Business & Investment

Do I need to buy Dalarama (TSX: DOL)?

Dararama (TSX: DOL) Canada’s largest discount store. Unlike many retailers, Dollarama has so far been able to escape the retail apocalypse brought about by e-commerce giants. Moreover, during the pandemic, the company is doing much better than most retailers. This has led many investors to wonder if it’s a good time to buy Dararama.

Let’s answer that question.

The charm of discount stores

Discount stores are an interesting investment. On the other hand, they are retailers and sell a huge number of products. In the case of Dararama, the company has expanded rapidly to well over 1,000 stores in all states. Against the backdrop of this aggressive growth, there were only 44 stores in 1992 and 304 stores in 2004.

Since reaching its 1,000 store milestone, Dollarama has been aggressively expanding. With new goals set by management, the company will grow to 1,400-1,700 stores within the next six years. This quarter, Dararama opened 42 new stores.

Another important point to note is the reach of Dollarama. outside Canada. The company signed a license and service agreement with the Latin American chain Dollar City a few years ago. The partnership worked well to prove Dalarama’s appeal to customers outside Canada. As a result, Dollarama acquired a 50.1% stake in Dollar City partners in 2019. Since then, Dollarama has pursued aggressive expansion of Dollar City, with more than 200 stores in three countries. Dalarama aims to grow to 600 stores in Colombia, Guatemala and El Salvador by 2029.

In terms of results, Dollarama reported sales growth of 12.3% in the last quarter. Same-store sales growth was 7.1% during the period. Overall, the company generated $ 161.9 million, or $ 0.52 per diluted share. These numbers alone may justify investors who want to buy Dararama.

A noteworthy point from that recent quarter is related to dividends. Dararama currently offers a small dividend with a yield of only 0.36%. If anything, at least at first, dividends look like round-off errors. Dararama has resumed its annual dividend increase before last year and announced a 6.8% increase in dividends.

Should I buy Dararama?

Dararama is an intriguing investment option. The company has an expanding network of stores throughout Canada and has a profitable business in Latin America. As the Canadian dollar continues to rise, this also means that the purchasing power of Dararama is rising. This only brings better products, more variety, and thus more sales.

In other words, Dollarama is the long-term best option for investors looking to diversify their retail stocks.

Do I need to buy Dalarama (TSX: DOL)? Do I need to buy Dalarama (TSX: DOL)?

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