Dollarama’s Resilience Shines Amid Economic Uncertainty: A Retailer’s Formula for Growth

Dollarama, Canada’s leading discount retailer, has delivered another strong financial performance, defying economic headwinds with robust revenue growth, margin expansion, and strategic investments. The company’s fiscal 2025 results, announced in April 2025, underscore its ability to thrive in a challenging environment, driven by disciplined execution, cost management, and a relentless focus on value-driven retail.

Revenue Growth and Operational Strength

In the fourth quarter of fiscal 2025, Dollarama’s revenue surged 14.8% year-over-year to $1.88 billion, benefiting from a 53rd week in its fiscal calendar, store expansion, and a 4.9% increase in comparable store sales. The latter was particularly notable, as it was achieved despite a 0.4% decline in average transaction size, signaling that increased customer foot traffic (up 5.3% in transactions) offset reduced spending per visit. This trend reflects the retailer’s success in attracting price-sensitive shoppers during a period of economic uncertainty.

Profitability metrics also improved significantly. Diluted EPS rose 21.7% to $1.40, while EBITDA hit $670.1 million—a 19.9% jump—with margins expanding to 35.6%, up from 34.1% a year earlier. Gross margins improved to 46.8% of sales, driven by lower logistics costs, even as SG&A expenses remained tightly controlled at 14.7% of revenue. These figures highlight Dollarama’s operational efficiency and pricing power.

Store Expansion and International Ambitions

Dollarama’s growth strategy hinges on disciplined store openings and international expansion. In fiscal 2025, the company added 65 net new stores, bringing its total to 1,616 locations. Management plans to accelerate this pace in fiscal 2026, targeting 70–80 new stores, signaling confidence in domestic demand.

Abroad, Dollarama’s 60.1%-owned subsidiary Dollarcity has become a key growth driver. With 632 stores across Colombia, Guatemala, El Salvador, and Peru, Dollarcity contributed $129.9 million to Dollarama’s net earnings in fiscal 2025—a 72.5% increase from the prior year. Plans to enter Mexico by summer 2025 and potentially Australia (via a pending acquisition of The Reject Shop) further signal its ambition to capitalize on the global discount retail boom.

Capital Allocation and Dividend Discipline

Dollarama’s balance sheet remains a cornerstone of its strategy. In fiscal 2025, the company spent $1.07 billion repurchasing shares, reducing its outstanding share count and boosting EPS growth. A 15% dividend hike to $0.1058 per share also reflects its confidence in sustained cash flows.

Looking ahead, Dollarama projects fiscal 2026 comparable store sales growth of 3.0–4.0%, slightly below fiscal 2025’s 4.6%, citing “modestly weaker consumer spending.” However, capital expenditures are expected to rise to $185–210 million, excluding a $46.7 million logistics hub in Calgary—part of a $450 million, three-year investment plan to modernize its supply chain.

Risks and Considerations

Despite its strengths, Dollarama faces challenges. Rising labor costs, supply chain disruptions, and geopolitical risks (e.g., delays in The Reject Shop acquisition) could pressure margins. The company also operates in a highly competitive space, with rivals like Walmart and Target also focusing on value-driven pricing.

Conclusion: A Recipe for Continued Growth

Dollarama’s fiscal 2025 results validate its model as a “recession-resistant” retailer. With a 14.8% revenue increase, 21.7% EPS growth, and 4.9% comparable store sales growth, the company has demonstrated resilience even as broader consumer spending slows. Its expansion plans—both domestically and internationally—and disciplined capital allocation (e.g., share buybacks, dividend hikes) position it to capitalize on long-term trends in discount retailing.

While risks like labor costs and supply chain issues loom, Dollarama’s execution to date suggests management can navigate these challenges. With a store network poised to hit 1,696–1,706 by fiscal 2026, and Dollarcity’s global footprint expanding, investors can be confident in Dollarama’s ability to deliver value in both good and bad economic times. For now, this discount king remains a compelling play on resilience and growth.