06/12/2013 08:35 EDT | Updated 08/12/2013 05:12 EDT

Dollarama CEO says discount chain aiming to grow in Ontario, Western Canada

MONTREAL - Dollarama Inc. expects to have 1,000 stores in its retail network over the next few years, with most of the growth in Ontario and Western Canada, chief executive Larry Rossy said Wednesday.

The discount chain now operates more than 800 stores and will open 80 new stores in its current fiscal year, Rossy said.

"For sure, we can get to 1,000 stores," Rossy said after Dollarama's annual meeting.

How many stores will be opened beyond that, is difficult to say, Rossy said, noting that population growth in Ontario and Western Canada is the reason for expansion by Dollarama (TSX:DOL) in these areas.

There are almost 300 Dollarama stores in Ontario and this year almost 50 per cent of its new stores will open in Ontario. About 35 per cent of new openings will be in Western Canada.

Rossy also said Dollarama has no plans at this time to offer items priced above $3 each and noted a majority of its merchandise remains priced at $1 or less, despite the introduction of higher-ticket items some time ago.

Dollarama has also tested Visa credit cards and their use is being considered but not for this year.

The Montreal company noted it isn't looking to buy up any other discount chains to add its stable of stores.

The arrival of U.S. discount chain Target isn't considered a threat to Dollarama but is a competitor for store locations, Rossy said.

Rossy made his comments after Dollarama reported a improved profit of $45.6 million or 62 cents per share of net income in the first quarter ended May 5.

That was up from $42.6 million or 56 cents per share a year earlier as sales increased to $448.1 million from $398.0 million.

In part, the higher revenue was due to the addition of 85 stores over the previous year, including 21 opened during Dollarama's fiscal first quarter. The company had 806 stores as of May 5.

Meanwhile, Dollar said it will keep its quarterly dividend at 14 cents per share, following an increase of three cents per share that was announced in April, and renew a stock buyback program launched a year ago.

Dollarama's overall sales and profit growth were below analyst estimates, which called for 67 cents per share of earnings and $449 million of revenue.

Comparable-store sales were up 3.7 per cent, due to larger average transaction values at established locations but the number of transactions fell 0.9 per cent.

Dollarama has been gradually adding items that cost $2 and $3 each, accounting for some of the increase in the average transaction values.

The company's stock was down 3.5 per cent, or $2.52, at $70.06 in mid-afternoon trading Wednesday on the Toronto Stock Exchange.