Montreal-based Dollarama Inc. has posted strong results for the first quarter of its 2026 fiscal year, exceeding analyst expectations on key performance metrics including revenue, EBITDA, and earnings per share. The company’s Latin American subsidiary Dollarcity also continues to show notable momentum, helping reinforce Dollarama’s premium market valuation.

The latest report from Stifel, released June 11, 2025, outlines Dollarama’s operational strength while noting that shares are currently trading at all-time high valuations. While Stifel has raised its target price for Dollarama from $162.50 to $190.00, it maintains a ‘Hold’ rating, citing limited room for multiple expansion.

Strong Financial Start to Fiscal 2026

Dollarama reported Q1 FY2026 revenue of $1.52 billion, marking an 8.2% increase year-over-year and surpassing both Stifel’s estimate of $1.493 billion and the consensus of $1.5 billion. The company’s gross margin expanded 100 basis points year-over-year to 44.2%, driven largely by lower logistics costs. Same-store sales growth came in stronger than anticipated at 4.9%, led by demand in consumables and a robust Easter seasonal product category.

“Q1FY26 EPS beat consensus expectations by 14%,” stated the Stifel report. Adjusted earnings per share (EPS) for the quarter reached $0.95, a 23% year-over-year increase, well above Stifel’s estimate of $0.81 and the consensus of $0.83.

EBITDA for the quarter was reported at $486 million, reflecting a 16% increase over Q1 FY2025, and also exceeding the $454 million consensus estimate.

Notable Same-Store Sales and Transaction Growth

Same-store sales growth of 4.9% was driven by a 3.7% year-over-year increase in transaction volume and a 1.2% increase in average transaction value—the first year-over-year gain in transaction size in six quarters. Despite a relatively soft February and March, likely due to reduced consumer confidence amid trade war uncertainties, sales rebounded in April.

The report stated: “The same-store-sales increase stemmed from a 3.7% Y/Y increase in transaction volume and a 1.2% Y/Y increase in average transaction value, marking the first Y/Y gain in transaction size in six quarters.”

Dollarcity’s Accelerated Performance and Mexican Expansion

Dollarama’s 60.1% owned Latin American subsidiary, Dollarcity, delivered exceptional performance. Earnings from Dollarcity rose 52% year-over-year, significantly higher than Stifel’s forecast of 14%. Revenue increased by 13%, with 97 new stores added year-over-year. Dollarcity also benefited from expanded margins thanks to lower inbound shipping and logistics costs.

“Dollarcity’s earnings increased 52% Y/Y, the strongest growth rate of the last three quarters,” the report noted.

The company is preparing for Dollarcity’s expansion into Mexico, marking its first foray into a new Latin American market in several years. While expectations are high based on past performance in Colombia, El Salvador, Guatemala, and Peru, Stifel analysts caution that the Mexican market presents a more competitive retail environment. The rollout is expected to be gradual, with only a few stores opening in the first year. 

Dollarcity is projected to post operating losses in Mexico for the first two to three years of operation.“The potential, in our view, is clear—but realizing it will require strong execution,” stated the analysts.

Updated Forecasts and Target Price

Reflecting the strong Q1 results, Stifel has revised its full-year FY2026 and FY2027 estimates upward. The FY2026 EPS estimate is now $4.67, up from a previous estimate of $4.47, and FY2027 EPS is projected at $5.24, up from $5.08. Revenue forecasts were also adjusted slightly higher for both fiscal years.

In response to the results, Stifel raised its target price for Dollarama shares by $27.50 to $190.00. The new target price is based on a blended valuation model, including:

1. A 36x multiple applied to FY2027 EPS,
   
2. A 23x multiple applied to FY2027 EBITDA,
   
3. A discounted cash flow (DCF) calculation.
   

The report noted: “We derive our target price using the average of: (1) a 23x multiple applied to our FY27 EBITDA estimates (vs. 20x previously), (2) a 36x multiple applied to FY27 EPS estimates (vs. 32x previously), and (3) a DCF calculation.”

Valuation Tension: Premium but Priced for Perfection

Despite Dollarama’s financial momentum, Stifel maintains a Hold rating on the stock due to its current valuation premium. As of June 11, 2025, Dollarama’s shares were trading at approximately 37 times forward earnings, which is about 12 turns higher than the company’s 10-year average.

“While Dollarama’s financial performance in recent years justifies a premium valuation, we do not see further multiple expansion potential from current levels,” analysts wrote. They noted a potential for valuation multiple contraction, especially if investors rotate into more cyclical consumer names.

Long-Term Risks and Defensive Strength

Several risks could affect Dollarama’s outlook, according to the Stifel analysis:

• Increased penetration of online retail, where Dollarama has minimal presence.
  
• Continued geopolitical instability, including the Russia-Ukraine conflict.
  
• Currency fluctuations, particularly the USD/CAD exchange rate, could impact cost of sales.
  
• Sustained inflation and high interest rates, which could reduce consumer purchasing power.

Offsetting these risks, analysts point to Dollarama’s defensive business model, loyal customer base, and growing international footprint. The company’s status as a value-focused retailer may prove especially resilient during periods of economic uncertainty.

“Valuation multiple could remain high,” the report noted, citing Dollarama’s larger scale, defensive characteristics, and international investments.

Store Growth and National Footprint

Dollarama continues to expand its physical retail network in Canada. The company opened 22 net new stores in Q1 FY2026, with plans to open 76 stores total by year-end. The report projects the company will reach 1,692 stores in Canada by the end of FY2026, and 1,757 stores by the end of FY2027.

Dollarama currently holds an estimated >80% market share in the Canadian value retail space and has 98% brand awareness, according to the report. Its merchandise includes general goods, consumables, seasonal items, and household products, with about 25–30% of inventory refreshed annually to maximize profitability.

Dollarcity: A Growing International Powerhouse

Dollarcity now operates 532 stores across Colombia, El Salvador, Guatemala, and Peru, generating US$1 billion in annual revenue as of December 31, 2023. With Dollarama holding a 60.1% stake, Dollarcity is emerging as a key value driver in the parent company’s growth trajectory.

The report underscores that Dollarcity’s success has “partly explains Dollarama’s premium valuation multiple and, in our view, this quarter’s strong showing reinforces this theme.”

Conclusion: Strong Outlook, Tempered by Valuation

Dollarama’s performance in Q1 FY2026 confirms its status as one of Canada’s strongest retail performers. With domestic same-store sales growth, international expansion via Dollarcity, and strong earnings growth, the business remains on a solid upward trajectory.

However, investors are advised to proceed with caution, as much of the good news appears already priced in. With a forward P/E multiple well above historical norms and limited room for upside based on valuation, Stifel’s Hold rating reflects a belief that the stock is currently “priced for perfection.”

As Dollarama continues to scale across Canada and Latin America, particularly with Dollarcity’s entry into Mexico, attention will shift toward execution and sustained consumer demand in a potentially volatile global economy.

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