Dollarama: Steadfast Focus on Value and Convenience Fuels Sales, Even as Competitive Challenges Loom

We initiate coverage on Canadian dollar store chain Dollarama with a narrow economic moat rating based on the retailer’s intangible assets as well as cost advantages from its sourcing and distribution scale. Our fair value estimate stands at CAD 106 per share, which implies 16 times enterprise value to 2026 adjusted EBITDA. Shares look expensive trading at a 39% premium to our intrinsic valuation. Given the competitive intensity in retail, we don’t think the stock price has incorporated realistic growth and margin assumptions for the retailer in the coming years.