Should You Buy Dollarama Ahead of Earnings?

Dollarama (TSX:DOL) is the largest dollar store retailer in Canada. The dollar store retail space enjoyed a renaissance after the 2007-2008 financial crisis. These retailers were able to significantly expand their target markets in the years following the Great Recession. Today, I want to discuss whether Dollarama is worth snatching up ahead of its second quarter fiscal 2023 earnings release.

The company is expected to release its Q2 fiscal 2023 results on September 9. Analysts expect Dollarama to put together a strong quarter. Shares of this dollar store retail stock have climbed 26% in 2022 as of mid-afternoon trading on August 31. The stock has shot up 39% in the year-over-year period.

Investors got to see the retailer’s first quarter fiscal 2023 earnings on June 8. Dollarama delivered sales growth of 12% to $1.07 billion. Meanwhile, comparable store sales increased 7.3% compared to the previous year. EBITDA climbed 20% to $300 million, which represented 28% of total sales.

Operating income jumped 24% to $220 million in the first quarter of fiscal 2023. Diluted net earnings per share were reported at $0.49 – up 32% from $0.37 in the first quarter of fiscal 2022. Meanwhile, Dollarama opened 10 net new stores in the quarter.

Dollarama currently possesses a price-to-earnings ratio of 34. That puts the stock in favourable value territory compared to its industry peers. Moreover, it offers a quarterly dividend of $0.055 per share, which represents a modest 0.2% yield.