A new Dollarama distribution centre and a lot more of the chain’s stores are headed for Canada over the next decade.
The retailer announced Wednesday that it had spent $46.7 million to buy land in Calgary, where it plans to build a warehouse and distribution center to service Western Canada.
The deal is slated to close in the fourth quarter of the company’s fiscal 2025 and the site is expected to be in operation by the end of 2027.
Looking even further out, Dollarama said it would expand its Canadian store network to 2,200 locations by 2034. The Montreal-based company said that store count was an increase from its prior goal of opening 2,000 stores by 2031. It currently has 1,541 locations.
The company decided to up its goal and open the centre “in light of the positive customer response to our value proposition year after year and following a re-evaluation of our market potential in Canada,” Neil Rossy, Dollarama’s chief executive, said in a statement.
The 200-store increase over three years works out to about 67 new stores per year, which Desjardins analyst Chris Li said makes it “right in line” with the current annual average of 60 to 70 stores per year.
He pointed out the distribution centre will be Dollarama’s second and should help it optimize its warehousing and distribution operations and support its growth plans while generating cost savings.
Irene Nattel with RBC Capital Markets felt similarly.
“In our view, (the) decision to add a second logistics hub in Western Canada makes a great deal of sense given growth in store count and geographic footprint, but as well from a security of supply/service perspective,” she wrote in a note to investors.
Dollarama’s announcements came the same day it reported a third-quarter profit of $275.8 million, up from $261.1 million a year ago.
That profit amounted to 98 cents per diluted share for the quarter ended Oct. 27, up from a profit of 92 cents per diluted share in the same quarter last year.
Sales for the quarter totalled $1.56 billion, up 5.7 per cent from $1.48 billion a year ago.
Comparable store sales rose 3.3 per cent as the number of transactions rose 5.1 per cent, but the average transaction size fell 1.7 per cent.
The results span a busy time period encompassing both the back-to-school season and the lead up to Halloween.
However, Canadians have been more prudent about their spending and some have cut back on discretionary purchases, weighing on retailers.
Dollarama’s price points tend to be much lower, helping it weather such periods, but Nattel said she’s still watching to see if the company encountered slowing demand in sales of non-essential goods.