WinterGems: reminiscence no trades, updates are in NOTES

WinterGems: reminiscence no trades, updates are in NOTES

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WinterGems: reminiscence no trades, updates are in NOTES
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Dollarama - 1 year later

Dollarama - 1 year later

A year ago I posted on a rarely mentioned compounder story - outside of the Canadian circle : Dollarama. Dollarama is hitting on all cylinders and expanding in Central America and soon Australia!

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@Govro12 WinterGems Stocks
Jun 11, 2025
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Before you continue glancing into the latest post, I would strongly encourage you to first review my analysis publish last year in June on this amazing dollar store company based in Canada :

Dollarama - The Dominant Dollar Store in Canada

@Govro12 WinterGems Stocks
·
June 5, 2024
Dollarama - The Dominant Dollar Store in Canada

Originally published in January 2024

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The article constitutes my personal views and is for entertainment purposes only. The main goal of this article is to log my personal views. Nothing in this article or these posts in this blog should constitute an investment advice. The projections and estimates provided here should be considered as purely speculative. Do your own model and projections. Please refer to the disclaimer at the end of this article for more details.

In a nutshell, Dollarama operates very efficient dollar stores across Canada with a dominant market share of around 65% to 75% (based on my own analysis) of the dollar stores segment.

Today (June 11th. 2025), Dollarama released some very strong results as shown below for the last quarter:

EPS is up 28% on sales up by 8.2%.

The stock reacted quite favourably on these strong results and the stock is up 53% since I last published on the company a year ago. I hope some of you joined the rank of shareholders at that time.

Comps sales is at a healthy and sustainable 4.9%. GM is within long term range at 44.2% (as shown below),

and operating margin has kept improving over the recent years now at 25.6% (historical. chart below) which is almost 3% higher than last year.

As I disclosure, Dollarama is part of my 2009 cohort- found this stock “a la” Peter Lynch, realizing that new Dollarama stores were popping up left and right in my area, replacing mom and pop dollar stores and started to investigate.

Now in recent years, there are 2 development that gets me excited for future growth: Dollarcity and international expansion via acquisition.

Dollarcity

Dollarcity had a total of 644 stores, with 377 locations in Colombia, 109 in Guatemala, 77 in El Salvador and 81 in Peru. This compares to 632 stores as at December 31, 2024. Dollarcity stores are very similar to Dollarama stores in Canada and there is strong synergies in terms of type of goods sold and operational systems. In June last year, Dollarama has increased its stake in Dollarcity to 60.1% (by about 10%) and has the option to further increase its stake to 70%. As of March 31, 2025, sales were up by 12.6% YoY.

The Corporation’s 60.1% share of Dollarcity’s net earnings for the period from January 1, 2025 to March 31, 2025 amounted to $40.3 million, compared to $22.1 million for the Corporation’s 50.1% share during the same period last year. This represents a 82.4% increase. As such, the net income of Dollarcity represents already a bit more than 10% of the overall operating income of the Company.

Some colours on how Dollarcity is performing: ie. operating margin gain, SSS positive, still quite new in Columbia and Peru. So Guatemala and El Salvador are the orignal countries.

Mexico expansion of Dollarcity

Dollarama and the Dollarcity founding stockholders have also agreed on governance terms providing for the future expansion of the business to a new country, Mexico. Dollarama and the Dollarcity founding stockholders will indirectly have an 80.05% and 19.95% equity interest, respectively, in the Mexico portion of the business. Based on comments yesterday from the CEO, Neil Rossy, a first pilot store in Mexico will open this Summer.

The merchandise should be very similar than the one you can find in other Latin America countries:

Australia expansion

Dollarama in March 2025, has reached a definitive agreement to buy the Reject Shop. Headquartered in Melbourne, The Reject Shop is Australia's largest discount retailer with a store network of more than 390 locations across the country. Its offering includes private-label and national brand products. The Reject Shop generated consolidated sales of A$866 million (C$779 million1) for the last twelve-month period ended December 29, 2024, and employs over 5,000 people.

Once the acquisition is consumed, this will represent an increase of almost C$800m in sales, adding close to 12.5% of sales. It will allow Dollarama to apply its operational knowhow to the Australian market. There are a lot of synergies between Dollarama and The Reject Shop in terms of merchandising. The Australian company should also benefit from the buying power of Dollarama since Dollarama has 8x more volume. It will be quite interesting to analyse the operating margin evolution of the Australian operation over the years.

The acquisition need to be accepted by shareholders this month. I will keep you posted.

Free cash Flow machine

Another aspect I like is that although Dollarama is expanding in Canada at a rapid pace, it is able to generate a very healthy free cash flow, matching almost the net income. This allows the company to make buyback when the stock is undervalued. I mentioned in more detail that aspect in my previous post.

To summarize, Dollarama is a beast in the retailer space, compounding at an impressive level with no down year since it became public in 2009 as shown below. It is not well known, but I am surprised that it has not yet achieved a cult status in the stock market. If you include today’s result, which is not shown in TIKR yet, the 12 mo EPS is now 4.39$.

The valuation is quite high at 43x trailing earnings, but put it in your watchlist, and next time Mr Mussolini south of the border derails the stock market, you may get a chance to get a few shares. Dollarama is totally immune to the tariff shitshow in my opinion.

Leave a comment - doubts and questions are welcome

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Disclaimer: The above article constitutes my or the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. I / The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. The information provided in this article is not making promises, or guarantees regarding the accuracy of information supplied, nor that you guarantee for the completeness of the information here. The information in this article is opinion-based and that these opinions do not reflect the ideas, ideologies, or points of view of any organization the authors may be potentially affiliated with. The authors reserve the right to change the content of this blog or the above article. The performance represented is historical" and that "past performance is not a reliable indicator of future results and investors may not recover the full amount invested.


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By @Govro12 WinterGems Stocks · Launched 3 years ago
reminiscence no trades, Alpha in Notes. Back on x.com/govro12 Enjoy interactions over perfections. Will always reply transparently. Use notes to interact with stock idea. Notes is more timely. Do your due diligence.
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