12/07/2017 07:42 EST | Updated 12/07/2017 11:30 EST

Dollarama Unbothered By Miniso's Arrival In Canada

CEO Neil Rossy said the two stores have different customer bases.

A Dollarama store is seen Tuesday, June 11, 2013 in Montreal.

MONTREAL — Dollarama Inc. says it's not worried about the arrival to Canada and growth plans of Chinese dollar store chain Miniso.

"We consider them a pure China-based, Chinese import dollar store," Dollarama CEO Neil Rossy said Wednesday during a conference call about its latest quarterly results.

"They do a very nice job in stores about one quarter to one third the size of ours."

Miniso has opened six stores in British Columbia and hopes to reach up to 50 locations by the end of next year, including Ontario, Quebec and Alberta.

We will consider them as competition as we consider all the other retailers in Canada as competition. Dollarama CEO Neil Rossy

Overall, the firm hopes to have 6,000 stores around the world by 2020.

Rossy said Miniso's merchandise is focused on "design-oriented non essentials" which is a different customer base than Dollarama. The Canadian retailer caters to many shoppers with a broad offering of food, kitchenware, party decorations, toys and seasonal goods.

"We will consider them as competition as we consider all the other retailers in Canada as competition. But there's nothing for us to react to at this time."

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The Quebec-based discount retailer (TSX:DOL) said it earned $130.1 million of $1.15 per diluted share in its third quarter, up from $110.1 million or 92 cents per share a year ago when it had more shares outstanding.

Analysts on average had expected a profit of $1.11 per share, according to Thomson Reuters.

Sales in the 13 weeks ended Oct. 29 totalled $810.6 million, up from $738.7 million.

Comparable store sales grew 4.6 per cent as the average transaction size grew 4.5 per cent and the retailer saw a 0.1 per cent increase in the number of transactions.

Dollarama said it has no immediate plans to expand its price points beyond $4.

Chris Wattie / Reuters
A pedestrian walks past a Dollarama store in Ottawa, Sept. 1, 2016.

"We had 17-plus years to master $1, and it's going to take us a bunch of years to master $3.50 and $4," Rossy added.

The retailer also said it will likely wait for other retailers to hike prices in response to minimum wage increases before it follows suit.

"If they do, it gives us an option. And if they don't, obviously, we must, like all the other retailers, find a way to fight a good fight and figure it out," Rossy told analysts.

'Conservative' outlook for fiscal 2019

Despite high expectations for the retailer, Dollarama again beat analyst forecasts for a 12th consecutive quarter, said Irene Nattel of RBC Capital Markets.

She said the company's revised guidance for the year and preliminary outlook for fiscal 2019 is likely "conservative."

"Overall, we continue to believe Dollarama remains one of the best growth opportunities in Canadian retail," added Brittany Weissman of Edward Jones.

Dollarama had 1,135 stores at the end of the quarter, up from 1,069 stores a year ago.

On the Toronto Stock Exchange, Dollarama shares closed down 2.12 per cent to $149.73 in Wednesday trading.

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