Dollarama is coming to Mexico. After Colombia, Guatemala, El Salvador and Peru. Dollarcity, a Latin American low-cost retailer in which the Quebec company now holds a 60% stake, will open stores there in 2026.
Sale of household cleaning products, food, personal care items, toys: Dollarcity, with its green and yellow sign, looks exactly like Dollarama… in a Latin American version.
With 547 stores spread across four Latin American countries, the retailer intends to go through Mexico to continue its expansion, Dollarama announced on Wednesday, during its annual general meeting and presentation of its results for the first quarter ended April 28, 2024.
The Quebec company took the opportunity to announce the acquisition of an additional 10% stake in Dollarcity. Dollarama now holds a total stake of 60.1%.
“Mexico has a population of nearly 130 million and a vibrant retail market. We believe local consumers will be interested in Dollarcity’s value proposition, as has been the case in our current countries of operation in Latin America,” said Dollarrama retailer President and CEO Neil Rossy. during a call with analysts.
The Montreal-based company will indirectly hold an 80.05% stake in the Mexican portion of the business, while Dollarcity’s founding shareholders will own 19.95%.
“We look forward to preparing to enter Mexico in the near term, a large and dynamic market with untapped potential in the off-price retail sector, guided by the cautious and disciplined approach that has accompanied our successful entries into Colombia in 2017 and Peru in 2021,” Mr. Rossy also mentioned in a press release.
“Since we initially acquired a majority stake in 2019, Dollarcity has more than tripled its sales and significantly increased its presence in key Latin American markets, demonstrating the underlying strength of its business model and l Latin American consumers’ interest in our value proposition. »
Dollarama’s 50.1% share in Dollarcity brought it 22.1 million in the first quarter of 2024, an increase of 68.3% compared to the 13.1 million received at the same date last year.
Without taking into account its projects in Mexico, the company wants to be able to count on a network of 1,050 stores in its four main markets (Colombia, Guatemala, Salvador, Peru) by 2031.
This decision to extend its tentacles outside Canada and particularly to Mexico does not surprise Maryse Côté-Hamel, assistant professor of consumer sciences at Laval University.
“It is certain that Dollarama has the wind in its sails in Canada due to the economic situation. But we can think that, eventually, the situation will improve, these are economic cycles. Will they continue to grow here? she asks herself. In the context, I can understand that they want to go to foreign markets. »
“Mexicans don’t buy the same products as us, don’t have the same tastes, don’t eat the same things,” she recalls.
“Canadian jujubes, [for example], wouldn’t work there,” she says. They prefer gummies with chili or other flavors. You have to understand this to have any chance of success. »
During the annual general meeting, Neil Rossy was asked about the numerous items thrown in the trash by the retailer. An investigation carried out by the Coops de l’information revealed in April that mountains of chocolates, Halloween, Valentine’s Day, Christmas and Easter decorations, sweaters and even unwrapped electronic devices had ended up in the trash bins, a common practice at Dollarama, according to information obtained by journalists.
“It is not Dollarama’s [practices] to throw away [items] that are still good,” defended Mr. Rossy, acknowledging that it can happen “from time to time” that items end up in the garbage can.
He also assured that when food is thrown away, it is because it has passed its expiration date.
According to Maryse Côté-Hamel, although it has damaged Dollarama’s reputation, the investigation carried out by the media will not harm the retailer’s sales. “Consumers end up forgetting because there is other news. And there isn’t a lot of competition at Dollarama. »
“It’s clear that someone who can’t afford anything else will still, by default, continue to go to Dollarama because that’s what fits their budget. »
“To that extent, you might think consumers are going to get over it, and I think they already have. »
Dollarama reported earnings of 215.8 million, or 77 cents per share, for its quarter ended April 28, 2024, up from earnings of 179.9 million, or 63 cents per share, a year earlier.
Sales for the quarter totaled 1.4 billion, up 8.6% from the same quarter last year.