Dollarama continued its pattern of strong operational execution in the third quarter of fiscal 2026, delivering results that exceeded expectations across key financial metrics. According to a research report authored by Martin Landry, Managing Director at Stifel Canada, the value-focused retailer benefited from solid Canadian same-store sales growth, expanding margins, and continued momentum from its Dollarcity international business.
For the quarter, Dollarama reported adjusted earnings per share of $1.17, up 19 percent year over year. The result exceeded Stifel’s forecast of $1.08 and consensus expectations of $1.11, with higher revenues and stronger gross margins in Canada driving the upside. While investors had anticipated a solid quarter following recent share price appreciation, the results reinforced Dollarama’s ability to deliver consistent growth amid ongoing consumer value sensitivity.
Canadian Same-Store Sales Reach a Seven-Quarter High
A standout feature of the quarter was Canadian comparable-store sales growth of 6.0 percent, the strongest performance in seven quarters. In his analysis, Landry noted that this result surpassed Stifel’s estimate of 4.2 percent as well as consensus expectations of 4.8 percent. Growth was driven by both traffic and basket size, with transaction volumes increasing 4.1 percent and average transaction size rising 1.9 percent.
Seasonal merchandise played a meaningful role during the quarter, supported by a favorable calendar shift that extended the Halloween selling period by four additional days compared with last year. While this created an easier comparison, the report emphasized that underlying demand trends in Canada remain healthy.
Total revenues for the quarter reached $1.91 billion, representing a 22 percent increase year over year and modestly exceeding Stifel’s expectations. Australia contributed $186 million to revenue growth during the quarter, although profitability in that market remains in transition.
Margin Expansion Reflects Strong Operating Discipline
Dollarama also delivered meaningful margin expansion, particularly in its Canadian operations. Gross margin in Canada increased by 110 basis points year over year to 45.8 percent, well ahead of Stifel’s estimate of 44.7 percent. Landry attributed the improvement to a more favourable mix of seasonal merchandise and lower logistics costs.
Selling, general, and administrative expenses showed modest leverage as well. Canadian SG&A declined by 10 basis points as a percentage of sales to 14.2 percent, reflecting scale benefits as revenues increased. Excluding contributions from Dollarcity and Australia, EBITDA margin in Canada reached 32.0 percent, up 110 basis points year over year and ahead of both Stifel’s forecast and consensus estimates.
Australia, however, remained a modest drag on earnings. According to the report, the Australian business reduced quarterly earnings per share by approximately $0.03 as Dollarama continues to invest in a multi-year turnaround of The Reject Shop banner.
Dollarcity Continues to Outperform Expectations
Dollarama’s international growth continues to be led by Dollarcity, which posted its strongest earnings growth in five quarters. Dollarcity’s earnings increased 64 percent year over year, supported by sales growth of 21 percent and margin expansion driven by lower logistics costs.
Following the end of the quarter, Dollarcity opened its 700th store, a milestone that Landry described as further evidence of the banner’s growing scale and brand recognition across Latin America. Dollarcity continues to represent a meaningful long-term growth driver within Dollarama’s portfolio.
In contrast, Australia remains in the early stages of transformation. Management completed four store renovations during the quarter and is implementing a comprehensive refresh that includes new layouts, shelving, fixtures, and lighting. Landry noted that the company expects to renovate the entire store network over a four-year period, with rebranding anticipated once Dollarama controls the majority of product sourcing.
Guidance Raised as Calendar Effects Come Into Focus
In response to the strong quarter, Dollarama raised its fiscal 2026 outlook. Management now expects comparable-store sales growth of 4.2 percent to 4.7 percent, up from its previous guidance of 3.0 percent to 4.0 percent. While this represents increased confidence, the updated guidance still implies a slowdown from the 5.3 percent year-to-date pace.
The moderation is largely attributable to calendar normalization. Last year’s fiscal calendar included 53 weeks, while the current year does not. Management quantified the calendar impact at approximately 180 basis points, reflecting the shift from additional Halloween selling days in the third quarter to slower late-January days later in the fiscal year.
Gross margin guidance was also raised, with the midpoint increased by 55 basis points. However, Landry cautioned that fourth-quarter gross margins could be slightly lower year over year due to challenging comparisons.
Valuation Remains the Central Question
Despite another quarter of strong execution, Stifel maintained a HOLD rating on Dollarama shares. The firm increased its target price to $200 from $190, reflecting a roll-forward of valuation multiples applied to fiscal 2028 estimates rather than a change in the company’s underlying performance outlook.
At current levels, Dollarama shares are trading at approximately 33 times calendar 2027 earnings. In Landry’s view, the valuation already reflects significant future earnings growth, limiting the potential for further multiple expansion. While Dollarama’s scale, defensive characteristics, and international investments could justify a premium valuation, the report also highlighted the risk of multiple contraction should investor preferences shift toward more cyclical consumer stocks.
The $200 target price is based on an average of three valuation approaches, including earnings and EBITDA multiples applied to fiscal 2028 estimates, as well as a discounted cash flow analysis.
Consistency Meets Valuation Discipline
Dollarama’s third-quarter performance reinforces its reputation as one of Canada’s most consistently executing retailers. Canadian operations remain strong, Dollarcity continues to scale rapidly, and management has demonstrated discipline in guiding expectations. As Landry’s analysis makes clear, the key debate is no longer about operational strength, but about valuation discipline in a stock that has already priced in much of its future growth.
