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ADS Widens Dotz Scope in Brazil

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Alliance Data Systems Corporation (ADS - Free Report) announced the latest advancement in the national rollout plan of the Dotz coalition loyalty program in Brazil. The loyalty program recently expanded into two new markets in Brazil's southern region – the State of Santa Catarina and the city of Curitiba in the State of Parana. Though the stock market did not react positively to the news (probably because of broader market fundamentals), we believe this will favorably impact the program’s performance going forward.

The expansion marks the sixth and the seventh market penetration for Dotz. Prior to these launches, Dotz had 8.2 million customers enrolled under the program. We expect a substantial increase in enrollment to the Dotz program as it is will now reach a population of 6 million in the State of Santa Catarina and another 2 million in the city of Curitiba.

Alliance Data holds 37% stake in Companhia Brasileira De Servicos De Marketing (Dotz), the operator of Brazil's Dotz loyalty program. Dotz now operates in Belo Horizonte, Brasilia, Sao Paulo State Interior (Campinas), Fortaleza, Recife, Santa Catarina and Curitiba, with an estimated total population of 26 million Brazilian consumers.

The Dotz coalition loyalty program is similar to the Canadian AIR MILES® Reward Program. By shopping with several national and regional sponsors (both online and at physical locations) in Brazil, consumers can collect points on their Dotz collector cards. These points can eventually be redeemed against various rewards.

In its second quarter-earnings conference call, Alliance Data announced that it intends to enter four additional Brazilian markets in the second half of 2013. With its fresh foray into these two markets, Dotz is perfectly on track to achieve its aim of exceeding $100 million in revenues in 2013, with 10 million collectors by the end of the year.

Concurrently, Dotz also entered into a regional partnership with Angeloni. The major chain of supermarkets in the southern Brazilian region ranks among Brazil's top-10 supermarkets and 500 largest companies. With the partnership, Angeloni joins the bandwagon of sponsors like Banco do Brasil, one of Brazil's largest national banks; Ale, one of the nation's largest gasoline station chains; Bob's, a national fast food restaurant chain; Pague Menos, a leading national drug store chain; and Magazine Luiza, a specialty electronic retailer.

Brazil, as the fifth-largest populated country with more than 190 million citizens, offers ample opportunities for Alliance Data to weave success out of a popular coalition loyalty program, and thus ramp up its Dotz program in the years to come.

Alliance Data carries a Zacks Rank #3 (Hold). Outperforming financial transaction service providers Total System Services, Inc. (TSS - Free Report) with a Zacks Rank #1 (Strong Buy), and Official Payments Holdings, Inc. and MasterCard Inc. (MA - Free Report) , both with a Zacks Rank #2 (Buy),  are worth considering.

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