The Canadian retail scene is home to some pretty robust juggernauts that may be a tad too cheap to ignore any further. Indeed, some of these TSX exclusives may not get nearly as much attention as comparable American retailers. For new Canadian investors, I’d argue there’s deep value to be had in such names as discount retailer Dollarama (TSX:DOL) and more-than-century-old retailer Canadian Tire (TSX:CTC.A) at current levels. And while the two retail juggernauts couldn’t be more different, I do think they could make for fine additions going into June’s end. Let’s check in on the two names, and I’ll give my personal preference.
Dollarama
First, we have the stronger of the two retail performers, with Dollarama stock now in a seemingly unstoppable multi-year rally. Over the past six months, DOL shares have gained close to 36%. And over the past two years, shares have more than doubled, rising 116% on the back of impressive quarterly earnings reports. Indeed, the hunt for value is on amid inflation and other economic headwinds. And Dollarama has met the demand for lower-priced necessities. Though it seems like the easy money has already been made, I can’t say enough good things about the firm’s growth story.
Ultimately, it’s more about where the retailer is headed next rather than where it has been in recent years. Looking ahead, the firm is poised to open more stores across the nation, likely at a time when consumers are still reeling from the impact of Trump’s tariffs. Although there is hope that a deal between Canada and the U.S. can be made within 30 days, I’d argue that DOL stock is a great way to ride out a scenario wherein tariffs remain in place for a few more months or even years. In short, it’s a tariff-resilient play that can stabilize just about any Canadian portfolio.
That said, the only issue with Dollarama, in my opinion, lies in the valuation.
The stock is going for 43 times trailing price-to-earnings (P/E). And while the discount retailer is probably the best-run in North America, I can’t justify paying such a historic premium. I’d personally wait for a pullback before initiating a large position. Though I wouldn’t be against nibbling on a tiny amount of shares (let’s say five or so) at under $200 per share.
Canadian Tire
Canadian Tire hasn’t been blasting off like Dollarama has, but the name has started picking up serious traction this year. I have no idea if the momentum from the first half (shares up around 20% so far in 2025) can carry into the second half and beyond. But with such a low valuation (11.9 times trailing P/E), I do see room for the name to enjoy further multiple expansion.
Personally, I think Canadian Tire has all the right drivers to power continued sales growth despite tariff unknowns. With Hudson’s Bay assets in hand, it will be interesting to see how the Canadian icon fares as it aims to offer Canadian consumers a good deal for a growing range of different discretionary goods. With a nice 3.9% dividend yield, a cheap valuation, and about as much volatility as the broad market, I’d go for Canadian Tire shares over Dollarama at this juncture. A big breakout for the $10.4 billion big-box retailer is a long time coming!
