While U.S. dollar store leaders are trying to get back some of their old glory days, Dollarama Inc. (DOL.TO) in Canada has seemed to not miss a beat. Its day-two reaction to earnings might feel lackluster, but its investors in Canada know that this the Canadian dollar store leader had just hit an all-time high after the earnings report.
Canadian analysts have raised their price targets handily — and the new consensus (see below) is calling for even larger gains yet to come. The same cannot be said for U.S. dollar stores even if they have made a significant comeback from their 2024 plunge-depth lows.
Dollarama posted stronger than expected earnings and sales in its first quarter, and the news sent the stock to an all-time high intraday and on a closing basis. Its market cap is now above $50 billion (Canadian Dollars). Value-oriented shoppers in Canada and in Latin America spent more per trip in its stores. Its comparable store sales rose by 4.9%, boosted by both key factors — a 3.7% boost in transactions and a 1.2% boost in its basket size. Gross margin also rose to 44.2%.
Demand was said to be strong for consumables across the board. Dollarama also noted that there were 22 net new stores opened, compared to 18 net new stores in the prior report. Dollarama is also expanding beyond just Latin America. The company’s press release noted:
“Dollarcity also continued to deliver value and advance its expansion plans, with the first stores in Mexico slated to open imminently… With The Reject Shop shareholders set to vote later this month, our acquisition of Australia’s largest discount retailer remains on track and is expected to close by the end of July. We’re excited to begin this new chapter of growth, while staying focused on our core Canadian business and Dollarcity partnership.”
CANADA’S WALL STREET SAYS…
Oggonomics has tracked almost 10 analyst calls raising their price targets (Canadian Dollars C$), as follows:
BMO Capital Markets raised its target price to C$215 from C$170.
CIBC World Markets raised its target price to C$204 from C$174.
Desjardins Securities raised its target price to C$205 from C$185.
Jefferies & Co raised its target price to C$223 from C$180.
RBC Capital raised its target price to C$207 from C$190.
Scotiabank raised its target price to C$210 from C$175.
Stifel Nicolaus raised its target price to C$190 from C$162.50.
TD Securities raised its target price to C$210 from C$185.
UBS raised its target price to C$196 from C$165.
Dollarama’s current C$192.30 share price in Toronto would compare to a fresh consensus analyst price target of $206.66 using the 9 newer analyst price targets that were raised above.
ADDITIONAL DRIVERS AND BENEFITS
Dollarama’s 60.1% share of Dollarcity’s net earnings from January 1, 2025 to March 31, 2025 nearly doubled (up 82.4%!) from its 50.1% share during the same time in 2024, due to continued strong operational performance and the acquisition of an additional 10% equity interest in Dollarcity on June 11, 2024.
Dollarama is becoming quite diversified. The Canada-based value retailer offers low-priced consumables in all Canadian provinces and two territories via approximately 1,616 store locations with price points generally up to C$5. Its 60.1% interest in Central American Retail Sourcing, Inc. is over Dollarcity as Latin American value retailer with approximately 632 conveniently located stores in Colombia, Guatemala, El Salvador and Peru. It is now opening its first store in Mexico. Its pending C$233 million acquisition of Reject Shop in Australia will give the company the following benefits from the time of the acquisition announcement:
- Australia’s largest discount retailer
- a store network of more than 390 locations in the country
- includes private-label and national brand products
- Reject Shop’s consolidated sales translated to C$779 million for the 12-month period ending December 29, 2024
- and it employs over 5,000 people.
DOLLARAMA VS. US DOLLAR STORE STOCKS
Dollarama shares are now up about 36% year-to-date and up over 50% from this time a year ago. This performance and expected upside ahead handily beats U.S. dollar store leaders>
Dollar General Corp. (NYSE: DG) is up 46% YTD and up 66% from its 52-week low. Unfortunately, that is still down 13% from a year ago. Its market cap is $24 billion. The current $111 share prices is barely $3 shy of the $114 consensus analyst price target.
Dollar Tree Inc. (NASDAQ: DLTR) is up 26% YTD and up 56% from its 52-week low. That leaves its shares still trading down 14% from a year ago. Dollar Tree’s market cap is $19.7 billion. Its current $94.50 share price is also just below its $95 consensus analyst price target.
IN THE END…
Dollarama’s Toronto-listed shares hit an all-time high of C$196.46 on Wednesday, with the ultimate C$192.99 closing price that day (an all-time high close as well) representing a gain of 9.8% on the day.
