Dollarama moves top price up to $3
Dollar store chain sees revenue increase 15% in first quarter
Dollarama, the successful chain of Canadian dollar stores, hiked the maximum price for goods sold in its stores by a dollar on Wednesday — to $3.
The ubiquitous Montreal chain sells a host of goods in fixed price increments. The previous top price for any item used to be $2, but the chain says over the summer it will introduce $3 items.
"By selectively introducing items at $2.50 and $3.00 starting in August 2012, we will be able to enhance our customers' shopping experience while staying true to our dollar store concept and our commitment to offering compelling value," Dollarama CEO Larry Rossy said.
The majority of goods sold in the stores will remain priced at $1 or less, Dollarama says.
Dollarama began as a pure dollar-store, but introduced some goods in the $1 to $2 range as part of its growth strategy in 2009 following an initial public offering. In the first quarter following the move, only 12 per cent of sales were of items worth more than $1. Now that figure has jumped to 51 per cent.
Indeed, the plan appears to be working, as the chain saw its revenue increase by almost 15 per cent to $398 million from $346.3 million in the first quarter.
Dollarama said the stronger sales were largely due to an increased number of operating stores, as well as more items priced above $1.
There were also 54 more Dollarama stores, rising to 721 locations across Canada. It added 17 stores in the first quarter alone.
But as the chain expands beyond its dollar-store origins, some investors are concerned the company may get away from its core strength.
"The danger for Dollarama in pushing towards higher price points however is that at $3 and above, they start to challenge Walmart and Target," Versant Partners analyst Neil Linsdell said of the move.