Dollarama Inc. (TSX: DOL) Q1 2026 Earnings Call | 06/11/2025

Here's a summary of Dollarama's First Quarter Fiscal 2026 Results Conference Call:

Q1 Fiscal 2026 Highlights

Dollarama reported a strong start to fiscal 2026, driven by sustained demand and strategic expansion.

• Sales: Increased 8.2% to over $1.5 billion.
• Same-Store Sales (SSS) Growth: 4.9%, consisting of a 3.7% increase in transactions and a 1.2% increase in average transaction size. This follows 5.6% SSS growth in Q1 last year.
  • SSS was noisy in February and March, picking up through April.
• Gross Margin: 44.2% of sales (vs. 43.2% in Q1 FY25), primarily reflecting lower logistics costs and reduced inventory shrink.
• SG&A as % of Sales: 15.3% (vs. 15.4% in Q1 FY25), with better labor productivity offsetting higher store expenses and TRS transaction costs.
• EBITDA: $496.2 million (32.6% margin). Excluding a $10.4 million unrealized gain from a Dollar City derivative, EBITDA was $485.8 million (31.9% margin).
• Diluted Net Earnings Per Share: Increased 27.3% to $0.98. (The unrealized gain contributed $0.03 to EPS).
• Dollar City Net Earnings Share: Increased to $40.3 million (vs. $22.1 million), due to strong operational performance and increased equity stake.
• Capital Allocation: No share buybacks in Q1 due to a short window and upcoming capital needs, but plans to resume NCIB through the year.
• Dividend: Board approved a quarterly cash dividend of 10.58 cents per share.
• Logistics Hub (Western Canada): CapEx guidance updated to include estimated spend on the new logistics hub ($285-$330 million range for FY26). Commissioning by end of calendar 2027 unchanged.

Canadian Operations

• Store Network Expansion: Opened 22 net new stores in Q1, bringing the total Canadian store count to 1,638. On track to achieve the higher target of 70-80 net new stores in FY26 (up from usual 60-70).
• Consumer Behavior: Sustained demand for consumables and positive seasonal performance (Easter) supported SSS. Overall mix is performing well despite lower consumer discretionary spending and an unpredictable trade environment.
• Counter-Tariffs: Managing Canadian counter-tariffs on US-imported national brand consumables using a flexible business model. Objective is to hold prices for as long as possible for customers.

International Expansion (Dollar City)

• Store Growth: Dollar City opened 12 new stores in Q1 (calendar year), bringing total to 644 stores across Colombia, Peru, El Salvador, and Guatemala.
• Mexico Entry: First Dollar City stores in Mexico are slated to open "imminently," marking a significant milestone for the team with strong historical track record in new markets. Mexico is seen as a large, high-potential market.
• Sales & Profitability (Dollar City): Sales up 13% and net income up 52%, despite store growth (17%) being higher than sales growth due to timing of openings and ramp-up periods. Same-store sales were positive.

Proposed Acquisition of The Reject Shop (TRS - Australia)

• The acquisition is moving forward, with a shareholder meeting for TRS shareholders later this month.
• Expected to close towards the back half of July, pending Australian court approvals.
• A dedicated team is actively working on integration plans.

Outlook and Priorities

• SSS Guidance: Full-year SSS guidance remains unchanged at 3%-4% due to continued normalization of SSS trends and ongoing market uncertainty.
• Gross Margin Guidance: Annual guidance range of 44.2%-45.2% remains unchanged, with expected positive momentum in logistics potentially offset by mix shift and shipping rates.
• SG&A Guidance: 14.2%-14.7% of sales for FY26 remains unchanged.
• Consumer Sentiment: Remains attentive to tariff-related and broader economic uncertainty and its potential impacts on consumer sentiment, as the consumer is perceived as "fragile."
• Focus: Continued focus on delivering compelling value for customers and strong execution across the business.