Dollarama Q4 Earnings Call Highlights

Key Points

• Dollarama met or exceeded fiscal 2026 guidance: consolidated sales rose 13.1% to CAD 7.3 billion and full‑year diluted EPS increased 13.7% to CAD 4.73, while Canadian same‑store sales grew 4.2% for the year despite Q4 weather and calendar headwinds (Q4 SSS +1.5%).
• International expansion is driving growth but costing near term: Dollarcity delivered strong top‑line and margin expansion in Latin America, yet Mexico is loss‑making (100% basis Q4 net loss $5.4M, FY $11.7M; FY27 guide $10M–$20M loss) and the Australia acquisition will incur AUD35–45M of integration costs and multi‑year transformation losses.
• Capital allocation balances growth and returns: the company repurchased >4.4M shares for CAD 834.2M, raised the quarterly dividend 13.4% to CAD 0.12, plans 60–70 net new Canadian stores in fiscal 2027 (long‑term target 2,200 by 2034), and expects CAD 420–470M of Canadian capex while flagging supply‑chain and energy cost risks to margins.

Dollarama TSE: DOL said it met or exceeded its financial guidance targets for fiscal 2026, as the discount retailer delivered same-store sales growth in Canada and expanded its international footprint through Dollarcity’s entry into Mexico and the acquisition of an Australian discount chain.

Fiscal 2026 results and fourth-quarter backdrop

President and CEO Neil Rossy said fiscal 2026 Canadian same-store sales increased 4.2% and earnings per share rose nearly 14% year over year. Chief Financial Officer Patrick Bui reported consolidated fourth-quarter sales rose 11.7% to CAD 2.1 billion, noting the quarter included one less week than the prior year. Full-year sales increased 13.1% to CAD 7.3 billion, driven by contributions from Australia, a larger store base, and same-store sales growth in Canada.

Diluted EPS increased 2.1% in the fourth quarter to CAD 1.43, which included a CAD 0.03 positive impact from Australia, Bui said. For the full year, EPS rose 13.7% to CAD 4.73.

Management emphasized that weather weighed on fourth-quarter performance in Canada. Rossy said unfavorable conditions across the country hurt traffic and peak sales periods through the end of January, but the company still delivered 1.5% same-store sales growth in the quarter.

Canada: same-store sales, margins, and store growth

Bui said fourth-quarter same-store sales growth of 1.5% was driven primarily by demand for seasonal products, but was offset by two key factors: a calendar shift and weather. Dollarama’s fiscal 2026 was a 52-week year following a 53-week year in fiscal 2025, which resulted in one less “historically strong” pre-holiday week and an additional “historically low” sales week at the end of January, Bui said. The quarter also included four fewer pre-Halloween shopping days than the prior year, which were recorded in the third quarter this year. Excluding the calendar impact, he said same-store sales would have been 3.5%.

Weather disruptions also contributed to a 1.6% decline in the number of transactions. Despite this, basket growth was 3.1%, Bui said.

On cadence, Rossy said momentum was strong coming out of the third quarter and into November, before traffic dropped in December and January amid unfavorable weather. He said traffic “resumed nicely” in February as fiscal 2027 began, suggesting the consumer environment remains consistent, with households under budget pressure seeking value and convenience.

Dollarama opened 75 net new stores in Canada in fiscal 2026, bringing the total to 1,691 stores at the end of January, Rossy said. The company opened its 1,700th Canadian store in February. For fiscal 2027, management said it expects to return to its “historical cadence” of 60 to 70 net new store openings and reiterated its long-term target of 2,200 stores by 2034.

To support long-term store growth, Rossy said development of a Western Canada logistics hub in Calgary is progressing “on time and on budget,” with the company expecting the facility to be operational by the end of 2027. He said a two-node logistics model would add redundancy and resilience.

On profitability, Bui said Canadian segment gross margin was 46.6% of sales in the fourth quarter versus 46.8% a year earlier, with the difference primarily tied to the prior year’s 53rd week and its scaling benefits. Full-year Canadian gross margin was 45.6%, “slightly exceeding the top end” of guidance, he said.

For fiscal 2027, Dollarama guided to Canadian gross margin of 45% to 45.5% of sales and same-store sales growth of 3% to 4%. Bui added that the company is monitoring global supply chain pressures that could negatively impact gross margin. Canadian SG&A was 14.5% of sales in the fourth quarter versus 14.7% a year ago, with full-year SG&A at 14.4% within guidance. For fiscal 2027, the company guided Canadian SG&A of 14.1% to 14.6% as scaling helps offset higher labor and operating costs.

Canadian capital expenditures are expected to be CAD 420 million to CAD 470 million in fiscal 2027, Bui said, reflecting higher spending tied to the logistics hub, including amounts shifted from the prior year.

International: Dollarcity growth and Mexico ramp-up

Rossy said Dollarcity continues to generate “strong top-line momentum, margin expansion, and footprint growth” across Latin America. Dollarcity opened 100 net new stores in 2025, bringing total store count to “just over” 700 at year-end, including 11 stores in Mexico since entry last summer, he said. Dollarcity is targeting 1,050 stores by 2034 across its first four Latin American markets, excluding Mexico, for which the company has not set a long-term target.

Bui said Dollarama’s share of Dollarcity net earnings increased 22% in the fourth quarter to CAD 70.5 million and rose more than 47% for the full year to CAD 191.5 million, driven by same-store sales and store growth, partially offset by the ramp-up in Mexico. On a 100% basis, Mexico posted a net loss of $5.4 million in the fourth quarter and $11.7 million for the year, he said.

For fiscal 2027, Bui reiterated the prior guidance that Mexico is expected to post a loss of $10 million to $20 million (100% basis), while noting it is “too early” to determine when the business will break even. In response to analyst questions, he said Mexico is ramping at a pace broadly in line with past experience in countries such as Colombia or Peru, but added that Mexico’s larger scale may require bigger upfront investments and that timelines can differ by market.

Dollarcity declared a $125 million dividend on February 5, with Dollarama’s share at $75.1 million, Bui said, adding that the dividend doubling versus the previous one reflects strong free cash flow generation. He also said Dollarama made a $38 million capital contribution early in fiscal 2027 toward Mexico expansion, following two $18 million contributions last year, partially funded by the latest dividend allocation.

Australia: transformation plan and expected investment year

Management described fiscal 2027 as a pivotal year for a multi-year transformation of the Australian retail platform, organized around three pillars: merchandising, store experience and network growth, and operational excellence.

Rossy said the transition will be “gradual and disruptive” through fiscal 2027, but necessary to set the business up for future success. The company expects its first Dollarama import SKUs to reach shelves in the second quarter of fiscal 2027, focused primarily on general merchandise and seasonal items. By the end of fiscal 2027, the company is targeting that about half of the Dollarama import SKUs will be sourced. On domestically sourced items—primarily consumables—management said it is reviewing products SKU by SKU to deliver increased value.

On stores, Rossy said the company plans to renovate 60 to 80 stores in fiscal 2027 (after completing four last year) and open 15 to 25 net new stores with Dollarama layouts and fixtures (after opening seven in fiscal 2026). The company is also strengthening IT infrastructure, optimizing processes, and migrating Australia’s ERP system to Dollarama’s platform.

Bui said Australia had a neutral impact on consolidated net earnings for fiscal 2026 over the roughly six-month period following the late-July acquisition. On a pro forma full-year basis, he said Australia generated approximately AUD 916 million in sales and a net loss of AUD 10.6 million. For fiscal 2027, he said Australia is expected to generate a net loss as the company ramps up integration and executes the transformation.

Bui highlighted several factors expected to pressure results in fiscal 2027, including incremental costs of AUD 35 million to AUD 45 million related to integration, IT transformation, additional headcount, and labor. He also said capital spending is expected to range from AUD 400,000 to AUD 600,000 per renovated store and AUD 800,000 to AUD 1 million per net new store, with additional sales impact from renovation-related closures. The largest uncertainty, he said, is the sales impact from merchandising changeover to lower-priced items, which depends on timing, how quickly lower-priced SKUs replace sales of incumbent higher-priced items, and any impact on store traffic.

Management reiterated that Australia is a multi-year, roughly four-year transformation. Bui said that timeline reflects the pace of converting the store base—about 400 stores at roughly 100 per year—and building a strong assortment of Dollarama SKUs. Rossy said stores will convert to the Dollarama banner once they reflect the company’s value proposition in both offering and shopping experience.

Guidance context, supply chain risks, and capital returns

Management said the macroeconomic and geopolitical backdrop remains uncertain. Rossy pointed to ripple effects from the conflict in the Middle East, including rising transportation, production, raw material, and inbound and outbound logistics costs tied to higher oil prices. He said Dollarama remains “highly disciplined as price followers,” passing on price increases only when necessary while protecting its year-round value proposition.

In response to analysts, Bui said some of the emerging transportation and product cost pressures are reflected in the fiscal 2027 Canadian gross margin guidance, but warned that a prolonged or worsening situation could have negative consequences for margins across the industry.

On capital returns, Bui said Dollarama repurchased more than 4.4 million shares for cancellation in fiscal 2026 for CAD 834.2 million. The company also announced a 13.4% increase to its quarterly cash dividend to CAD 0.12 per share.

Looking ahead, management said it intends to continue balancing capital allocation between growth in Canada and Latin America and the Australian transformation, while directing the majority of excess cash to share buybacks and dividends, subject to quarterly board approval.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.