On Monday, UBS reaffirmed its Neutral stance on Dollarama Inc . (TSX:DOL:CN) (OTC: DLMAF), maintaining the price target at Cdn$147.00. The firm highlighted Dollarama's effective store operations, which have been refined over time, as a key factor in maintaining cost efficiencies while still providing an appealing shopping experience for customers.
Dollarama's strategy includes employing a higher number of full-time equivalent (FTE) employees per store and per 1,000 square feet compared to many of its U.S. dollar store competitors. This staffing approach is believed to enhance restocking efficiency, store cleanliness, and customer service.
Dollarama's operational efficiency is further supported by its selective inventory choices. The company offers a narrower selection of stock-keeping units (SKUs) than its peers, despite typically operating larger store spaces. This selective SKU strategy is paired with a deliberate avoidance of perishable and frozen/refrigerated items to minimize complexity and reduce the risk of product shrinkage or spoilage. Additionally, Dollarama steers clear of trendy or fashionable items, which helps limit shrink and inventory obsolescence.
The analyst from UBS included visual evidence to support their observations, with photographs from a recent visit to a Dollarama store featured on pages 4-8 of the report. These images are intended to underscore the retailer's strong in-store presentation and the effectiveness of its operational strategies. The photographs serve to illustrate the clean and well-organized store layout, which is part of Dollarama's commitment to providing a superior shopping environment.
Dollarama's business model and operational tactics have been identified as significant contributors to its success. The company's emphasis on staffing, inventory selection, and store layout are seen as key elements that differentiate it from its competitors in the dollar store sector. UBS's maintained Neutral rating and price target reflect the firm's assessment of Dollarama's current position and potential in the retail market.
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