Dollarama Inc., betting the surge in sales it has enjoyed during the recession will have staying power when the economy recovers, intends to expand its presence by 30 to 40 stores a year for the foreseeable future.
In a prospectus filed as part of an initial public offering, Canada’s largest discount retailer said it sees “opportunity for significant growth” as it becomes a publicly traded company.
Currently, the Montreal-based retailer operates 585 stores across the country, but said it sees the potential for at least 900 based on its current per capita penetration rate in Quebec, which is much higher than in the other provinces.
Dollarama recorded a 7% increase in same-store sales in its fiscal second quarter. However, whether it can continue its growth once the economy begins to rebound is an open question.
Retail analyst Wendy Evans, founder of Evans and Company Consultants Inc., said there’s room for expansion in the dollar-store sector as long as they continue to offer a wide variety of products.
“Probably as the economy improves and the market expands, I guess that the prices may go up a little bit more and they’ll be able to expand their assortments more broadly,” Evans said.
“Whether the growth will be as good as previously I don’t know but I think there’s still lots of opportunity for new stores.”
John Williams, president of retail consultant J.C. Williams Group, said he thinks the dollar-store market is “close to being saturated” as other mass merchants start to offer similar prices to stay competitive.
But he said stores like Dollarama should be able to maintain at least a portion of the new customers they gained during the recession.
“When times get good again some people will go back to their old ways, but there will be a portion of the population that says, ‘Well, that dollar greeting card will be just fine.’”
Dollarama tried to distinguish itself from its dollar store competitors–including Buck or Two, Dollar Giant, Dollar Store With More, Everything For a Dollar and the Great Canadian Dollar Store–through consistent product offerings at multiple price points.
“Many Canadian dollar stores have a market positioning similar to close-out retailers, offering a ‘treasure hunt’ type shopping experience. Product selection and availability at these retailers change frequently and are often inconsistent, largely as a result of a sourcing strategy focused on importers and liquidators,” the company wrote in its prospectus.
“Some dollar stores, including Dollarama, have differentiated themselves by offering a more consistent product selection which includes everyday household needs and a selection of nationally branded products, as well as an assortment of unique and seasonal items. This strategy is intended to drive customer loyalty and repeat traffic.”
