The most popular merchandising format of the last two decades in Canada has been value retailing, notes a new report from Desjardins Securities analyst Keith Howlett, who is recommending consumers buy shares of Dollarama Inc.
“With the exception of Dollarama, the value-oriented success stories are beginning to run out of market space for their existing formats,” he wrote in a report to clients. “Whether they will continue to dominate the next 20 years or not, it is clear that they have accelerated their market share gains during the recession.”
The analyst, who has a Buy rating on the dollar chain’s shares with a target price of $26, notes that while brands are still important to consumers, they have “broken down a bias that paying a high retail price assures quality, of confers higher social status,” and will happily patronize Winners, Joe Fresh, H&M, Costco and Dollarama.
The analyst also observed that integrated retail models — in which retailers control brand building, production, distribution and retailing — are amongst the most financially successful, citing Lululemon, Joe Fresh and H&M.
Photo: Shoppers at the Dollarama in Promenades Cathédrale in Montreal (THE GAZETTE/Dave Sidaway)