(Reuters) -Dollarama posted an increase in first-quarter sales and profit on Wednesday, as more Canadians shopped at its stores for affordable groceries and essentials.

Canadian consumers have been looking for affordable deals and bargains for a wide range of products such as clothes, groceries and cleaning supplies, as they grapple with higher cost of living.

Constrained household budgets have encouraged more people to visit discount stores such as Dollarama and Dollar Tree, which sell essential products used by consumers at competitive prices.

"We are seeing a progressive normalization in comparable store sales, with growth primarily driven by persistent higher than historical demand for core consumables and other everyday essentials," CEO Neil Rossy said.

The Montreal-based discount store's sales rose 8.6% to C$1.41 billion ($1.03 billion) in the quarter ended April 28, compared with C$1.29 billion a year ago and in line with LSEG estimates.

The company earned 77 Canadian cents per share compared with 63 Canadian cents a year ago. Analysts on average were expecting a profit of 76 Canadian cents.

The retailer reaffirmed its annual comparable sales forecast of growth between 3.5% and 4.5%.

Separately, Dollarama said it had acquired an additional 10% stake in Latin American value-retailer Dollarcity, increasing its stake to 60.1%.

Dollarama, which is looking to expand its business in Latin American countries and Mexico, said the deal is unlikely to impact its net earnings per share for fiscal 2025.

($1 = 1.3747 Canadian dollars)

(Reporting by Granth Vanaik in Bengaluru; Editing by Mohammed Safi Shamsi)