Dollarama acquires an additional 10% stake in Dollarcity, bringing it to 60.1%. (Photo: 123RF)
What to do with Dollarama, Manuvie and Canadian Natural Resources stocks? Here are some analyst recommendations likely to move prices soon. Note: the author may have a completely different opinion than that expressed by the analysts.
Dollarama (DOL, $120.54): better visibility on the game plan in Latin America
Five-dollar-or-less retailer Dollarama revealed financial results for the first quarter of its 2025 fiscal year that were slightly better than Stifel’s Martin Landry’s forecasts.
He emphasizes that customer demand remains good and that the company’s management has reiterated its forecasts for the entire financial year. “However, the major news was the acquisition of an additional 10% stake in Dollarcity, to bring it to 60.1%, which also plans a surprise arrival in Mexico in 2026, which more than doubles its market potential,” says the analyst.
Dollarama also has the option to acquire another additional 9.89% stake in Dollarcity “in the future”, which would bring it to 69.9%.
Dollarcity is a Latin American discount retailer that had 547 stores as of March 31, including 324 in Colombia, 99 in Guatemala, 72 in El Salvador and 52 in Peru.
“The acquisition of a majority stake in Dollarcity (announced in July 2019) was a success for Dollarama, since the company succeeded in implementing the same strategy and business model as the one it implemented. place in Canada,” he said.
According to the details of the agreement, Dollarama and the founding shareholders of Dollarcity will hold 80.05% and 19.95%, respectively, in the company’s Mexican operations. The leaders of the Quebec company also predict that the Latin American subsidiary (excluding Mexico) will have 1,050 stores by 2031, while the previous target was 850 by 2029.
“The acquisition price of the additional 10% tranche of approximately $762 million gives Dollarcity a valuation of $7.62 billion, which is higher than our estimate of between $5B and $6B. According to our calculations, the transaction was made at a multiple of 45 times the subsidiary’s last 12 months’ profits, which is high. On the other hand, it is supported by a compound annual profit growth rate of 50% for two years, by the arrival in Mexico and the increase in the target number of stores in its four main countries,” explains the analyst.
He estimates that at the end of 2025, Dollarcity’s contribution to Dollarama’s profits will range between 10% and 12%, but with a growth profile twice as fast.
Looking back at the first quarter results, Martin Landry states that revenues of $1.4 billion were in line with forecasts, but that same-store sales (open for more than a year) missed the target, increasing by 5. 6% over one year, while the consensus of analysts was counting on an increase of 6%. Earnings per share came to $0.77, while the consensus expected $0.75.
He reiterates his recommendation to “hold” Dollarama shares due to a valuation that he considers high, but raises his target price over one year, from $110 to $125.
Denis Lalonde
