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UPDATE 2-Dollarama shares hit record high as profit tops estimates

* Profit beats estimates for 9th straight qtr

* Store traffic rises for the first time in four qtrs

* Shares rise as much as 8.7 pct (Adds Q2 details, share movement)

Sept 7 (Reuters) - Dollarama Inc's shares touched an all-time high after the Canadian dollar-store operator reported a better-than-expected profit for the ninth straight quarter, as customers spent more at its stores.

The company, which raised its product price ceiling to C$4 last year, faces far less competition in the market than its U.S. peers, allowing it to raise prices and improve margins.

Dollarama's gross margins improved to 39.6 percent in the second quarter from 38.4 percent a year earlier. In contrast, U.S. retailer Dollar General Corp reported a slide in its second-quarter profit margins, as it cut prices more aggressively to compete with Amazon's Whole Foods Market.

Dollarama said on Thursday that average basket size on checkout rose 5.9 percent in the quarter ended July 30. Traffic rose 0.2 percent - the first time in four quarters.

Shares of the Montreal-based company rose as much as 8.7 percent to C$132.39 on the Toronto Stock Exchange.

The company said its same-store sales rose 6.1 percent.

Dollarama's net income jumped 24 percent to C$131.8 million ($108.40 million), or C$1.15 per share.

Excluding items, the company earned C$1.15 per share, beating the average analyst estimate of C$1.04, according to Thomson Reuters I/B/E/S.

The company, which opened 17 stores in the quarter, said sales rose 11.5 percent to C$812.5 million. However, they narrowly missed analysts' expectations of C$812.6 million.

($1 = C$1.22) (Reporting by Anirban Paul in Bengaluru; Editing by Maju Samuel)