Dollarama (TSE:DOL) reported higher first-quarter fiscal 2027 sales and earnings, supported by same-store sales growth in Canada, continued expansion in Latin America and the addition of its Australian business.
On the company’s earnings call, President and CEO Neil Rossy said Dollarama delivered “a strong performance” in the quarter as it pursued profitable growth in Canada while advancing international growth initiatives. CFO Patrick Bui said consolidated sales rose 21.4% to nearly CAD 1.9 billion, reflecting store network growth, Canadian same-store sales gains and the sales contribution from Australia.
Bui noted that, similar to the prior year’s first quarter, results included an unrealized gain on the fair value of the Dollarcity call option. That accounting adjustment positively affected EBITDA margin by 90 basis points and EPS by CAD 0.06, he said, adding that it reflected Dollarcity’s underlying performance rather than an operating item.
Canadian Same-Store Sales Rise 5.6%
Dollarama’s Canadian business posted a 5.6% same-store sales increase in the first quarter, on top of 4.9% growth in the same period last year. Rossy said the result was supported by both traffic and basket growth, showing that the retailer’s value proposition continued to resonate with consumers amid economic uncertainty.
Bui said demand remained strong for everyday products and that first-quarter sales also benefited from a recovery in demand after weather-related disruptions weighed on traffic in the fourth quarter of the prior year. In response to an analyst question, Bui said the company saw “fairly consistent trends throughout the quarter,” including as it exited the period, though there was some variability later in the quarter due to the late arrival of spring and summer.
Despite the strong start, Dollarama left its full-year same-store sales outlook unchanged at 3% to 4%. Bui said consumers continue to face inflation and higher costs, including fuel and everyday goods, while overall consumer confidence appears to be weakening.
The company opened 28 net new stores in Canada during the quarter, bringing its Canadian store count to 1,719 at quarter end. Rossy said Dollarama remains on track to open 60 to 70 net new stores in fiscal 2027. He said the company aims to front-load store openings before the seasonally busier back half of the year so that it can focus on store operations and customer service.
Rossy also said construction of Dollarama’s future logistics hub in Western Canada is progressing on budget and on schedule, with the facility expected to be fully operational by the end of calendar 2027. He described the project as an important part of the company’s long-term growth and future two-node distribution model in Canada.
Margins Benefit From Logistics Costs, But Pressures Remain
Gross margin in the Canadian segment was 45% of sales, up from 44.2% a year earlier. Bui said the increase primarily reflected lower logistics costs and the positive impact of scale.
During the question-and-answer portion of the call, Bui said logistics benefited from the company’s 5.6% same-store sales growth and described the quarter as smooth from a logistics standpoint, with no friction or detention costs of the type the company might normally incur. He said higher fuel costs did not affect the first quarter but are expected later in the year, especially in the second half.
Dollarama maintained its full-year Canadian gross margin guidance of 45% to 45.5%. Bui said the company expects some supply chain pressures in subsequent quarters but believes it has tools to partially mitigate them if those pressures level off in the near term.
Rossy said global economic uncertainty, including geopolitical developments and conflict in the Middle East, is creating inflationary pressures for consumers and businesses and affecting global supply chains, raw materials and transportation costs. He said the duration of the conflict will determine the magnitude of those pressures.
In response to an analyst question about cost inflation in China, Rossy said there is pressure on pricing, particularly in plastics. He said the company is “parking” some large, high-cube plastic items, similar to actions taken during the period of elevated freight rates during COVID, while using its importing capabilities to adjust its product mix throughout the year.
Dollarcity Expands as Mexico Remains in Investment Mode
Rossy said Dollarcity, Dollarama’s Latin American growth platform, had a solid start to the year, supported by strong same-store sales and continued network expansion. Dollarcity opened 20 net new stores across its Central and South American markets, bringing the regional store count to 741 locations.
Bui said Dollarama’s share of Dollarcity’s net earnings grew 27.1% to CAD 51.2 million in the quarter. That reflected a 37.7% increase in net earnings from Central and South American operations, partly offset by a CAD 4.3 million loss related to the Mexico ramp-up, which he said was in line with expectations.
Dollarcity ended the quarter with 11 stores in Mexico and opened two additional stores earlier in the current quarter. Rossy said the company is scaling the Mexico platform “carefully and progressively over time,” consistent with prior Dollarcity market entries. Bui said Mexico will remain in investment mode through fiscal 2027.
Australia Transformation Underway
Rossy said Dollarama has begun advancing its transformation roadmap in Australia. The first Dollarama-sourced products reached shelves after quarter end, and the company expects a gradual rollout as it introduces products SKU by SKU. Rossy said Dollarama does not expect to reach a critical mass of imported Dollarama products before year end, when about half of its import products are expected to be transitioned.
In Australia, Dollarama fully renovated 13 stores during the quarter and opened eight net new stores. At quarter end, 28 of its 410 Australian locations were operating with the Dollarama layout and fixtures. Rossy said the new format improves store navigation and allows for greater SKU density.
Responding to an analyst question, Rossy said the company aims to renovate 400 Australian stores over four years, averaging about 100 annually. For fiscal 2027, the company continues to expect 60 to 80 renovations and 15 to 25 net new stores. Rossy said Dollarama will not rebanner a store until it has been renovated or is a new store, and the decision will depend on whether the store feels like it represents Dollarama’s value proposition.
Bui said Australia’s financial performance is tracking in line with expectations. He reiterated that the shift to lower-priced merchandise, along with the pace of product introductions, is expected to weigh on sales in fiscal 2027, particularly in the second and third quarters as the transition accelerates.
Capital Returns Continue
Bui said Dollarama continued to deploy excess cash during the quarter, repurchasing nearly 2 million common shares for cancellation under its normal course issuer bid for total consideration of CAD 339.1 million. The company also announced that its board approved a quarterly cash dividend of CAD 0.12 per share.
Looking ahead, Bui said expectations across Dollarama’s markets remain broadly unchanged despite macroeconomic uncertainty. Rossy said the company will remain focused on what it can control, including direct sourcing, operational execution, disciplined pricing and its multi-price point strategy.
About Dollarama (TSE:DOL)
Dollarama Inc is a Canada-based company principally engaged in operating discount retail stores. The company provides a broad range of everyday consumer products, general merchandise, and seasonal items, with merchandise at low fixed price points. General merchandise and consumer products jointly account for the majority of the company’s product offerings. The company’s stores are throughout Canada, generally located in convenient locations, such as metropolitan areas, midsize cities, and small towns.
