With Donald Trump’s return to the U.S. presidency, businesses and investors alike are bracing for potential economic shifts. One of the key policies expected to make waves is the implementation of new tariffs on imports from Canada, Mexico, and China. According to Trump’s recent statements, a 25% tariff on Canadian and Mexican imports, along with a 10% tariff on Chinese goods, is set to take effect next month. For Canadian consumers, this could mean one thing: rising prices. And when prices climb, shoppers flock to discount retailers. That’s why Dollarama (TSX:DOL) is a stock worth considering before these tariffs take hold.
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Why Dollarama
Dollarama stock has long been a favourite among Canadian shoppers looking for affordability. But it could see even greater demand as inflationary pressures and tariffs drive prices higher. The company, which operates over 1,500 stores nationwide, specializes in low-cost products ranging from household essentials to seasonal goods. Unlike many retailers that rely heavily on premium-priced imports, Dollarama stock has a strong supply chain with bulk purchasing power to keep costs low.
If you needed further proof of Dollarama stock’s resilience, just look at its latest earnings report. The company’s third-quarter results for fiscal 2025 showed a 5.7% increase in net sales, climbing to $1.6 billion. Even more impressive, net earnings per share rose 6.5% to $0.98 – a testament to the company’s ability to maintain strong margins despite rising costs. With a quarterly revenue growth rate of 7.4% year over year, Dollarama stock continues to outperform many of its retail competitors.
In terms of profitability, the company maintains an enviable operating margin of 25.6%, with a net profit margin of 17.9%. These figures reflect Dollarama’s disciplined cost management and efficient supply chain operations. These help it maintain high profitability even in challenging economic environments. Additionally, the retailer has a return on equity of 156.5%, a figure that significantly outpaces most of its peers.
More to come
Beyond its current success, Dollarama stock is setting its sights on long-term expansion. The company recently revised its store count target, aiming to open 2,200 locations across Canada by 2034, up from the previous goal of 2,000 by 2031. This signals confidence in the sustainability of demand for its low-cost goods, as well as its ability to capture a larger share of the market.
Furthermore, Dollarama stock has continued to expand its international footprint through its investment in Latin American discount retailer Dollarcity. The move gives it access to a rapidly growing consumer base in Colombia, Guatemala, El Salvador, and Peru. This diversification could provide an extra growth avenue, particularly if domestic economic conditions become more challenging.
Trump tariffs
One of the biggest concerns surrounding Trump’s proposed tariffs is how they will affect Canadian businesses and consumers. Historically, tariffs have led to increased costs for goods imported into the U.S. and Canada alike, as many manufacturers and suppliers operate cross-border supply chains. While this is bad news for many retailers, Dollarama stock could be one of the rare beneficiaries.
Dollarama stock has been on an impressive run. Over the past year, shares have climbed nearly 40%, significantly outperforming the TSX. The stock currently trades at approximately $138 per share, with a forward price-to-earnings (P/E) ratio of 27.2. While this valuation is higher than some traditional retailers, it reflects the company’s strong growth prospects and defensive positioning in uncertain economic times.
For investors with $5,000 to put to work in the market, Dollarama stock presents an intriguing opportunity. The combination of tariff-induced inflation, strong financials, and an expanding store footprint makes it a compelling stock to own. While the stock has already seen significant gains, it remains well-positioned for further growth as economic conditions push more shoppers toward discount retailers.
Foolish takeaway
With economic uncertainty on the horizon and rising costs making affordability a top priority for Canadians, Dollarama stock stands out as a stock that could benefit significantly from changing consumer behaviours. Its latest earnings show strong momentum, its expansion plans are ambitious, and its ability to adapt to economic shifts has been proven time and again.
