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Dollarama achieves major retail milestone

12/9/2015

While same-store sales at Dollar General and Dollar Tree have decelerated of late, that is not the case with Canada’s largest dollar store operator which recently opened its 1,000th location.



Montreal-based Dollarama now operates 1,005 stores throughout Canada, making it the nation’s largest operator of small format value priced stores. The company said its same store sales increased 6.4% during the third quarter ended Nov. 1, on top of a prior year increase of 5.9%. Conversely, Dollar General said its same store sales for the third quarter ended Oct. 30, increased 2.3% compared to a prior year increase of 2.8%. Dollar Tree’s third quarter comp, which does not include the acquired Family Dollar stores, increased 2.1% compared to a prior year increase of 5.9%.



"We have done very well so far this year with managing the significant deterioration of the Canadian dollar through the use of foreign exchange contracts in order to hedge the cost of merchandise paid for in U.S. dollars,” said Dollarama Chairman and CEO Larry Rossy. “Certainly our pricing strategy has contributed to some of the uplift seen in the gross margin so far in Fiscal 2016. We expect our performance across key indicators, such as EBITDA margin and gross margin, to normalize and return to historical levels in Fiscal 2017, as we look to continually reinvest in the value proposition offered to our customers.”



The company achieved the notable milestone of surpassing the 1,000 store mark during the quarter as it has opened 50 stores year-to-day and expected to end the fiscal year with a total of 70 to 80 openings. While that may not seem like much compared to the gaudy numbers of a company like Dollar General with 12,400 U.S. locations and 730 openings this year, it’s worth remembering that Canada’s population of roughly 35 million is about one tenth the size of the U.S. Dollarama’s rate of expansion is expected to slow slightly next year with 60 to 70 openings planned.



The new store expansion and same store sales growth enabled the company to grow sales by 13% to $664.5 million and helped earnings per share increased 41.8% to 78 cents from 55 cents.



The key driver of the company’s same store sales growth was an increase in average transaction size. The company disclosed that 59.7% of its sales came from products priced higher than $1.25 compared to 54.1% the prior year.


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