Dollarama boosts Dollarcity stake to 60.1 percent and announces plans for first store in Mexico by 2026
Dollarama Inc. has increased its stake in Dollarcity to 60.1 percent and announced significant expansion plans for the Latin American chain, as per BNN Bloomberg.
Montreal-based Dollarama revealed on Wednesday that it acquired an additional 10 percent interest in Dollarcity, with plans to enter the Mexican market. This acquisition was made in exchange for 6,060,478 Dollarama common shares, valued at approximately $761.7m based on Tuesday's share price of $125.68.
Additionally, Dollarama secured an option to purchase an extra 9.89 percent stake in Dollarcity by December 31, 2027.
Neil Rossy, Dollarama's chief executive, described these moves as the “natural next step” in the ongoing partnership with Dollarcity's founding stockholders.
He stated, “The timing seemed like the right time ... We've been discussing it with our partners for some time and it got to the point where we both felt it made sense for both parties. So, it's an evolution of the business and an evolution of the partnership at the same time.”
Dollarama and the Dollarcity founding stockholders will indirectly hold 80.05 percent and 19.95 percent interests, respectively, in the Mexican segment of the business. Dollarcity aims to launch its first store in Mexico in 2026.
Rossy highlighted the significant investment required for entering a new market, noting that Mexico, being the largest market between Latin America and Canada, was a strategic choice.
Following its entry into Colombia in 2017 and Peru in 2021, Dollarcity operates 547 stores across these markets, as well as in El Salvador and Guatemala.
The company plans to expand to 1,050 locations by 2031, an increase from the previously projected 850 sites by 2029, with the majority of growth expected in Colombia and Peru.
The expansion announcement coincided with Dollarama reporting a profit of $215.8m, or 77 cents per diluted share, for its quarter ended April 28, up from $179.9m, or 63 cents per diluted share, a year earlier.
Sales for the first quarter totaled $1.4bn, up from $1.3bn in the same quarter last year. Comparable store sales rose 5.6 percent, driven by an 8.7 percent increase in the number of transactions, despite a 2.8 percent decrease in average transaction size.
Chief financial officer Patrick Bui noted that shoppers are visiting stores more frequently but spending less per visit, attributing this cautious spending to high interest rates and inflation, which have recently started to ease.
The quarter included the Easter period, which Rossy described as average due to its dependence on timing and weather.
Despite the positive financial results, Dollarama's share price dropped four percent, or approximately $5.14, to close at $120.54 on Wednesday.
