Many factors influence investors in picking common stocks. Without looking into the business performance, the top ones are market capitalization and brand profile. The first refers to the company's size or total value, while the second pertains to brand reputation. Both factors translate into higher perceived share prices.
A name that deserves serious attention in the last quarter of 2024 and beyond is a recognized Canadian value retailer. Dollarama (TSX:DOL) has a market cap of $38.8 billion and is number 37 in Brand Finance's Canada 100 2024 Ranking. The independent brand valuation consultancy firm annually lists Canada's strongest and most valuable brands.
Dollarama is a winning investment in the consumer discretionary sector, evidenced by total returns of 202.1% and 806.2% in five and ten years, respectively. As of October 8, 2024, the consumer defensive stock trades at $138.71 per share, up 45.7% year-to-date. But given the current and historical stock performance, is Dollarama a buy, sell, or hold for 2025?
Simple concept
The first official Dollarama store in Matane, Quebec, opened in 1992. Larry Rossy, the founder's grandson, had a simple concept: offer all items for $1.00 or less. His management team converted all 44 variety store locations to this new concept. The dollar store retail chain expanded fast and grew its presence from 2001 to 2003.
Fast forward to 2011, Dollarama has become a well-established company and celebrated the opening of its 700th store. The following year, it introduced two new price points – $2.50 and $3.00. It also came with greater product selection and compelling value. 2013 marked the entry into Latin American markets through a licensing and services agreement with Dollar City.
Dollarama is forward-looking, too. It launched an e-commerce site in 2019, another growth platform to keep up with the times. The global pandemic hit in 2020, yet the full-year fiscal 2021 results (12 months ending January 31, 2021) showed business resiliency. Sales and net earnings increased 6.3% and 0.05% to $4 billion and $564.3 million, respectively.
Consistent, profitable growth
The business has picked up post-pandemic. Dollarama reported increasing revenue and earnings every year from fiscal 2022 to fiscal 2024. Fiscal 2025 results would be the same as Canadian consumers continue patronizing the dollar store retail chain amid an inflationary environment.
In the six months ending July 28, 2024, sales and net earnings rose 8% and 17.9% year-over-year to $3 billion and $501.8 million. Another encouraging sign that the business is doing well is the guidance for 60 to 70 new store openings in fiscal 2025.
Neil Rossy, Dollarama's President and CEO, said results across the board were strong due to the normalizing environment. "Our strong traffic trends quarter after quarter also confirm that the breadth of our product offering is allowing us to meet the needs of our consumers," he added.
Solid investment option
Dollarama is a buy if you don't own shares yet, a hold if you have a position, but never a sell. This retail stock is a solid investment option for its size, favourable brand profile, and consistent, profitable growth. You'll get value for money even during high inflation or regardless of the economic environment.
