This Retail Stock Is Soaring in 2025 and Offers a Great Way to Diversify Outside of the U.S. Market

If you’re looking for a top retail stock to own, without worrying about how the U.S. will do amid an intensifying trade war with China, there’s one company you may not want to overlook, and that’s Canadian-based Dollarama (TSX:DOL).

Dollarama has been one of the best growth stocks on the TSX in recent years. And recently, the company reported its latest earnings numbers. Let’s go over how it did, how it may perform in the future, and why it’s worth investing in it right now.

In Q4, which ended on Feb. 2, the company’s sales rose by 14.8% to nearly $1.9 billion. And for the full year, its growth rate was 9.3%, as its top line hit $6.4 billion.

Comparable store sales, which include just the same stores which were open a year ago, grew by a rate of 4.9% for the quarter and 4.6% for the year. That represents some solid organic growth for the company, especially at a time when many other retailers are struggling.

What is especially attractive about the business is that its margins are really solid. Dollarama’s net earnings were nearly 21% of its sales for the quarter. That gives the company plenty of flexibility to still generate a strong profit even if it needs to cut prices in order to improve upon its overall competitiveness, which may be necessary given the economy may be heading for a recession in light of the ongoing trade war with the U.S.

The good news is that Dollarama isn’t dependent on the U.S. for expansion. Instead, its focus is on other markets. Central and South America are key areas it is targeting for a lot more expansion. Later this year, the company is going to expand into Mexico. And through its position in Dollarcity, it has a presence in more than 630 stores and it plans to expand that to 1,050 by 2031 – and this doesn’t include Mexico.

Even domestically, Dollarama plans to grow its presence from over 1,600 stores in Canada to 2,200 by 2034. And, there’s still more beyond this.

Recently, the company announced it is planning to acquire an Australian discount retailer, The Reject Shop. The deal is worth about $233 million and it will close in the second half of this year. It’s not a big acquisition but it would give Dollarama a huge expansion opportunity in Australia. The Reject Shop generated 866 million in sales over the past 12 months (in Australia dollars). And it is profitable but its margins are slim as net income on that totaled just 6.2 million AUD.

In addition to all this, in the near term, one big opportunity I see for Dollarama is the potential for it to generate more sales domestically, especially as Canadian consumers look to spend their money on Canadian-based goods and with Canadian companies. Dollarama is based out of Quebec, and shoppers may opt to spend more money there than in a U.S.-based retailer such as Walmart.

Dollarama gives consumers a good mix of value as its price point ranges between $0.87 and $5.00, and so there will be many  areas where it offers similar and comparable items to those that can be found at Walmart. If consumers focus on buying Canadian, Dollarama could see an acceleration in its growth rate in the weeks and months ahead.

All in all, Dollarama may make for a fairly safe retail stock to own. Canada doesn’t have a trade war going on with China or other Asian countries; the retailer can still easy import from those parts of the world without worrying about tariffs. The big concern, instead, is just how well the Canadian economy holds up. A recession due to the trade war could impact overall demand. CEO Neil Rossy says while the impact from tariffs is “manageable,” the big concern is whether it leads to a worsening economy. Rossy says that “tariff wars are not good for anyone.” But he does note that Dollarama can mitigate the effect of tariffs by making pricing adjustments and product substitutions.

Year to date, shares of Dollarama are up around 16%. Over the past year, the stock is up by more than 40%, and its five-year returns are nearly 300%. The stock has made for a fantastic buy and the only thing investors may not like about it is it trades at a premium – nearly 40 times trailing earnings. But with so much growth still ahead for the business, this can make for an excellent investment to hang on to for the long term.

Between its growth potential domestically, in Latin America, and even Australia, this is a company that can still get a whole lot more valuable in the years to come. Whether you want some short-term safety or just a great stock to hang on to for the long term in your tax-free savings account, Dollarama is an excellent option to consider.