Discounters thriving north of the border

MONTREAL – U.S. discount-store operators should keep an eye on their Northern neighbors, as Canadian dollar stores continue to thrive. Anticipating their growth potential, Virginia-based Dollar Tree acquired Canada’s Dollar Giant Store in November 2010, adding 86 more stores to its repertoire and marking its first expansion outside of the United States.

More recently, canadian dollar-store operator Dollarama reported that sales for the fourth quarter ended Jan. 30, increased 12.3% to $408.7 million from $364.1 million in the fourth quarter ended Jan. 31, 2010. According to the company, the increase was driven by the opening of 49 net new stores during the fiscal year ended Jan. 30 and comparable store sales growth of 5.3% in the fourth quarter. The company added that although Christmas sales were strong, unfavorable weather conditions in January compared to last fiscal year negatively impacted the number of transactions in the fourth quarter of fiscal 2011.

"We are pleased with our fourth quarter and year-end financial and operating results. Providing consumers with a compelling value proposition by offering an assortment of merchandise at multiple price points proved to be a very efficient strategy in generating strong cash flows," said Larry Rossy, CEO of Dollarama.

Dollarama opened 49 net new stores in fiscal 2011; above expectations, according to Rossy. He said the company is on track to open approximately 50 new stores during fiscal 2012.

Dollarama operates 652 stores across Canada.

Dollar Tree acquired the 86 Dollar Giant stores including substantially all assets, inventory, leasehold rights and intellectual property for approximately $52 million in cash, plus the assumption of certain liabilities.