The Reject Shop (ASX: TRS) is an Australian discount retail company with a primary focus on offering low-cost products to consumers. Its core operations revolve around the sale of a wide range of products, including household goods, food, and personal items, all at affordable prices. The Reject Shop’s stores are strategically located across Australia, with a significant presence in both metropolitan and regional areas. The company is known for its efficient supply chain and cost-effective operations, ensuring that it remains competitive in the highly challenging retail market.
Dollarama’s Acquisition of The Reject Shop: What It Means for the Retail Landscape
The Reject Shop has agreed to a $259 million takeover by Canadian value retailer Dollarama. This move is set to reshape the future of the Australian discount retail market, offering new growth prospects and expansion opportunities. The deal, which has been agreed upon by The Reject Shop’s board of directors, sees Dollarama offering shareholders $6.68 per share in cash. This bid represents a generous 112% premium over the stock’s closing price of $3.15 on March 26, 2025, demonstrating the value Dollarama places on the Australian chain. This acquisition will see the Canadian giant acquire all outstanding shares in The Reject Shop, making it a complete buyout of the business.
This move comes at a time when the Australian retail environment is facing increasing pressure. The competitive retail sector is experiencing heightened challenges due to the rise of global online retailers, including giants like Shein and Temu, which are entering the Australian market.
Despite this, The Reject Shop’s strength has always been its physical presence, and Dollarama’s investment in the Australian chain will ensure that the discount retailer can compete effectively with both brick-and-mortar stores and online giants. The Reject Shop’s latest full-year accounts, for the 12 months to June 30, show sales of $852.7 million, up 2.6 per cent on a comparable store basis. But Earnings slid 41 per cent to $5.4 million, while net profits slumped 36 per cent to just $4.7 million. They had been as high as $16.6 million in 2016. Brian Walker, founder of the Retail Doctor Group, has stated that the acquisition is a good deal for The Reject Shop, given the strong growth potential under Dollarama’s ownership.
Expansion Plans: Doubling the Footprint
Dollarama, which operates more than 1,600 stores across Canada, has ambitious plans for The Reject Shop. The Canadian company has committed to almost doubling The Reject Shop’s store network in Australia over the next decade. Currently, The Reject Shop operates around 390 stores across the country, but Dollarama aims to expand this number to nearly 700 by 2034. This expansion is seen as a clear indication of Dollarama’s belief in the strength of The Reject Shop’s business model and the growing demand for low-cost retail options in Australia.
Clinton Cahn, CEO of The Reject Shop, has expressed his excitement about the deal, emphasising that the acquisition will bring more Reject Shops across Australia, making them more accessible to customers in both urban and rural areas. This would ultimately create a larger footprint and reach, benefiting both consumers and shareholders alike.
Cahn further highlighted that Dollarama intends to work closely with the local management team to ensure that The Reject Shop’s unique offerings continue to meet customer demands. While it is still unclear whether the stores will continue to trade under The Reject Shop name, the partnership will bring much-needed stability to the business. Dollarama’s global muscle in sourcing and logistics is expected to alleviate operational constraints and help The Reject Shop expand its market presence.
The Future of The Reject Shop Under Dollarama
With the deal expected to be finalised by mid-2025, The Reject Shop’s future appears promising under Dollarama’s ownership. As part of the acquisition, Dollarama plans to increase The Reject Shop’s store count, strengthen its retail operations, and explore new avenues for growth. Dollarama’s business model, which focuses on providing quality products at low prices, aligns well with The Reject Shop’s strategy, making this acquisition a natural fit for both companies.
The partnership between Dollarama and The Reject Shop is also expected to result in better sourcing capabilities, as Dollarama’s global supply chain expertise will likely improve the availability and affordability of products in The Reject Shop’s stores. Additionally, with Dollarama’s financial backing, The Reject Shop will be able to invest in its infrastructure and technology, making shopping more convenient for customers.
For The Reject Shop’s shareholders, the $259 million offer represents an attractive proposition, as the $6.68 per share cash offer is significantly higher than the stock’s previous market value. The deal provides certainty and value for shareholders, which has been well-received by large institutional investors, including Kin Group, the retailer’s largest shareholder, who has indicated that it will support the deal. A special shareholder meeting in June will determine the outcome, but the strong backing for the deal suggests that it will be approved by shareholders.
