September 1, 2016 / 11:57 AM / 3 years ago

Canada's Dollarama draws more shoppers, beats profit estimates

(Reuters) - Dollarama Inc reported a better-than-expected quarterly profit as the Canadian dollar store operator’s sales got a boost from more shoppers visiting its stores.

The company’s results come in contrast to those from U.S. dollar store operators, who have been struggling with increased competition from Wal-Mart Stores Inc and lower food prices.

Dollarama, which raised its price ceiling to C$4 from C$3 during the second quarter ended July 31, said traffic rose 1 percent from a year earlier.

“The traffic growth was particularly telling given some investor concern heading into the quarter, given the recent performance of Wal-Mart in Canada,” Raymond James analyst Kenric Tyghe wrote in a note.

Wal-Mart’s Canada unit reported a much smaller rise in second-quarter same-store sales due to intense competition from companies such as Loblaw Co Ltd and Sobeys Inc, who took price cuts on some products to fend off competition.

Shares of Dollarama rose as much as 2.7 percent to C$99.48 in early trading on Thursday.

The Montreal-based retailer said it opened 13 stores in the second quarter, bringing the total number of stores to 1,051.

The company’s general, administrative and store operating expenses rose about 7 percent. However, the expenses as part of sales were 15.2 percent, compared with 15.9 percent a year earlier.

Dollarama said same-store sales rose 5.7 percent, compared with 7.9 percent last year.

The company’s net income rose 11.4 percent to C$106.4 million ($81.1 million), or 88 Canadian cents per share.

Revenue rose 11.6 percent to C$729 million.

Analysts on average had expected a profit of 84 Canadian cents per share and revenue of C$726.55 million.

Reporting by John Benny and Anet Josline Pinto in Bengaluru; Editing by Maju Samuel

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