Dollarama Inc. (TSX: DOL) is Canada’s leading value retailer with a rapidly increasing store count of more than 2,700 stores. These stores are concentrated in Canada, Latin America, and Australia. This franchise continues to serve the customer by offering a value proposition that’s hard to beat.
As the world has struggled from increasingly challenging times, the company’s value proposition has become increasingly valued and needed. This is what we’re seeing as the Latin American expansion continues to gain steam in ever more profitable territory.
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Dollarama’s growth journey in Latin America
The initial entry into the Latin American market involved Dollarama buying a 50.1% stake in Dollarcity, which operated stores in Colombia, Guatemala, and El Salvador. Today, Dollarama has a total 781 stores in the region. This includes stores in Mexico and Peru, which are fast-growing regions for the retailer.
The strength of the Latin American region is evidenced in Dollarama’s most recent second-quarter result. During this period, DollarCity’s net earnings increased 30.3% to $49.9 million. As a result of this strong performance, DollarCity declared a cash dividend. This US $75.1 million dividend to Dollarama will be used to fund its expansion in Mexico.
Consolidated results show continued strength
As far as the bigger picture, consolidated results, Dollarama is showing momentum here too. In the second quarter, same-store sales (SSS) increased 5.4% in Canada. This stellar performance has brought greater confidence to management’s outlook. They have therefore increased their fiscal 2027 SSS growth guidance to 4%–4.5% from the prior 3%–4%.
Also, Canadian gross margins increased marginally despite supply chain pressures. Clearly, higher energy prices and tariffs have been managed pretty effectively. This was in large part due to the scale and flexibility of Dollarama’s business.
Growing store count at Dollarama
The results that DOL stock keeps posting demonstrate the demand for its value proposition.
The environment remains challenging for consumers, as the trade war challenges and geopolitical pressures are all adding up to rising costs and consumer pressure and strain. This makes Dollarama’s value proposition all the more valuable. Consumers want to reduce expenses and Dollarama is ready and able to oblige, as it has done for decades.
This all means that the market is able to happily absorb an increasing Dollarama store count. In Canada, Dollarama added 15 net new stores in the first half of this fiscal year, with 65 to 75 new stores planned for the full year.
In Mexico, Dollarama opened 10 new stores in the latest quarter, which brings the total store count to 21 stores. Finally, Dollarama has been busy renovating existing Australian stores that the company acquired, as well as adding new stores. There are currently 60 stores in Australia, up from 28 in the first quarter.
The bottom line
DOL stock is not cheap, trading at more than 30 times this year’s expected earnings. But you get what you pay for in this case. Dollarama stock has consistently beaten earnings expectations; the company’s retail proposition continues to be in high demand, and its operations are extremely well-managed.
