Dollarama Inc. (TSX:DOL) is a Montreal-based dollar store retailer, the largest in Canada. Dollarama stock has dropped 1.7% in 2018 as of early afternoon trading on March 21. Shares have still climbed 54.8% year over year and Dollarama has established itself as a premier growth stock on the TSX. The company is set to release its 2017 fourth quarter and full-year results on March 29.
Dollar store retailers have performed very well in North America following the 2007-2008 financial crisis. These retailers have seen a more diversified customer base, especially among sections of the middle and upper middle class. This is in stark contrast to the bulk of the retail industry which has suffered immensely since the financial crisis. Just recently the retailer Toys “R” Us announced that it was officially going out of business.
Dollarama released its third quarter results on December 6. Sales climbed 9.7% year over year to $810.6 million and gross margin was 40.1% of sales compared to 39.5% of sales in the prior year. Back in the second quarter Dollarama saw profits boosted by its decision to begin allowing credit card transactions. Customers spent more than double that they did with regular payments when they paid with credit, and the average basket count in Q2 rose by 5.9%.
Retail sales were up in 2017 but were somewhat sluggish in the month of December. Dollarama offers a modest dividend of $0.11 per share representing a 0.3% dividend yield. Still, it is hard not to be optimistic about its growth prospects going forward. It is trading more than $15 off of its all-time highs and could be a bargain ahead of Q4 and full-year results.
