LESS BECOMES MORE
Low-cost retailer Dollarama plans to offer more products for $3.50 and $4 this year,
The retail chain that built its business on everything for a dollar will begin offering products at $3.50 and $4 later this year.
Dollarama executives said Wednesday during an earnings call that stocking more items at higher price points allows them to offer more variety to customers as well as better-quality products.
“You can only do so much at $1 when it comes to a vase. You can do a lot more at $2 or $3,” said Dollarama chief executive Larry Rossy, during the call to discuss the company’s fourth-quarter and fiscal 2016 results.
Dollarama began increasing its prices beyond $1 about six years ago, rising to $3 for some items. Customers don’t seem to be pushing back. In the final quarter of fiscal 2016, average transaction size grew 3.5 per cent and traffic grew 4.2 per cent.
“Overall, I am very pleased with the solid growth in sales and improved bottom-line results,” said Rossy,
Dollarama also announced that Rossy, who has led the Montrealbased company through a period of strong growth since it went public in October 2009, will soon take up the role of executive chairman.
His son, Neil Rossy, becomes Dollarama’s president and CEO on May 1.
“I’m excited to take the helm of a company that is part of my DNA,” said Neil, 46.
Neil Rossy is Dollarama’s chief merchandising officer. He’s been with the company since Dollarama was created, and has been a member of its board of directors since 2004.
Annual same-store-sales growth was 7.3 per cent, the company reported.
Although it began as a cash business, Dollarama now accepts debit cards, accounting for 49.2 per cent of sales. It has begun test-marketing the use of credit cards in British Columbia.
“There was a time when we looked at toothpicks and said, ‘let’s buy as many toothpicks for a dollar as we can.’ Now we buy a good toothpick; we’re taking pride in our offering and it seems to be paying off.” NEIL ROSSY CHIEF MERCHANDISING OFFICER
Softness in the Chinese economy has allowed Dollarama to get more from Chinese vendors for less, offsetting the cost of the falling Canadian dollar and increasing profit margins. The company opened 75 net new stores in the past12 months, bringing the number of stores nationwide to 1,030.
It plans to add as many as 70 new stores in the current fiscal year, with an eye to bringing the total store count in Canada to 1,400 over time.
The company is rolling out a threeyear plan to improve processes, adding mobile scanning technology, WiFi and equipping staff with point-ofsale devices to allow them to process sales from anywhere in the store.
Dollarama is also moving toward higher-quality products.
“There was a time when we looked at toothpicks and said, ‘let’s buy as many toothpicks for a dollar as we can,’ ” Neil Rossy said.
“Now, we buy a good toothpick; we’re taking pride in our offering and it seems to be paying off.”
Dollarama saw increases in sales, net earnings and earnings per share for the fourth quarter and fiscal year ended Jan. 31.
For the quarter, diluted net earn- ings per share rose 31.6 per cent to $1.00. The quarterly dividend will go up 11.1 per cent to 10 cents per share, to be paid May 4.
Annual sales last fiscal year were $2.65 billion, up 13.7 per cent from $2.33 billion in the fiscal year ended Feb. 1, 2015. Its profit increased to $385.1million, or $3 per diluted common share, for fiscal 2016, ended Jan. 31, from $295.4 million, or $2.21 per share, in fiscal 2015.
For the quarter ended Jan. 31, sales grew 14.6 per cent to $766.5 million. Net profit was $124.8 million, or $1 per diluted share, up from $100.27 million, or 76 cents per share, a year earlier.
The results were above expectation, according to BMO Capital Markets analyst Peter Sklar, whose target price for the stock is $93.00. The stock closed at $88.91on Wednesday.