About Dollarama
Dollarama is Canada’s largest value retailer with more than 2,700 locations across three continents and seven countries. The retailer has risen by offering consumers a wide range of goods at prices that offer attractive relative value. In these difficult and uncertain macroeconomic times, it is easy to see how this business model is truly resonating with consumers. Here are three reasons to buy Dollarama stock.
Strong financial figures
In the five years ending January 31, 2025 (the end of Dollamama’s fiscal year), revenues rose nearly 60% to $6.4 billion. Moreover, earnings per share (EPS) rose by more than 190% to $4.16.
Today, Dollarama continues to achieve impressive results. In the latest quarter, the company reported a 22% increase in sales, a 6% increase in same-store sales, continued strong traffic and improved margins. Considering all this, it should come as no surprise that Dollarama’s share price is on fire. As you can see in the chart below, Dollarama’s stock price today is almost $200 per share. This equates to a return of 287% over five years.
Dollarama Stocks: Valuation
Dollarama’s share 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 stocks because the macroeconomic environment has been so shaky and uncertain. Today I’ve seen a weak macro environment benefit Dollarama as consumers look for the lowest price option for their purchases.
So while Dollarama’s rating makes me hesitate, I’m willing to pay.
Looking ahead
As Dollarama’s size in Canada has continued to grow, it makes sense that growth rates would be lower. In fact, store sales growth in Dollarama’s last quarter was strong at 6%, but it is not the high store sales growth of previous years.
While there is still room to expand its Canadian network, and Dollarama is in fact accelerating its new store expansions, 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 revenue rose 56.5% to $42.5 million.
In addition, the company is expanding into Mexico, with currently nine stores, and into Australia. Dollarama’s international growth strategy is a new growth engine for the retailer in the coming years.
The bottom line
Dollarama continues to exceed expectations and has done so for years. This shows that it is not 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 stress and uncertainty, Dollarama is exactly what consumers need to make our lives more affordable. Dollarama’s share price on the TSX reflects this and the future still looks bright.
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