DOLLARAMA REPORTS FISCAL 2026 FIRST QUARTER RESULTS

Dollarama reported a strong start to fiscal year 2026, with sales increasing 8.2% to $1,521.2 million and comparable store sales up 4.9%, driven by consumables demand and seasonal offerings. EBITDA rose 18.8% to $496.2 million, representing a margin of 32.6%, while net earnings increased 26.9% to $273.8 million, or $0.98 per diluted share; the company is maintaining its fiscal 2026 guidance, including net new store openings of 70 to 80 and comparable store sales growth of 3.0% to 4.0%.

Analysis

Dollarama (DOL) reported a robust start to fiscal 2026, with first-quarter sales increasing 8.2% year-over-year to $1,521.2 million, underpinned by a 4.9% rise in comparable store sales. This comparable growth, which builds upon a strong 5.6% increase in the prior year's corresponding quarter, was driven by a 3.7% increase in transaction volume and a 1.2% rise in average transaction size, indicating sustained consumer demand for consumables and effective seasonal offerings. Profitability saw significant expansion: EBITDA climbed 18.8% to $496.2 million, boosting the EBITDA margin to 32.6% from 29.7%. This margin improvement was aided by a $10.4 million unrealized gain from a derivative on its equity-accounted investment, which contributed 70 basis points. Operating income grew 20.7% to $388.8 million, leading to an operating margin of 25.6%, up from 22.9%. Consequently, net earnings surged 26.9% to $273.8 million, translating to a 27.3% increase in diluted net earnings per share to $0.98. Gross margin improved by 100 basis points to 44.2%, primarily attributed to lower logistics costs, while SG&A as a percentage of sales edged down to 15.3% from 15.4%, reflecting cost discipline. The company continued its store network growth, opening 22 net new stores, and highlighted ongoing expansion and value delivery at Dollarcity, in which it holds a 60.1% interest. Dollarama reiterated its fiscal 2026 guidance, including 70 to 80 net new store openings and comparable store sales growth of 3.0% to 4.0%, explicitly noting this guidance does not incorporate the proposed acquisition of The Reject Shop. The strong financial outperformance and maintained outlook underscore the company's operational resilience and market position, aligning with the extremely positive sentiment signal.

Key Decisions for Investors

• Dollarama's robust Q1 FY2026 performance and reaffirmed guidance support a positive outlook; investors should evaluate the current valuation in light of these strong fundamentals.
• Closely monitor the impending shareholder vote on The Reject Shop acquisition, as this unquantified factor could significantly alter the company's growth trajectory and risk profile.
• Key performance indicators for continued monitoring include comparable store sales trends, particularly customer traffic, the persistence of enhanced gross margins, and Dollarcity's expansion and earnings contribution.