On Thursday, BMO Capital Markets updated its outlook on Dollarama Inc. (DOL:CN) (OTC: DLMAF) shares, increasing the price target to C$138 from C$133, while maintaining an Outperform rating on the stock. The revision comes on the heels of survey findings that indicate a robust customer visitation pattern at the discount retailer's stores.
The survey highlighted that approximately 70% of Canadians shop at Dollarama at least once a month, with 27% of those customers visiting more frequently compared to three months prior.
This behavior suggests a continued preference for Dollarama among consumers, particularly in a climate of rising inflation, as shoppers tend to favor more budget-friendly options.
Dollarama's ability to attract customers appears to align with the company's financial projections, supporting their guidance of achieving a same-store sales growth (SSS) of 3.5-4.5% for the fiscal year 2025. The increased price target of C$138 reflects a higher valuation multiple, now set at 20 times the firm's fiscal year 2026 estimated EBITDA, up from the previous 19 times.
BMO Capital Markets has indicated plans to repeat the survey in the near future to further monitor consumer behavior and its impact on Dollarama. The retailer's performance and customer engagement levels will continue to be areas of focus as the market assesses the company's growth potential in the context of ongoing economic pressures.
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