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Dollarama thrives as it awaits more U.S. competition

MONTREAL — Dollar stores in the United States have seen much success in recent years (check out Retailing Today's report on Dollar General here) and they appear to be doing just as well north of the border. Dollarama, Canada's leading dollar-store operator with 704 locations across the country reported Wednesday that net earnings for the fourth quarter increased to $63.6 million, or 84 cents per diluted share, compared to $42 million, or 56 cents per diluted share, for the corresponding period of fiscal 2011. For fiscal 2012, net earnings per diluted share increased to $2.30, compared with $1.55 for fiscal 2011.

"We are extremely pleased with our fourth quarter financial and operating results," said Larry Rossy, CEO of Dollarama. "Once again, we recorded double-digit growth performance in sales, operating income and net earnings as well as a 7.9% growth in comparable store sales. We owe this achievement to the strength of our business model, the solid operating foundation we have built, the continued growth of our store network and to our team's disciplined execution."

Sales for the fourth quarter of fiscal 2012 increased by 14.7%, from $408.7 million in the fourth quarter of fiscal 2011 to $468.7 million. The increase was mainly driven by the opening of 52 net new stores during fiscal 2012 and by comparable-store sales growth of 7.9% in the fourth quarter of fiscal 2012, over and above comparable store sales growth of 5.3% in the fourth quarter of fiscal 2011, the company said. Comparable-store sales growth for the fourth quarter consisted of a 3.8% increase in average transaction size combined with a 4% increase in the number of transactions. The holiday season and the favorable weather conditions experienced during the fourth quarter of fiscal 2012 helped boost the overall sales results, according to the company.

Sales for fiscal 2012 increased by 12.9%, from $1.4 billion in fiscal 2011 to $1.6 billion. The increase was mainly driven by new store openings as well as a 5.4% increase in comparable store sales. Comparable-store sales growth consisted of a 5.2% increase in the average transaction size combined with a 0.2% increase in the number of transactions.

Though Dollarama may be Canada's leading dollar-store chain, it faces growing competition from U.S. based companies including Dollar Tree, which acquired Canada's Dollar Giant store in 2010, and Target, which will open its first stores in Canada in 2013.