DOLLARAMA INC, COULD BE CANADA’S BEST RETAILER? By Katie Davis
If you live in Canada, not many can say that they have never shopped at a Dollarama, whether to stock up on needed essentials for the house, cottage, camping or for that hockey road trip. Their stores are not fancy, but neither are the prices and the shelves are always stocked with everything from food to office supplies and everything from name brands to generic. Now if we are going to call something the best, we need to look at the numbers as you can have all the products you want on the shelves but if you are not putting money in the bank or back to shareholders you are not the best. So looking at the results from Canada’s largest chain of dollar stores, you will see some amazing results. Gross margins and EBITDA (Earnings before interest, taxes, depreciation and amortization is an indicator of a company’s financial performance) both grew and most importantly, net income surged 31.6 percent, going from $0.76 per share to $1.00 rewarded shareholders with an 11% dividend increase as well. So it should be no surprise that Dollarama continues to expand in new markets and looking at last quarter they opened 25 new stores increasing the store count to 1,030 stores across Canada. Dollarama expects to open between 60 and 70 stores over the next year, and analysts think the company can maintain that pace for years to come. Dollarama’s business model is the main reason that they can deliver these types of results as they focus on lower cost items, price changes have less of an impact on their customer percep- tion of value. If you shop at Sobeys or Loblaws and your favorite item goes from $12.99 to $13.49 you talk to all your friends about it and you can’t believe of the increase in price. However, Dol- larama can increase your favorite item from $1.00 to $1.50 and it doesn’t feel like the same 50 cent increase. That is because it is not, the Sobeys or Loblaws, 50 cent increase represents a 3.8 percent increase where Dallarama’s is 50 percent but you won’t be talking about it by the time you get to your car in the parking lot. Dollarama, like most retailers, felt the recent pain of Canada’s declining dollar with 99% of its products coming from China, but because of their price perception, Dollarama was able to pass on price increases to customers with little to no negative effects. Even better news for Dollara- ma, now that the loonie has moved in a positive direction for the retailer, prices will stay higher and increased profits should be the result. Total sales are up 14.6 percent, with same-store sales up 7.9 percent very impressive results for any retailer.
CANADA’S PJ’S PETS IS CLOSING 27 STORES By Katie Davis
The pet store chain that operates Pets Unlimited, Petculture and Oliver & Pets Co is closing 27 of its 39 stores across Canada. “We are saddened to say that we are closing our doors after almost 50 years of serving the pet community across Canada,” said Brad Hamilton, vice president of PJ’s Pets, in a news release. The 27 stores that are closing include one in Newfoundland and Labrador, one store in Prince Edward Island, six in Nova Scotia, three in New Brunswick, eleven in Ontario, and five in British Columbia. The stores that are closing are offering dis- counted prices on pet merchandise, including pet food, accessories and supplies. A March 2016 report by Price Waterhouse Cooper says the company employs 427 people and that the pet store chain has accu- mulated losses totalling $16.5 million since 2013. The report also says the company partly blames a loss of business on a decision to stop selling puppies in 2011. However, some stores may not be disap- pearing altogether, just the Pets Unlim- ited name. As will be the case for the Pets Unlimited locations in Sydney, Nova Scotia, as they recently posted on their Facebook page that it will be reopening under new ownership in May.
Time will tell if Dollarama is Canada’s best retailer, but if their operations, expansion potential, and terrific business model are any sign they are definitely in the running.
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MAY 2016 • SPOTLIGHT ON BUSINESS
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