Even as U.S. President Donald Trump’s tariffs cause economic uncertainty, business appears to be booming for one Canadian company – Dollarama.
As of Monday, Dollarama’s stock price is up 34 per cent compared with the start of the year. Compared with this time last year, the stock was up 39 per cent.
Compared with five years ago, the stock price was up 271 per cent.
So why is Dollarama’s stock skyrocketing at a time of economic uncertainty?
“It’s in the name itself,” said Moshe Lander, economist at Concordia University.
Consumers will always look for ways to save money during an affordability crisis or economic downturn, Lander said.
“What they’re effectively advertising in the name is that if you come here, you’re going to get more for less. And that’s really what people are looking for right now,” he said.
The high price of groceries in Canada is enticing people to look for cheaper options at discount stores like Dollarama, University of Guelph food economist Mike von Massow said.
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“Dollarama is strategically doing a couple of things, (such as) adding food products to their line and therefore giving people a wider range of options to come into the store for,” von Massow said.
The company has said “consumables” are driving the company’s recent growth.
“Consumables were once again a driver behind our sales with general merchandise and seasonal remaining stable,” Dollarama CEO Neil Rossy told investors during an earnings call in August.
Consumables can be anything from food items to goods like shampoos, soap and fast-moving consumer goods.
“Walmart, Loblaws, everybody understands how competitive the environment is at this point in time with the instability and customers focus on consumables and their base needs,” Rossy added.
While Dollarama doesn’t offer fresh produce, von Massow said customers are willing to shop at multiple stores to save more money.
“Dollarama is adding some shelf-stable food products and people are more willing to look around. They are more willing to go to more than one store to get what they need,” he said.
During times of economic distress, people’s diets also tend to change, Lander said.
“It’s really hard to pass up on that $3 bag of Doritos that will sustain you through a day rather than buying $3 of healthier food since the $3 healthier food won’t get you through breakfast,” Lander said.
“They’re going to put that nasty stuff on the table. Don’t get me wrong, it’s delicious, but it’s not healthy.”
The pattern of Canadians seeking discounts goes beyond just Dollarama. Canadian fintech firm Koho says it’s noticing a change in the consumption habits of its users.
“There’s been a notable shift in user priorities. We’re seeing a decrease in demand for long-term financial services, such as credit building, while demand for immediate financial support, such as cashback rewards and short-term borrowing, has increased substantially,” said Faye Lucas, head of consumer trust at Koho.
“The rising cost of consumables, especially groceries, is a major driver of discount-seeking behaviour. In fact, grocery and dining are among the top categories where Koho users are leaning most heavily into cashback features.”
Lander said, however, that there is no guarantee that firms can count on discounted, cheap goods to retain consumers if the overall economic conditions improve.
“What Dollarama is going to have to start thinking about is, while they’re riding this high, how are they going to sustain it?” Lander said.
While Dollarama could see shrinking demand if the economic situation improves, von Massow said he thinks some customers will stick around.
“Some people will stick with those shopping habits,” he said.
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