Dollarama could raise prices above $3

Dollarama says it could eventually introduce productspriced above $3 as it raises prices in the face of a low Canadian
dollar.

"We'll hold on as long as we can, but you're going to see someinflation I would say in Canada, unavoidably," CEO Larry Rossy saidWednesday in a conference call to discuss strong fourth-quarterresults.

The discount retailer said it has absorbed some of the currencyheadwinds through lower margins, but has been forced to raise prices, for example, by adding 25 cents to some $1 items.

"I think at $1 we're struggling to get good value for the clienttoday," Rossy told analysts.

A loonie or less

When Dollarama started 23 years ago, all items sold for a loonieor less.

But three years after it began selling items between $1.25and $3, 71.5 per cent of sales now come from these higher priceitems.

The retailer said it also expects that it can open more stores inCanada than it thought as it continues to open locations inunderpenetrated markets, particularly in Ontario and Western Canada.

The company said Wednesday the country can support about 1,400stores, compared with the 1,200 maximum in its prior forecasts.

Dollarama has 955 stores following the addition of 81 locations lastyear including 27 in the fourth quarter.

Meanwhile, Dollarama said it is feeling no negative pressure inAlberta or Western Canada from the impact of lower energy prices.

Target liquidation

The liquidation of Target stores is having a short-term negativeimpact on Dollarama sales, but Rossy said the possible expansion ofWalmart into some of these locations would be positive, as has beenthe experience for the 380 Dollarama stores located near Walmartstores.

Dollarama raised its quarterly dividend by a penny tonine cents per share Wednesday as it reported its fourth-quarterprofit rose about 21 per cent from a year ago and beat the analysts'estimates.

The retailer earned a fourth-quarter profit of $100.3 million or76 cents per share, compared with a profit of $83 million or 59cents per share a year ago. Analysts had expected a profit of 71cents per share.

Rising sales

Sales rose 15 per cent to $669 million for the quarter ended Feb.1.

The increase was due to a 9.3 per cent growth in the number ofstores and an 8.5 per cent increase in same-store sales comparedwith a year ago when results were hurt by bad weather that forcedtemporary store closures ahead of Christmas.

For the full year, the chain earned $295.4 million or $2.21 perdiluted share, compared with $250.1 million or $1.74 per share in2013.

Sales increased 13 per cent to $2.33 billion on a 5.7 per centincrease in same-store sales.

Dollarama shares closed up $1.80 at $68.10 on the Toronto StockExchange.