Dollarama's “Costco-Like” Value Proposition: A High-Growth Investment Opportunity in 2025

In an era where value-driven retail is reshaping global consumer behavior, Dollarama (DOL) has emerged as a standout player, earning the moniker “Canada's Costco” from Bernstein Research. This label is not merely a branding exercise but a reflection of the company's operational discipline, financial strength, and strategic vision. With Bernstein assigning an “Outperform” rating and a C$220 price target[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1], investors are increasingly scrutinizing whether Dollarama can replicate Costco's success while offering superior valuation metrics.

Operational Excellence: The Foundation of a Costco-Like Model

Dollarama's business model mirrors Costco's in several critical ways. Both companies prioritize lean operations, high gross margins, and a focus on broad customer appeal. Dollarama's 45% gross margin[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1] and 27% EBIT margin[Bernstein sees Dollarama as Canada’s ’Costco,’ stays cautious on…]^[2] outperform traditional U.S. dollar-store chains, positioning it as a high-quality compounder. Its stores, described as “clean and well-stocked,” attract a diverse demographic, from budget-conscious shoppers to middle-income households—a stark contrast to U.S. discount retailers that often cater to lower-income segments[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1].

Costco, meanwhile, relies on its membership model and bulk pricing to drive loyalty. While Dollarama lacks a membership fee structure, its value proposition is similarly compelling: everyday low prices on a curated mix of household essentials, snacks, and seasonal items. This alignment is underscored by Bernstein's analysis, which notes that Dollarama's valuation multiple (trailing P/E of ~25x as of September 2025) is significantly lower than Costco's 54x trailing P/ECostco Wholesale (COST) Statistics & Valuation - Stock Analysis^[3], suggesting undervaluation relative to its growth potential.

Retail Trends Fueling Value-Driven Growth

The 2025 retail landscape is defined by a shift toward price sensitivity. According to Deloitte, consumer spending is projected to grow 3.1% year-over-year, with durable goods purchases rising 4.7%[Retail Outlook Positive For 2025, With Spending …]^[4]. This trend is driven by easing inflation, a robust labor market, and anticipation of Federal Reserve rate cuts, all of which are boosting purchasing power. Nearly 60% of retail executives expect customers to prioritize price over brand loyalty in 2025[Retail Outlook Positive For 2025, With Spending …]^[4], a dynamic that directly benefits value retailers like Dollarama and Costco.

Private-label expansion is another tailwind. Retailers such as Walmart and Target have demonstrated that private-label products can command premium margins while competing with national brands[Walmart, Target And Nordstrom Boost Sales By…]^[5]. Dollarama, though smaller in scale, is leveraging similar strategies by emphasizing quality and affordability. Its recent acquisition of Australia's The Reject Shop and its stake in Mexico's Dollarcity[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1] further diversify its product offerings and regional relevance.

International Expansion: A Multi-Thousand-Store Opportunity

Dollarama's long-term growth hinges on its international ambitions. Bernstein estimates a global opportunity of over 10,000 stores, compared to its current 2,700 locations[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1]. The company's expansion into Australia and Latin America has already yielded strong results: Q4 2025 revenue rose 14.8% year-over-year to C$1.88 billion, driven by 15 new stores and 4.9% comparable sales growth[Dollarama 4Q Profit, Revenue Rise as Value Proposition]^[6]. With a focus on markets like Mexico, Australia, and Southeast Asia—regions with underpenetrated discount retail sectors—Dollarama is poised to replicate its Canadian success.

Costco, by contrast, faces saturation in its core U.S. and Canadian markets. While it continues to invest in e-commerce (projected to grow 11.5% in 2025[Costco’s Strategic Position In A Shifting Retail…]^[7]) and global expansion, its growth trajectory is more constrained. Dollarama's leaner model and lower operational costs give it an edge in emerging markets where infrastructure and pricing dynamics favor agility over scale.

Financials and Valuation: Why Dollarama Outperforms

Dollarama's financials reinforce its outperform potential. For fiscal 2025, the company reported revenue of C$6.41 billion (up 9.3% year-over-year) and net income of C$1.17 billion (up 16%)[Dollarama Full Year 2025 Earnings: EPS Beats Expectations]^[8]. Its profit margin expanded to 18%, outpacing Costco's 2.92%Costco Wholesale (COST) Statistics & Valuation - Stock Analysis^[3], a testament to its efficient cost structure. Bernstein highlights that Dollarama's stock trades at a discount to Costco despite superior margins and growth rates[Dollarama Dubbed ‘Canada’s Costco’ as Bernstein Rates Outperform]^[1], making it an attractive value play.

Risks and Considerations

While the “Costco-like” analogy is compelling, investors should note key differences. Dollarama's reliance on physical stores and its exposure to commodity pricing could pose risks in a volatile economic environment. Additionally, its international expansion requires significant capital and operational execution, which may test management's capabilities. However, given its strong balance sheet and proven ability to scale, these risks appear manageable.

Conclusion: A Compelling Case for Outperformance

Dollarama's combination of operational efficiency, strategic international expansion, and alignment with value-driven consumer trends positions it as a high-conviction growth stock. With Bernstein's endorsement and a valuation that appears undemanding relative to its peers, the company offers a unique blend of near-term profitability and long-term scalability. For investors seeking exposure to the value retail boom, Dollarama's “Costco-like” model is not just a catchy label—it's a roadmap to outperformance in 2025 and beyond.