Reject Shop transformation under Canada’s Dollarama begins with inventory reset

The new Canadian owner of The Reject Shop will only change its name to ‘Dollarama’ when it believes the revamped discount chain best reflects its strategy. And that means much cheaper products.

The Reject Shop will eventually change its name to ‘Dollarama’ under its new Canadian owner.

The new Canadian owner of The Reject Shop is resigned to its Australian acquisition ringing up losses until at least 2028, as it revamps the discount retailer into a true bargain paradise.

It will not take its parent’s name, Dollarama, until The Reject Shop is transformed and reflects the type of attractive value offering for local shoppers that the Canadian company is known for.

In the meantime, Dollarama Inc, which has a market capitalisation almost equivalent to the combined size of Woolworths and Coles, is preaching patience as it begins to re-engineer all 401 The Reject Shop stores in Australia to become more like its highly successful chain in Canada and through Latin America.

The Reject Shop was privatised by Montreal-based Dollarama Inc in July after a $259m takeover and it is not expected to be a source of profit for the Canadian parent until after fiscal 2027.

But this is part of a long-term strategy beginning with shipping to Australia new products that will better fit its lower-priced retail model, concluding with snuffing out the 44-year old Australian brand.

Dollarama Inc reported that sales for The Reject Shop for the 13 weeks to November 2 were $C186.1m ($203m) with the Australian business reporting a net loss of $C8.6m. The Reject Shop is, for now, a minor segment of Dollarama Inc’s North American business which in that same 13 week period reaped sales of $C1.72bn and a profit of $C330.3m.

“In Australia, we have begun laying the groundwork for The Reject Shop’s multi-year transformation,” Dollarama Inc president and chief executive Neil Rossy told analysts at the company’s third quarter earnings briefing.

“It’s all hands on deck to transform the business ahead of deploying our value proposition over the coming years.”

All 401 The Reject Shop stores will eventually trade as Dollarama.

This required investment and new merchandising, logistics and planning, he said. Dollarama products would start appearing on the shelves next year and continue to populate the aisles into 2028.

“On the merchandising front, updating the product offering is a deliberately thorough undertaking, which requires planning on the procurement, logistics, and inbound shipping sides.

“The process of reviewing all SKUs (stock keeping units) takes time because of the volume and related complexities, as well as the initial legwork involved on the compliance side. It’s also the most important aspect of this transformation in terms of delivering our value proposition to the Australian consumer.

“We continue to be on plan to have select Dollarama SKUs starting to hit shelves next year, with penetration gradually increasing throughout fiscal 2027 and fiscal 2028.

“As this transformation happens Dollarama Inc doesn’t expect The Reject Shop to have a positive impact on its overall profitability in the near term, including fiscal 2027.”

Some shoppers should start noticing a difference already as a select few Reject Shop stores are fitted out and restocked. “We have begun introducing the Dollarama layout through the store renovations and new store openings. Overhauling an existing store entails overhauling the floor plan, new fixtures, racking, lighting, etc. We have renovated four stores since the beginning of the year,” Mr Rossy told analysts about its burgeoning Australian retail renovation.

“We expect to ramp up in fiscal 2027 as we fine tune the process and to renovate all existing stores over a four-year period.”

The Dollarama fixtures and layout allow for more density in shelf placement, among other improvements, he said. “This will be very impactful once we are further along with the Dollarama merchandise rollout.”

A ultra-low priced competitor to Big W, Kmart and Target could mean a shake-up at the bargain end of the retail scene. Dollarama landed a knock-out bid for The Reject Shop at $6.88 a share to secure unanimous support for the deal including from the company’s then largest shareholder, packaging billionaire Raphael Geminder.