according to Raymond James Financial Inc. analyst Kenric Tyghe. Dollarama’s earnings per share for the fiscal second quarter also missed estimates by a penny.

The company, which is adding stores throughout Canada, blamed part of the slowdown on a decision to minimize price increases. At the same time, it increased its gross-margin forecast, helped by lower-than-expected inflation on products imported from China and measures to control costs.

Dollarama shares, which have soared almost 1,700 percent since the company went public in 2009, plunged 14 percent to C$44.80 in Toronto, the biggest decline since December.

To contact the reporter on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, David Scanlan, Steven Frank

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