Dollarama's Australian acquisition is beginning to change the shape of the group's growth, adding meaningful revenue while operating at substantially lower margins than the company's reported Canadian segment.
Australia generated C$184.8 million of sales and C$10.2 million of EBITDA in Dollarama's second quarter of fiscal 2027. That implies an EBITDA margin of about 5.5%, compared with the 34.9% reported for the Canadian segment. At group level, EBITDA margin fell from 34.1% to 32.2% even though the Canadian segment's margin increased from 34.5% a year earlier.
That divergence changes how Dollarama's headline results should be read. Consolidated sales and earnings are still growing, but Australia is currently adding much more to the group's revenue base than to EBITDA. The company itself identifies the inclusion of a full quarter of the lower-margin Australian business as the main reason for the decline in consolidated EBITDA margin.
Dollarama reported Q2 sales of C$2.027 billion, up 17.6% from C$1.724 billion a year earlier. EBITDA increased 11.0% to C$653.0 million and net earnings rose 8.7% to C$349.3 million. Diluted earnings per share increased 11.2% to C$1.29.
The consolidated numbers nevertheless combine businesses with very different current economics.
| Q2 fiscal 2027 | Group | Canadian segment | Australia | Finance Gazette calculation |
|---|---|---|---|---|
| Sales | C$2,026.6m | C$1,841.9m | C$184.8m | Australia = 9.1% of group sales |
| EBITDA | C$653.0m | C$642.9m | C$10.2m | Australia = 1.6% of group EBITDA |
| EBITDA margin | 32.2% | 34.9% | 5.5% | Australian margin derived from segment figures |
| Gross margin | 44.5% | 45.7% | 32.4% | Australia 13.3 percentage points lower |
| SG&A / sales | 15.1% | 13.8% | 28.1% | Australia 14.3 points higher |
| Capital expenditure | C$126.1m | C$102.5m | C$23.6m | Australia = 18.7% of group capex |
Dollarama defines EBITDA as a non-GAAP measure that includes its share of earnings from equity-accounted investments. That matters when interpreting the Canadian segment comparison because Dollarcity's equity-accounted earnings are included in that measure; the 34.9% figure should therefore not be read simply as a margin generated by Canadian stores alone.
The acquisition's effect becomes clearer by examining the absolute movement in the consolidated results.
Dollarama's group sales increased by approximately C$302.8 million from the comparable quarter. Australia's reported sales contribution increased from C$25.7 million to C$184.8 million, a difference of C$159.0 million.
That means the change in Australia's reported contribution accounted for approximately 52.5% of the increase in consolidated sales.
The comparison is affected substantially by acquisition timing. The previous-year quarter contained only 13 days of The Reject Shop's results following Dollarama's July 2025 acquisition, whereas fiscal Q2 2027 contains a full quarter. It therefore says something about how Australia is changing Dollarama's consolidated accounts, not how rapidly the Australian business itself grew on an underlying basis.
The equivalent EBITDA calculation is very different. Group EBITDA increased by about C$64.6 million, from C$588.5 million to C$653.0 million. Australia's contribution increased from C$3.3 million to C$10.2 million, meaning the change in Australia represented approximately 10.7% of the increase in reported group EBITDA.
The comparison therefore reveals a substantial difference between Australia's contribution to the change in reported revenue and its contribution to the change in EBITDA.
Dollarama's consolidated margin decline did not coincide with declining reported margins in its Canadian segment.
Canadian sales increased from C$1.698 billion to C$1.842 billion during Q2, while Canadian segment EBITDA increased from C$585.2 million to C$642.9 million. Its reported EBITDA margin improved from 34.5% to 34.9%.
Canadian gross margin also edged higher, from 45.6% to 45.7%, while SG&A remained unchanged at 13.8% of sales. Australia reported a 32.4% gross margin and SG&A equivalent to 28.1% of sales.
Dollarama quantified the effect at consolidated level. It said Australia's lower gross margin produced a negative 110-basis-point impact on group gross margin, while Australia's higher SG&A ratio also represented a negative 110-basis-point impact.
Australia produced positive EBITDA but remained loss-making further down the income statement. The business recorded an operating loss of C$17.1 million and a net loss of C$13.8 million in Q2. Across the first half, its operating loss was C$29.4 million and net loss C$25.1 million.
Dollarama continues to expect its Australian segment to report a net loss for fiscal 2027.
Capital expenditure adds another dimension to the changing group mix.
Australia accounted for C$23.6 million of Dollarama's C$126.1 million Q2 capital expenditure. That is approximately 18.7% of total group capex, roughly twice Australia's 9.1% share of consolidated sales.
The same pattern appears across the first half. Australian capital expenditure reached C$48.0 million out of a consolidated C$238.3 million, or about 20.2%, while Australia generated approximately 9.8% of first-half group sales.
That investment is taking place while Dollarama converts the former Reject Shop estate. Its annual information form says the programme includes introducing Dollarama-imported products, refining price points, deploying Dollarama layouts and fixtures, transforming IT infrastructure and developing a longer-term logistics plan. The company has said the Dollarama brand will be introduced only once stores reflect its value proposition.
Dollarama estimates that opening a new Australian store requires approximately A$0.8 million to A$1.0 million of capital expenditure, while renovating an existing store to the Dollarama format requires approximately A$0.4 million to A$0.6 million.
During Q2, 25 Australian stores were renovated and four net new stores opened. By August 2, only 60 of Dollarama Australia's 414 stores had the new layout and fixtures, about 14.5% of the network.
The present Australian margin therefore reflects a business still undergoing substantial operational change. That does not establish what its eventual profitability will be, but it does explain why the current numbers should not be treated as the economics of a completed Dollarama-format Australian network.
The margin mix shift has occurred alongside stronger Canadian trading. Comparable-store sales in Canada increased 5.4% in Q2, comprising a 3.7% rise in transactions and a 1.7% increase in average transaction size.
Dollarama consequently increased its fiscal 2027 Canadian comparable-store-sales guidance from 3.0%-4.0% to 4.0%-4.5% and raised expected net new Canadian store openings from 60-70 to 65-75. Its Canadian gross-margin, SG&A and capital-expenditure guidance remained unchanged.
The resulting Q2 picture is therefore more specific than a simple margin-compression story.
Dollarama's established Canadian segment continued to produce higher sales and EBITDA, and management raised key Canadian growth guidance. At the same time, Australia became a more significant component of consolidated revenue while contributing a much smaller proportion of EBITDA and absorbing a disproportionately large share of capital expenditure.
For now, that is the measurable change inside Dollarama. Australia already represents about one dollar in every eleven of group sales, but only about one dollar in every 64 of group EBITDA. Until more of the Australian network has moved through the transformation programme, the acquisition is likely to remain an important factor in understanding the difference between Dollarama's headline revenue growth and its consolidated margins.
