1 week Ago By [email protected] (David Olive)
is thriving while most retailers are mired in a sales slump during a cost-of-living crisis. Indeed, Dollarama is a stock-market darling. Its shares have gained in value by 47 per cent in 2024.
Its shares trade at $139. And Montreal-based Dollarama has room to grow in Canada, with to increase its Canadian store count by almost 40 per cent, to 2,200 outlets by 2034. Dollarama has no interest in the U.
S. market, whose . Instead, Dollarama has a 60.
1 per cent stake in Dollarcity, a Latin American dollar-store operator with outlets modelled on Dollarama. Dollarcity is expected to double its store count to about 1,050 outlets by 2030. Dollarcity operates in Colombia, Peru, El Salvador and Guatemala, and will open its first Mexican stores in 2026.
Dollarama tries to fly under the radar, though it is now a $5.8-billion business (fiscal 2024 revenues). In competing with some of the world’s biggest retailers, including fellow discounters Walmart, Amazon and Costco, Dollarama is not as expansive in discussing its strategies as, say, Canadian Tire.
Dollarama also has Dollar Tree to contend with. That Virginia-based firm, a Dollarama counterpart, operates more than 220 stores in Canada. Yet with a market capitalization of almost $40 billion, Dollarama is the most valuable dollar-store chain in North America.
The two dominant U.S. chains, Tennessee-based Dollar General and Dollar Tree, have market caps of $24 billion and $22 billion, respectively.
The stock market performance of the U.S. firms is a mirror image of Dollarama’s.
Shares of Dollar General have lost 45 per cent of their value in 2024, and Dollar Tree stock is down by more than 50 per cent. Some factors in Dollarama’s consistent success are self-evident. Its stores are ubiquitous.
There are three Dollarama outlets within a 15-minute walk from where this column is written in west-end Toronto. And lifting its price cap to $5 from $1 in 2022 enabled Dollarama to increase its product selection, which has attracted middle-income patrons without alienating loyal customers. Dollarama also offers name-brand products now that it has the size to strike favourable deals with national brand marketers like Nestlé, PepsiCo and Kraft Heinz.
And Dollarama still sells the prosaic household necessities — buttons, stationery, gift wrap and party supplies — that are too low-priced for its rivals to bother with or are difficult to find in a Walmart superstore. In December, Dollarama settled a alleging it failed to include “ecofees” in its posted prices for electronics products between 2021 and 2023, which were payable at checkout. Dollarama denies liability or wrongdoing.
But it will pay $3 to $10 to claimants eligible under the settlement. The demise of F.W.
Woolworth and S.S. Kresge triggered the emergence of mom-and-pop five-and-dimes, or dollar stores, often dingy and cramped.
Their proliferation made the new retail niche ripe for consolidation. Enter Montreal’s Rossy family, which operated a variety store chain dating from 1910 and adopted the dollar-store concept in 1992. By the 2010s, the mom-and-pops had practically disappeared, replaced by the bright green and yellow colours of Dollarama, whose buying power the independents couldn’t match.
The puzzle for U.S. market analysts is why Dollar General and Dollar Tree, which dominate the U.
S. industry with a combined $94.5 billion in revenues and a total of more than 36,000 stores, underperform their smaller Canadian counterpart in profitability.
The U.S. chains each have gross profit margins of about 30 per cent to Dollarama’s nearly 40 per cent.
One issue for the U.S. chains is that they have overexpanded, and many of their stores are in high-crime districts.
The U.S. stores often carry perishable food items with low profit margins.
Dollarama swears off refrigerated food. And so, Dollar General’s latest annual profit of $2.3 billion is lower than it was five years ago.
And Dollar Tree reported a $1.4 billion loss last year, after closing hundreds of poorly performing stores. At Dollarama, there’s also something to be said for good genes.
CEO Neil Rossy, a fourth-generation Rossy to ply the retail trade, and Dollarama’s chief executive since 2016, is obsessed with new products. They clutter Rossy’s office at Dollarama’s Montreal headquarters and the basement test-store on the premises. Rossy curates a “Wall of Shame” in his office — a display of products Dollarama chose not to sell and a few slow-sellers that made it into stores and had to be yanked.
The wall is a caution to the firm’s buyers that they can never be too careful in assessing what customers want. Rossy is young enough, at 54, to oversee expansion beyond the Western Hemisphere and he muses about European and Asia Pacific expansion. For now, though, the key for Rossy is to not stock anything in his stores that might earn a place on his Wall of Shame.
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