With all the uncertainty in the economy today and volatility picking up in the stock market, many investors are struggling to figure out which stocks are worth buying. Meanwhile, Dollarama (TSX:DOL) stock continues to rally, already up more than 20% year to date.
With questions about which industries might be impacted most by tariffs and how a potential economic slowdown could affect consumer spending, it’s no surprise that many high-quality stocks are selling off.
It’s also no surprise, though, that one of the few stocks thriving in this environment is Dollarama, the impressive defensive growth stock.
So, here’s why Dollarama is one of the best long-term investments you can make and why I’d consider it one of the top retail stocks to buy in Canada right now.
Dollarama stock is made for this environment
One of the main reasons why Dollarama stock is one of the best investments you can buy and hold for the long haul is its incredible track record of growth. Not only does it grow its revenue and earnings at an impressive pace, but more importantly, it consistently grows its sales and expands its operations year after year.
While Dollarama can certainly rally when the economy is booming, and the broader market is in a bull run, it often performs even better when the economy is slowing down.
That’s because, as a discount retailer, more consumers turn to Dollarama to buy their everyday essentials when times get tough, whether due to inflation, rising unemployment, or a combination of both.
For example, when inflation surged following the pandemic in 2022 and 2023, Dollarama’s annual revenue growth jumped from around 6% to 7% to more than 16% in each of those two years.
Therefore, the worse the economy gets, the more attractive Dollarama becomes for consumers, which is why it’s such a high-quality stock and one of the best to buy for the long haul.
Why is the retailer rallying?
With Dollarama stock up more than 20% already year-to-date, while the TSX is in negative territory, it’s clear that investors are gravitating toward reliable stocks that can continue to perform well, even in this uncertain environment.
And while some of its rally is due to the fact that investors recognize its potential in this environment or are looking to shore up their portfolio with a high-quality defensive investment, it’s also seen a significant rally due to the strong earnings it posted earlier this month.
For example, when it reported earnings for the fourth quarter of its fiscal 2025 year, which ended on January 31, 2025, Dollarama’s normalized earnings per share (EPS) unsurprisingly beat expectations, coming in at $1.40, which was ahead of the consensus estimate of $1.31.
This was largely due to another uptick in same-store sales growth, which led to a significant increase in revenue. That’s promising, considering that much of the increase in economic concerns across Canada began after the quarter ended.
Plus, in addition to its performance in the quarter, looking forward, Dollarama stock also gave investors a lot to be excited about.
The growth stock keeps on growing
On top of the growth potential Dollarama has in Canada as more consumers turn to its stores for their essential household goods, it also has plenty of potential outside of Canada through its investment in the Latin American dollar store chain, Dollarcity.
Dollarcity has already been growing rapidly as it continues to open new stores across several markets. And now, with plans to expand into Mexico later this year, there’s even more growth potential on the horizon.
In fact, analysts estimate that with the continued expansion of Dollarcity in Latin America, combined with Dollarama’s domestic growth, its normalized EPS could increase another 8% this year (fiscal 2026) and grow by another 13.1% in fiscal 2027.
Therefore, although the stock has already rallied significantly to start the year, and it’s by no means cheap at these levels if you’re looking for a reliable defensive investment with the ability to continue growing at an impressive pace for years to come, there’s no question Dollarama is one of the best retail stocks to buy now.
