Dollarama Earnings Call: Growth Now, Investments Ahead

Dollarama ((TSE:DOL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Dollarama’s latest earnings call struck a confident tone, pairing double‑digit sales and EPS growth with a clear appetite for investment in new markets and infrastructure. Management framed weather‑related softness, Australia and Mexico losses, and emerging supply‑chain pressures as deliberate, manageable trade‑offs rather than signs of weakness in the core Canadian franchise.

Top‑Line Expansion and EPS Momentum

Consolidated fiscal 2026 sales climbed 13.1% to $7.3 billion, while Q4 revenue rose 11.7% to $2.1 billion despite having one less trading week. Diluted EPS increased 13.7% for the year to $4.73, with Q4 EPS up 2.1% to $1.43, including a modest $0.03 boost from the newly acquired Australian business.

Canadian Same‑Store Sales and Basket Resilience

In Canada, same‑store sales grew 4.2% for the year, landing squarely within guidance and underscoring steady consumer demand. Q4 same‑store sales were 1.5%, but management stressed that adjusting for the calendar shift would imply about 3.5%, with a 3.1% gain in basket size offsetting a 1.6% decline in transactions.

Store Network Growth in Canada and Dollarcity

Dollarama opened 75 net new Canadian locations in fiscal 2026, finishing the year with 1,691 stores and surpassing 1,700 in February. Dollarcity added 100 net new stores in 2025, pushing its network beyond 700 units and advancing toward a long‑term target of 1,050 stores by 2034, excluding the newer Mexico market.

Dollarcity Profit Surge and Dividend Upside

Dollarama’s share of Dollarcity net earnings jumped 47% to $191.5 million for fiscal 2026, with Q4 earnings contribution up 22% to $70.5 million. Reflecting strong free cash flow, Dollarcity doubled its dividend to USD 125 million, of which Dollarama will receive USD 75.1 million, adding another lever to shareholder returns.

Margins and Tight Cost Management

Canadian gross margin reached 45.6% for the year, slightly above the top end of guidance, while Q4 margin came in at 46.6%, essentially flat year over year. SG&A leverage improved, with Q4 SG&A at 14.5% of sales and full‑year SG&A at 14.4%, and management guiding to 45.0%–45.5% gross margin and 14.1%–14.6% SG&A in fiscal 2027.

Capital Returns and Investment Spend

The company continued to return cash aggressively, repurchasing more than 4.4 million shares for cancellation at a cost of $834.2 million. The board also lifted the quarterly dividend by 13.4% to $0.12 per share, while earmarking $420 million to $470 million in Canadian capital expenditures for fiscal 2027, largely for logistics.

Logistics Build‑Out and Infrastructure for Scale

Dollarama highlighted steady progress on its Calgary logistics hub, which remains on time and on budget and should be operational by the end of 2027. The facility will support a two‑node distribution model in Canada, designed to underpin long‑term growth and add supply‑chain redundancy as the store base expands.

Weather and Calendar Drag on Q4 Traffic

Management attributed softer Q4 traffic partly to unfavorable winter weather, including cold temperatures and heavy precipitation that curtailed shopping trips. A shift from a 53‑week to a 52‑week fiscal year also hurt peak sales weeks, contributing to a 1.6% decline in transactions and under‑stating underlying same‑store momentum.

Australia: Investment Phase and Short‑Term Losses

Roughly six months after closing the deal, the Australian business was neutral to consolidated earnings in 2026 but posted a pro forma full‑year net loss of AUD 10.6 million on AUD 916 million of sales. Fiscal 2027 is framed as an investment year with a planned net loss, integration and transformation costs of about $35 million to $45 million, and heavy store renovation and new‑store capital outlays.

Mexico Ramp‑Up and Path to Breakeven

Mexico remains in early build‑out mode, recording losses of USD 5.4 million in Q4 and USD 11.7 million for the full year on a 100% basis. Management expects Mexico to lose roughly USD 10 million to USD 20 million in fiscal 2027 before EBITDA losses begin to narrow, with no firm timeline yet for breakeven as the chain gains scale.

Supply‑Chain Risks and Cost Inflation

Geopolitical tensions in the Middle East are beginning to lift transportation, production and raw‑material costs, which could pressure gross margins if sustained. While some impact is embedded in guidance, management cautioned that a prolonged or worsening situation might create margin headwinds that cannot be completely passed through to shoppers.

Uncertain Impact of Australia Product Transition

The largest near‑term unknown is how the shift to Dollarama‑sourced SKUs in Australia will affect sales and profitability. The company anticipates a gradual, potentially disruptive merchandising transition, with lower‑priced imported items displacing existing higher‑priced products and an unclear timeline for when the volume benefit fully compensates for the mix change.

Guidance and Multi‑Market Investment Roadmap

For fiscal 2027, Dollarama guided Canadian same‑store sales growth of 3% to 4%, gross margin of 45.0% to 45.5% and SG&A of 14.1% to 14.6%, alongside 60 to 70 net new stores and $420 million to $470 million in capital spending. Dollarcity will continue rapid expansion toward 1,050 stores by 2034, while Mexico and Australia are expected to remain loss‑making as management invests in store growth, system integration and a multi‑year path to profitability.

Dollarama’s call portrayed a retailer leaning into its strengths in Canada while deliberately spending to build out Latin American and Australian platforms. For investors, the key message is that near‑term earnings drag from these newer markets is being consciously traded for a larger, more diversified footprint anchored by a resilient and cash‑generative core business.