Dollarama Inc (TSX:DOL) saw its shares fall more than 7% on Tuesday after the company forecast annual sales largely below expectations, signaling softer demand as consumers become more selective amid persistent inflation and a weakening labor market.
The Canadian discount retailer expects comparable store sales growth of 3% to 4% in fiscal 2027, below analysts’ consensus of 3.9%.
The guidance follows fourth-quarter 2026 results that were mixed against expectations. For the quarter ended February 1, 2026, Dollarama reported net earnings of C$392.5 million, up 0.4% year-over-year, with diluted earnings per share of C$1.43, slightly exceeding the C$1.41 estimate.
Sales rose 11.7% to C$2.1 billion, driven by expansion in Canada and Australia, but comparable store sales in Canada increased only 1.5%, falling short of the 2.6% consensus. The shortfall was attributed to poor weather and a calendar shift that reduced high-traffic pre-holiday shopping days.
Operating income for the quarter grew 4.7% to C$584.4 million, with an operating margin of 27.8%, down from 29.7% a year earlier. EBITDA increased 6.2% to C$711.5 million, representing a margin of 33.9%.
During the quarter, Dollarama opened seven net new stores in Canada and one in Australia, while repurchasing about 888,000 shares for C$174.8 million.
Looking ahead, Dollarama expects to return to its historical pace of 60 to 70 net new store openings in Canada in fiscal 2027, while maintaining gross margin guidance of 45% to 45.5% and SG&A in the range of 14.1% to 14.6%.
Analysts at Jefferies said the company delivered strong earnings but noted that Canadian store-level growth fell short of expectations, reflecting calendar effects and weather-related disruptions.
They also pointed to margin pressures from the ramp-up of Australian operations, which contributed to higher operating costs and a modest decline in EBITDA margin. Despite these near-term challenges, the firm highlighted that Canadian sales remained resilient, with growth supported by higher average transaction values.
Jefferies further noted the company’s international operations, including Dollarcity, contributed solidly to overall results, and emphasized that Dollarama’s ongoing share repurchases and dividend increases demonstrate financial flexibility even as investments in Australia continue.
The firm has a ‘Buy’ rating and $235 price target on Jefferies, implying upside from current levels of about $173.