Scotia Capital Sees Positives For Dollarama (DOL.T)

Scotia Capital Markets sees potential for Dollarama Inc. (DOL.T), as company management was bullish on its plans for expansion. It has an Outperform rating and a C$30 price target on shares. In the research report, Scotia writes, "DOL again noted they see room for at least 900 stores based on a penetration rate of 37K people/store. While this reflects current QC penetration, they note they see potential for even more stores there. The 900-store goal may understate the actual longer-term potential. Management believes opening 30-40 new stores per year best exploits their ability to open and operate stores well. The new store payback period is 24 months." Scotia went on to say, "A major scanning initiative will provide the major underpinnings for significant productivity improvement. It will provide DOL a daily SKU count (vs. the current count every 27 days) and should lead to better replenishment, lower store costs by ~$15M, reduce shrink, and increase productivity. POS will be rolled out by November 2011 with end-to-end replenishment fully in place by July 2012."