Dollarama Inc. has increased its stake in Latin American retailer Dollarcity to 60.1 per cent with the acquisition of an additional 10 per cent interest and announced plans that will see Dollarcity expand into Mexico.
The Montreal-based company says it acquired the additional stake in exchange for 6,060,478 Dollarama common shares. The shares were worth a total of about $761.7 million based on Dollarama's share price of $125.68 on Tuesday.
Dollarama also has acquired an option to buy an additional 9.89 per cent stake in Dollarcity at any time on or before Dec. 31, 2027.
Dollarama and the Dollarcity founding stockholders also said that they have agreed on governance terms for the expansion of the business to Mexico.
Dollarama and the Dollarcity founding stockholders will indirectly have an 80.05 per cent and 19.95 per cent interest, respectively, in the Mexican portion of the business. Dollarcity intends to pilot its first store in Mexico in 2026.
"With its strong leadership team, Dollarcity is well-positioned to continue delivering profitable growth, both from its current markets of operation and as we eye our next market of entry," Dollarama chief executive Neil Rossy said in a statement.
"We look forward to preparing for entry in Mexico in the near term, a large and dynamic market with untapped potential in the value retail space, guided by the same careful and disciplined approach as with our successful entries in Colombia in 2017 and in Peru in 2021."
The deal came as Dollarama reported a profit of $215.8 million or 77 cents per diluted for its quarter ended April 28, up from a profit of $179.9 million or 63 cents per diluted share a year earlier.
Sales for what was Dollarama's first quarter totalled $1.4 billion, up from $1.3 billion in the same quarter last year.
Comparable store sales for the quarter rose 5.6 per cent, including an 8.7 per cent increase in the number of transactions and a 2.8 per cent decrease in average transaction size.
"As anticipated, we are seeing a progressive normalization in comparable store sales, with growth primarily driven by persistent higher than historical demand for core consumables and other everyday essentials," Rossy said.
"As Canadian consumers continue to seek out compelling value for their hard-earned money, we will remain focused on executing on our value and convenience promise."
This report by The Canadian Press was first published June 12, 2024.
Companies in this story: (TSX:DOL)
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2024-06-12 12:27:27Z
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