Dollarama (DOL.TO) is expanding, and will open hundreds of new stores in Canada over the next decade, after the company saw sales rise in a year marked by the COVID-19 pandemic.
The Montreal-based company, which reported fourth-quarter earnings on Wednesday, said it will open more than 600 new stores in Canada by 2031, bringing its overall store count to 2,000. That's an update from its previously disclosed target of 1,700 stores nationwide by 2027. According to Dollarama, there are 1,356 store locations across the country as of Jan. 31.
"Our hard-earned position as a weekly shopping destination for millions of Canadian families has been reconfirmed and strengthened by the pandemic," chief executive Neil Rossy said on a conference call with analysts on Wednesday.
"Based on our experience, our historical performance and what we see going forward, we feel very confident in raising our long-term store target."
Dollarama's stock was up nearly 7 per cent as of 1:45 p.m. ET, trading at $55.75.
Rossy says the company sees opportunities for expansion, particularly as Dollarama's average price point is currently up to $4, meaning the "addressable market is higher." Chief financial officer Jean-Philippe Towner says Dollarama had considered several factors when deciding to expand its store count to 2,000, including household income data, Canada's retail landscape, and the company's real estate portfolio. The company says the new growth target is not a result of changes in consumer behaviour – such as making larger purchases in fewer trips – brought on by the pandemic.
Dollarama saw sales in the three-month period ending Jan. 31 fall short of analysts' expectations as the company grappled with more stringent public health measures as a result of the pandemic.
"These stricter measures resulted in an abrupt and sustained decline in store traffic and sales through to fiscal year-end," Rossy said.
Sales in the quarter increased by 3.6 per cent to $1.1 billion, while comparable store sales – a key metric in the retail industry – fell by 0.2 per cent when compared to the same period last year. Analysts had expected sales of $1.13 billion, according to Refinitiv.
However, the company said sales momentum has returned, as restrictions ease in many regions across the country.
With files from Reuters
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.