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Indigo Books & Music Inc. is bulking up on premium dolls by introducing the popular U.S. American Girl chain within its book stores as a separate shop.

Starting in the spring, the Toronto-based books and gifts seller will introduce the American Girl dolls, owned by U.S. toy titan Mattel Inc. and whose sister dolls include Barbie.

Indigo will start with two American Girl shops in its stores in Yorkdale Shopping Centre in Toronto and its standalone Chapters outlet on Robson Street in Vancouver.

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"We're looking to do as many of these as makes sense for the market," said Heather Reisman, chief executive officer of Indigo, in an interview on Tuesday as she unveiled the plans. "We have a big ambition for it."

American Girl joins an array of foreign retailers looking to expand in Canada, viewing the market as an attractive one that weathered the recession better than others. Nevertheless, foreign chains have found it difficult to find prime retail space, prompting some to team up with incumbents.

American Girl carries high-end dolls whose prices start at about $80 for Bitty Baby and $110 for the My American Girl. The stores are known for their events and activities; the ones in Canada will have a doll hair salon and ear piercing for the dolls along with American Girl books, which are already stocked at Indigo. They also carry clothing, accessories and doll furniture.

Prices will be the same as those south of the border, Ms. Reisman said.

Already American Girl has a Canadian customer following at its U.S. stores, said Jean McKenzie, executive vice-president of American Girl. "There is a very vocal group of girls and moms who are advocates of the American Girls brand," she said.

The chain has 15 U.S. stores with another opening in San Francisco on Nov. 15. The Canadian shops will be the retailer's first foray outside its U.S. base.

Indigo has been rapidly expanding beyond books to toys and other children's products along with gifts and home wares to make up for declining book sales in the digital age.

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Robert Gibson, an analyst at Octagon Capital, said Indigo will probably test the two American Girl boutiques and then roll out more across Canada – as many as 15 in major urban locations by fiscal 2015. "Because these are big ticket items, we don't believe they will initially be in every store."

He predicted that Indigo will drop weak-selling book space and replace it with the American Girl boutique. He estimated American Girl could add $20-million to $30-million in incremental revenue and, conservatively, $2-million (8 cents a share) to $3-million (12 cents a share) in net profit in fiscal 2016.

The American Girl business has played out well for Mattell. In its third quarter, its American Girl sales jumped 20 per cent and 22 per cent in the first three quarters of 2013, Mattell said this month. "It's a $600-million business," Mattel chairman and chief executive Bryan Stockton told analysts. "It's growing strong double digits."

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