Canadian discount chain Dalarama has paid a considerable penny to rejected shops with plans to open hundreds more stores in Australia.
As the economic order undergoes major structural changes, Canadian investors jumped at down-under retail opportunities.
Australia’s largest discount retailer, The Reject Shop is a quiet business accomplisher and is known locally for selling a wide range of inexpensive products, from confectionery tupperware to gardening tools.
The chain has 390 stores in Australia, with 65 stores than Kmart, owned by Wes Farmers.
But things may not be that quiet anymore.
The rejected shop stock prices skyrocketed when the huge Dolrama from Canadian discount stores issued a $259 million (US$165 million) acquisition offer in late March.
Dollarama agreed to buy all shares in the rejected shop at $6.68 per share, more than twice the chain’s final closing price of $3.15 on March 26th.
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The large offer provided immediate and attractive value to shareholders, causing the stock to skyrocket to 111%. This is the biggest profit since the rejection shop first opened in 1981.
The bold move has raised some eyebrows at stakeholder meetings, but Daralama’s boss claims that the rejection shop has a bigger, better, brighter future.
Dollarama, which operates more than 1,000 stores in Canada (which clearly discounts the expansion of the US chain, which is planned for expansion for Mexico), is still growing and potentially an undeveloped market despite the widespread presence of rejected shops.
In a presentation with stakeholders later last month, Dollarama president and CEO Neil Rossy said he thought his company could almost double the number of stores.
“We believe that when translated into our business model, the TRS (Refusal Shop) platform will provide a strong foundation for future growth, reflecting the purpose of growing the network to around 700 stores by 2034,” he said.
Rossy said the companies implemented very similar models and values, but he said one collision on the road was the cost of labor and real estate.
Furthermore, despite the market domination of rejected shops, stocks have declined for years.
They manifest as a small problem for Dalalama executives.
“We believe that with one know-how and our capital, we can serve a considerable amount of value, and I think our offer is fair in that context,” Rossy said.
“The management of TRS has done an incredible job bringing business where we are today, and I think we can help them bring it to the next level with our know-how and expertise, the capital needed to grow our business.”
The transaction is expected to be officially concluded in three to four months.
Consumer trends during high inflation
Dollarama’s excitement to undertake a department store chain selling small, cheap and discounted items could be fueled by the current high-inflation environment, leading many Australians to cut discretionary spending.
Last year, Monash University revealed a survey showing that larger, more expensive items are less popular with shoppers.
But rejected shops and their Canadian counterparts, mainly household items, small furniture, snacks and some groceries.
Data from the Australian Bureau of Statistics (ABS) also shows that household expenditure is gradually recovering. In February 2025, household expenditures rose 3.3% the previous year.
