Dollarama Inc.

Posted: 12 Apr 2010

See all articles by André Perold

André Perold

Harvard Business School - Finance Unit

Date Written: April 2, 2010

Abstract

Dollarama is the leading operator of dollar stores in Canada. The firm performed extraordinarily well after a leveraged buyout in 2004, and recently executed a highly successful IPO. The company sources its goods primarily from Asia. It has strong brand recognition and competitive advantages in operations, purchasing, and merchandising. In the face of margin pressures, Dollarama recently took the risky decision to move from the single one dollar price point to multiple price points. The additional price points offer some flexibility, but customers' appetite for purchasing products priced above $1 has yet to be fully determined. Dollarama is on a fast growth track but remains chiefly concerned about its vulnerability to supply disruptions and to increases in merchandise costs from higher input prices. The firm appears quite overvalued based on a multiples analysis, but considerably undervalued based on a discounted cash flow analysis.

Suggested Citation

Perold, André F., Dollarama Inc. (April 2, 2010). HBS Case No. 210-041, Harvard Business School Finance Unit, Available at SSRN: https://ssrn.com/abstract=1588050

André F. Perold (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6680 (Phone)
617-496-6592 (Fax)

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