Dollarama's Global Expansion and Margin Resilience: A Strategic Play for Long-Term Value Creation

In the ever-evolving retail landscape, few companies have mastered the art of value creation as deftly as Dollarama. The Canadian dollar-store titan has long been a poster child for disciplined capital allocation and operational efficiency, but its recent foray into global expansion has elevated it from a regional success story to a potential global leader. With a 60.1% stake in Latin America's Dollarcity and a $1.7 billion acquisition of Australia's The Reject Shop, Dollarama is proving that its “$1.99” model—built on razor-thin margins and relentless cost discipline—can thrive in diverse markets. For investors seeking a high-conviction play in the discount retail sector, the question is no longer if Dollarama can scale its strategy globally, but how quickly it can do so.

The Engine of Margin Resilience: Capital Efficiency and Operational Discipline

Dollarama's financials tell a story of meticulous execution. In 2025, the company reported a 45.1% gross margin and an EBITDA margin of 33.1%, both showing year-over-year improvements driven by logistics cost reductions and scale-driven efficiencies. These metrics are not anomalies but the result of a business model engineered for resilience. By centralizing sourcing, optimizing supply chains, and maintaining a lean store-level structure, Dollarama has consistently outperformed peers in margin preservation.

Consider the math: a new store costs an average of $920,000 and achieves payback in two years. With 70–80 new Canadian stores planned for 2026 and 100+ openings in Latin America, the company is capitalizing on its proven formula while maintaining a fortress balance sheet. Net debt stands at $2.04 billion, but with $229 million in cash and a 15% dividend hike in 2025, Dollarama is returning value to shareholders even as it fuels international growth.

International Expansion: A Calculated, Multi-Pronged Strategy

Dollarama's global ambitions are not a leap of faith but a calculated bet on markets where its model aligns with local demand. In Latin America, its Dollarcity subsidiary has grown from 632 stores in 2024 to 644 in early 2025, with Mexico—a $1.5 trillion retail market—now in the crosshairs. The first Mexican stores, opening this summer, will be a test case for a market with 130 million consumers and rising inflation. If successful, Dollarcity's target of 1,050 stores by 2031 becomes not just aspirational but achievable.

Meanwhile, the acquisition of The Reject Shop in Australia has added 390+ stores to Dollarama's portfolio overnight. The Reject Shop's pre-acquisition financials—$866 million in annual sales, a 40.64% gross margin, and 16.2% EBIT growth in H1 2025—speak to a business already operating at scale. Post-acquisition, Dollarama's plan to leverage its global sourcing and logistics network to compress costs further is a masterstroke. Australia's dollar-store sector, projected to grow at 3.3% CAGR through 2025, offers a fertile ground for margin expansion.

The Investment Case: Balancing Risk and Reward

Critics may point to currency volatility, regulatory hurdles, and integration risks in emerging markets. Yet Dollarama's playbook—hedging foreign exchange exposure, prioritizing cash flow, and scaling methodically—mitigates these concerns. The company's 2025 share repurchase program, which returned $1 billion to shareholders, also signals confidence in its intrinsic value.

For investors, the key is to assess whether Dollarama's international bets align with its core strengths. The answer, based on current performance, is a resounding yes. The Reject Shop's debt-free balance sheet and $75 million in cash provide a buffer for strategic reinvestment, while Dollarcity's 12.6% sales growth and doubling of net earnings in Q1 2025 demonstrate that the model can replicate across borders.

A High-Conviction Play in a Shifting Retail Landscape

Dollarama's strategy is not merely about opening stores; it's about redefining the value retail sector. By combining operational rigor with strategic acquisitions, the company is creating a global ecosystem where its strengths—low-cost logistics, private-label dominance, and a “one-price” model—can compound.

For investors, the time to act is now. Dollarama's stock, with its robust earnings growth and disciplined capital returns, offers a rare combination of defensive qualities and aggressive expansion potential. As the company moves from Canada to Mexico to Australia, it is not just expanding its footprint—it is redefining what it means to be a value creator in an era of economic uncertainty.

In the end, the question for investors is not whether the discount retail sector is resilient—it is. The question is which player has the discipline, scale, and vision to lead it. Dollarama, with its global ambitions and margin resilience, is emerging as the clear front-runner.