Dollarama Enters into an Agreement to Provide Business Expertise and Sourcing Services to Central American Dollar Store Chain Dollar City
MONTREAL, Feb. 5, 2013 /PRNewswire/ - Dollarama Inc. ("Dollarama" or the "Corporation") (TSX: DOL) announced today that it has, through a wholly-owned subsidiary, entered into an agreement to share its business expertise and provide sourcing services (the "Agreement") to Dollar City, a Central American dollar store chain looking to expand its activities in Central America, Colombia, Peru and Ecuador (the "Region"). Dollar City currently operates 15 locations in the Region.
"Dollarama is as much an importer as it is a retailer. Our business isn't just based on growing our network of stores; it's also based on the continued development of our low-cost direct sourcing platform," said Larry Rossy, Chairman and CEO of Dollarama.
As per the terms of the Agreement, Dollarama will share its business and operational expertise with Dollar City as well as leverage its direct sourcing and importing expertise to provide their growing network of stores with a compelling product offering. Dollarama will not be taking on any operational responsibilities with respect to Dollar City or making any capital commitments. The Agreement has a term of eight years and contains key financial performance indicators at specified milestones throughout the term. It also includes an option to acquire a majority interest in Dollar City as of the beginning of the seventh year of the term.
"Dollarama's unique dollar store concept and compelling product offering continues to be very successful with Canadian consumers. Our objective is to test the potential of the Latin American market in a way that minimizes risk, capital and time investment and we believe that we have found the right strategic approach and the right partners to achieve this," added Mr. Rossy.
While Dollarama does not expect the Agreement to have a material operational or financial impact on the Corporation in the medium term, it believes that the Latin American market holds long-term potential.
Latin America: An Attractive Retail Environment for the Long Term
Latin America is the world's second-largest emerging market, with a gross domestic product (GDP) of US$5.6 trillion, representing approximately 9 percent of global GDP, and more dynamic growth rates compared to developed regions such as the U.S. and Canada. The spending habits of Latin America's young and increasingly urban population of over 589 million people are similar to those of North Americans, with a high level of penetration of U.S. imports and North American brands. This dynamic is also observed in Central America and Andean Pact countries where Dollar City operates which, coupled with its smaller scale, makes the Region a strategic entry point into Latin America.
The retail landscape in many regions of Latin America, including Central America and Andean Pact countries, is increasingly modern, with a growing presence of global retailers with global brands. Despite the presence of many global retailers and a retail landscape similar to North America's, the dollar store market is underdeveloped and underserved, providing for significant growth potential.
"As we continue to explore opportunities to extend the reach of our concept, Latin America stands out as an increasingly attractive market. This collaboration with Dollar City will provide us with a timely window and a strategic entry point to participate in the long-term potential of this dynamic emerging market. Furthermore, we believe that our product offering can be easily adapted to appeal to local tastes as well as offer consumers tremendous value," added Mr. Rossy.
Focus Remains on Canadian Growth Strategy
Dollarama remains focused on the execution of its Canadian growth strategy, driven by the densification of underpenetrated markets. The Canadian market continues to have significant growth potential which Dollarama plans to capture with its usual disciplined approach to site selection and product sourcing as well as a focus on execution.
"We are committed to unlocking the significant untapped value that is available in the Canadian retail market and expanding our footprint, with 80 new locations set to open in fiscal 2014. While we look forward to this new endeavour in Latin America, we remain focused on strengthening our leading market position here in Canada," concluded Mr. Rossy.
Conference Call Details
Dollarama's Chief Executive Officer, Mr. Larry Rossy, and Chief Operating Officer, Mr. Stéphane Gonthier, will hold a conference call today, at 2:00 p.m. EST to discuss this business venture. They will be joined on the call by Mr. Michael Ross, Chief Financial Officer and Secretary, and Mr. Neil Rossy, Chief Merchandising Officer. In addition to the Corporation presentation on the call, there will be a question and answer session at which investors and financial analysts are invited to ask questions. Media may participate in the call on a listen-only basis.
To participate on, or listen to the call, please dial (514) 392-1478 or (866) 223-7781 and indicate that you would like to participate in the Dollarama conference call.
This conference call will be recorded and available for replay beginning two hours after the end of the call and will be available through March 5, 2013. To access the replay, please dial (514) 861-2272 or (800) 408-3053, then the access number 2273658#.
About Dollar City
Dollar City is a Central America-based dollar store chain. It is operated by a well-established and reputable group of investors with extensive management and business experience in Latin America. Dollar City currently owns and operates 15 stores in El Salvador and Guatemala and is looking to expand its activities in the other countries of Central America, Colombia, Peru and Ecuador.
Dollarama is Canada's leading dollar store operator, with 761 locations across the country. Our stores provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Dollarama aims to provide customers with a consistent shopping experience, offering a broad assortment of everyday consumer products, general merchandise and seasonal items. Products are sold in individual or multiple units at select fixed price-points up to $3.00.
Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements are based on information currently available to us and on estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's management's discussion and analysis (MD&A) for Fiscal 2012 and in its continuous disclosure filings (available on SEDAR at www.sedar.com): future increases in operating and merchandise costs, inability to sustain assortment and replenishment of our merchandise, increase in the cost or a disruption in the flow of imported goods, disruption of distribution infrastructure, inventory shrinkage, inability to renew store, warehouse, distribution center and head office leases on favourable terms, inability to increase our warehouse and distribution center capacity in a timely manner, seasonality, market acceptance of our private brands, failure to protect trademarks and other proprietary rights, foreign exchange rate fluctuations, potential losses associated with using derivative financial instruments, level of indebtedness and inability to generate sufficient cash to service our debt, interest rate risk associated with variable rate indebtedness, competition in the retail industry, current economic conditions, failure to attract and retain qualified employees, departure of senior executives, disruption in information technology systems, unsuccessful execution of our growth strategy, holding company structure, adverse weather, natural disasters and geo-political events, unexpected costs associated with our current insurance program, litigation, product liability claims and product recalls, and environmental and regulatory compliance.
These factors are not intended to represent a complete list of the factors that could affect us; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as of February 5, 2013, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
SOURCE DOLLARAMA INC.