Dollarama (TSX:DOL) is Canada’s largest dollar store retail chain. It has been a top performer on the TSX over the past decade. This should come as no surprise. Dollar stores have thrived since the Great Recession. These retail outlets have managed to widen their demographic consumer net, and this has been key to growth over the course of the 2010s.
Shares of Dollarama have climbed 46% in 2019 as of close on September 27. The company released its first quarter fiscal 2020 results on September 12. Dollarama reported a 9% year-over-year increase in sales and 4.7% growth in comparable store sales. It also closed its acquisition for a 50.1% stake in Latin American value retailer Dollarcity.
This acquisition will provide Dollarama with another retail footprint that should compliment its Canada-based operations. Unfortunately, the ongoing global trade war will continue to weigh on Dollarama’s earnings going forward. The trade war between the United States and China will make it difficult for the company to provide the kind of appealing discounts its customers have grown accustomed to.
Dollarama’s profit came in below expectations in Q2, but the company raised its guidance for comparable store sales growth for the full year to between 3.5% and 4.5%. Shares still possess a high price-to-earnings ratio of 27.5. There is a lot to like about Dollarama’s international push, but I want better value before pulling the trigger on the stock right now. It’s worth monitoring for growth investors in the fall.
