Dollarama (TSX:DOL) may have suffered one of its worst post-earnings fumbles in a while, but before you look to book profits and move on to the next hot Canadian momentum stocks, I do think it’s worth exploring what went wrong to determine whether the latest dip into correction territory is a buying opportunity for long-term thinkers.
Of course, shares of Dollarama have been increasingly volatile in the past year, and it has made an otherwise flawless five-year chart look a bit toppy. And at more than 36 times trailing price-to-earnings (P/E), the name doesn’t scream “steal” at these levels, even though it may be a tad on the cheap side relative to its more recent history. The growth story is still as strong as ever, especially in a climate where inflation could have a resurgence.
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Dollarama’s a perfect defensive retailer for a time like this
Whether it’s energy-related inflation due to the blockage in the Strait of Hormuz – which has sent oil prices well above US$100 (it’s currently over US$150 per barrel now as of Wednesday afternoon, before a big deadline put in place by President Trump) – AI-related inflation on the latest and greatest gadgets, or what lingers of food inflation, all signs suggest 2026 is going to be a doozy for the budgets of Canadian consumers. And, with that, Dollarama looks like a place that could win a ton of business away from other retailers that lack the value proposition.
To put it simply, Dollarama has what it takes to give consumers great deals at a time when so many goods are rapidly going up in price. Indeed, it’s hard to get used to all this inflation when one’s budget is being stressed to the max. When it comes to navigating inflation or even hyperinflation, few firms are a better bet than Dollarama.
Dollarama looks like a winner amid inflation
Of course, Dollarama isn’t immune to the inflationary forces at work. But it is able to dodge and weave better than most other retailers, and by doing so, it can gain serious market share at a time when the consumer may be in a rather mixed spot. Though DOL stock has bounced sharply in recent sessions, now up close to 5% from past-month lows, the name remains off more than 15% from all-time highs. And while the name narrowly avoided a bear market, I wouldn’t be too surprised if another pullback is in the cards, perhaps at the hands of a broader market sell-off due to rising geopolitical fears.
At the end of the day, Dollarama looks ready to take a hit if it means getting customers in its doors. The company’s CEO, Neil Rossy, made a promise that his firm “will only pass on price increases where absolutely necessary.” Perhaps it’s words like these that give consumers more confidence to shop. Any way you look at it, Dollarama is a defensive growth staple that can keep on growing when times of recession come rolling in.
Whether it’s the hard-to-beat deals in consumables, which could comprise more of the mix if we are headed for an economic downturn, or the whole affordable “treasure hunt” experience, I think Dollarama is a fantastic bet now that it’s down. It’s a share-taker and one that’s misunderstood following a quarter that didn’t have the best same-store sales numbers in the world. As inflation heats up again, my guess is that sales will start picking up traction again.
