As far as retail stocks go, Dollarama Inc. (TSX:DOL) has been a clear leader — in financial results as well as its stock price performance. It feels like Dollarama is just what the times are calling for: unbeatable low prices, reliable product assortment of essentials and consumables, and an easily accessible network.
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About Dollarama
Dollarama is Canada’s leading value retailer with more than 2,700 locations across three continents and seven countries. The retailer has risen by offering consumers a broad assortment of merchandise at price points that offer compelling relative value. In these difficult and uncertain macro economic times, it’s easy to see how this business model is really resonating with consumers. Here are three reasons to buy Dollarama stock.
Strong financial metrics
In the five years ended January 31, 2025 (Dollarama’s fiscal year-end), revenue increased almost 60% to $6.4 billion. Also, its earnings per share (EPS) increased more than 190% to $4.16.
Today, Dollarama continues to post impressive results. In its latest quarter, the company reported a 22% increase in sales, a 6% increase in same-store sales, continues strong traffic, and improving margins. Considering all of this, it’s should come as no surprise that Dollarama’s stock price has been on fire. As you can see from the graph below, Dollarama’s stock price today is at almost $200 per share. This equates to a 287% five-year return.
Dollarama stock: Valuation
Dollarama’s stock price on the TSX has historically traded at premium multiples — but, you get what you pay for. In the past, this has made me wary of the stock, as the macro economic environment was so shaky and uncertain. Today, I have seen that a weak macro environment is a good one for Dollarama, as consumers seek the lowest price option for their purchases.
So, while Dollarama’s valuation does cause me to pause, I am willing to pay up.
Looking ahead
As Dollarama’s size has continued to grow in Canada, it makes sense that its growth rates would drift lower. In fact, Dollarama’s latest quarter’s same store sales growth rate was strong, at 6%, but it is not the high teens same store sales growth rates of prior years.
While there is still room to add to its Canadian network, and in fact Dollarama is accelerating its new store additions, the company has turned to other markets. In Latin America, Dollarama’s Latin American subsidiary, Dollar City, is posting strong results. In fact, Dollarama’s share of Dollarcity’s earnings rose 56.5% to $42.5 million.
Additionally, the company is expanding into Mexico, with nine stores at this time, as well as Australia. Dollarama’s international growth strategy is another growth engine for the retailer in future years.
The bottom line
Dollarama continues to beat expectations and in fact, as been doing so for may years. This shows how it would not be wise to underestimate this company. Their Canadian network continues to impress, and Dollarcity also continues to perform exceptionally well. I think that in today’s world of economic strain and uncertainty, Dollarama is just what consumers need to make our lives more affordable. Dollarama’s stock price on the TSX reflects this and the future still looks bright.
