This article was created with the assistance of artificial intelligence, using transcript from my video on ranking the Canadian retail stocks.
This is one of the more interesting tier lists I’ve done, because Canadian retail right now is a tale of two tapes. Three of these retailers are crushing both the TSX and the S&P 500. The other three are high-quality businesses that have either had their thesis knocked off course or are stuck in a consumer pullback.
I ranked six of the largest retailers in Canada from S to E: Alimentation Couche-Tard, Pet Valu, Loblaw, Canadian Tire, Aritzia and Dollarama. The reasons the winners are winning and the losers are losing are very different, so I’ll go through each one.
Here’s the split over the last three years. Aritzia, Loblaw and Dollarama have pulled away. Couche-Tard, Pet Valu and Canadian Tire have gone nowhere or gone backwards.
Disclosure up front: I own Aritzia, and have since 2019.
Alimentation Couche-Tard (TSX: ATD): C Tier
Couche-Tard is the company behind Circle K, one of the largest convenience store operators in the world and one of the biggest Canadian success stories on the market. It runs over 17,000 stores across the US, Europe and Canada, with the US as its biggest market. It got to where it is through acquisitions, and plenty of people thought it overpaid for Circle K at the time.
The stock hasn’t done much lately. It’s a roughly C$77 billion company that is up only about 14% over three years. On EV/EBITDA it sits around the 17th percentile of the last decade, which means it has only been cheaper about 17% of the time.
The first thing to understand is the business mix. Road fuel is around half the business, and merchandise and services are about 47%.
That makes fuel margins the big swing factor. Last quarter fuel margins came in well above expectations, and that drove the earnings beat. The market didn’t react much, because elevated fuel margins are hard to sustain. The steadier, higher-margin side is the store itself: snacks, drinks, tobacco, food and car washes, at roughly 35% gross margins. Same-store merchandise sales grew just 1.7%.
Growth here has always come from buying chains. Couche-Tard buys baskets of 100, 200, 300 stores, folds them in, improves the margins and rebrands them. Its latest deal is Żabka, more than 13,000 stores in Poland and Romania with about US$1.1 billion of EBITDA, and the largest acquisition in its history. Żabka is interesting because it’s a modern convenience chain built around food and an app, with no gasoline at all.
The catch is leverage. Debt is around 1.77 times EBITDA today and is expected to rise to about 3 times after Żabka, with management planning to bring it back down within two years. With rates rising in the US, where much of Couche-Tard’s business is, the market doesn’t like that. Buybacks have been scaled back as a result.
The bull case is real: it’s the cheapest of the big three (Dollarama, Loblaw and Couche-Tard), it has a 6.8% free cash flow yield, investment-grade credit, a long record of running acquired chains, a very fragmented market to keep consolidating, and US same-store sales are back above zero.
The bear case is that earnings have gone sideways. Adjusted EPS was $3.12 in fiscal 2023 and $3.10 in fiscal 2026, which is exactly why the stock has been flat. I think the main issue is merchandise. Convenience-store price points have reached the point where people just aren’t buying. A few years ago I’d grab two or three bags of chips at a convenience store and pay a few dollars more than the grocery store. Now it’s about $20 for three bags versus about $10 at No Frills. I don’t see a clear path back for that side of the business, which is why I removed Couche-Tard as a Canadian foundational stock at Stocktrades Premium a few years ago.
It goes in the middle of the pack, in C tier. My thesis has shifted. I’m not bearish, but I’m not bullish either. The stock is cheap, and I think it’s cheap for a good number of reasons.
Pet Valu (TSX: PET): E Tier
Pet Valu went public in 2021, in the middle of the COVID pet boom, and the timing was perfect for the IPO. Today it runs just under 900 stores, 71% of them franchised, and 76% of Canadians live within five kilometres of one. It’s a C$1.3 billion small cap that is more than 50% off its high, with flat growth and falling traffic.
The valuation looks very cheap. The free cash flow yield is around 11.4%, and on my system the stock grades as cheap below $29.90 while trading around $19.60. The caveat is that there isn’t much trading history to compare against, and the early history is inflated COVID valuations. A stock can look cheap for a lot of reasons, and it’s your job to figure out why.
About 81% of sales are food and 16.5% are toys and hard goods.
You’d think food makes this defensive, since people have to feed their pets no matter what. The problem is that as money got tighter, a lot of people gave up pets, switched to cheaper brands, bought food at Walmart or Costco, or traded down within Pet Valu itself. Competition is heavy: Global Pet Foods, PetSmart, Mondou, plus Costco, Walmart and even Dollarama, which now sells dog food.
The franchise model is the interesting part. About 63% of revenue is wholesale to franchisees. Pet Valu also opens corporate stores, which typically pay back in about two years, and then often sells them to franchisees at a gain. That drives a good chunk of profit, but it isn’t something you want to rely on.
Leverage is 2.3 times including leases, so not as bad as it sounds. The bigger issue is capital returns: dividends and buybacks are running at about 115% of free cash flow. If the company thinks its shares are cheap, it should buy them back. It can’t keep doing both and paying out more than it brings in.
There is a bull case. I think most of the trade-down has already been absorbed. 88% of sales come from loyalty members (I’m one of them, buying my dog’s food there), so the customers left are likely to stick around. Same-store sales were up 18% and 17% in 2021 and 2022 and are now flat, which suggests the worst of the post-pandemic fade is behind it. That doesn’t mean the worst is over. Traffic is falling, 2026 guidance assumes no improvement, prices are being cut to hold customers, and much of the EBITDA growth has come from selling stores to franchisees.
Pet Valu goes at the bottom of the list, in E tier. I see the worst priced into the stock, but I also see the weakest business of the six.
Loblaw Companies (TSX: L): B Tier
Loblaw is a foundational stock at Stocktrades Premium and has beaten every expectation I had for it. It’s also one of the most hated companies in Canada from a consumer standpoint. It’s the country’s largest grocer and drugstore operator: No Frills, Maxi, Real Canadian Superstore, Loblaws, T&T and nearly 1,400 Shoppers Drug Marts, worth about C$80 billion.
The trade-down is the whole thesis. When food inflation hit 9% in 2022, people traded down to private label and discount stores. I used to shop at Sobeys almost exclusively. Since 2022 I shop at Costco and No Frills because it’s cheaper. Loblaw has the biggest discount exposure in Canadian grocery, over 50% of revenue versus under 25% at Metro. No Frills and Maxi comps are running near 4% against about 1.5% for total food, and 62% of the 77 stores Loblaw opened in 2025 were discount stores.
Pharmacy is the other engine. Pharmacy comps have run between 5.6% and 7.5% for eight straight quarters, helped by GLP-1 weight-loss drugs. I wouldn’t count on that pace forever.
Loblaw also sold PC Financial to EQB, taking EQB shares as part of the payment, so it now owns roughly 17% of Equitable Bank. EQB becomes PC Optimum’s exclusive financial partner.
Debt is about 2.3 times adjusted EBITDA, which is fine for a business with cash flows this consistent. And Loblaw has been an aggressive buyer of its own stock, much of it at prices nowhere near today’s.
That’s how a company that grows revenue around 4% a year produces double-digit earnings growth. From fiscal 2022 to 2025, EPS grew 41%: about 13% from revenue growth, 13% from wider margins as it reinvested in its stores, and 11% from a lower share count.
The bear case is valuation. Loblaw trades around 27 times trailing earnings and in the 99th percentile of its own decade on EV/EBITDA. It has only been more expensive about 1% of the time over ten years, which is unusual for a low-margin, volume-based grocer. My system puts the top of fair value around $60 a share, and it wouldn’t be cheap until about $41. The valuation rose because growth rose, but there’s only a finite number of Canadians who can trade down, and food same-store sales are already slowing.
It’s also the most politically exposed stock on this list, from food inflation headlines and the grocery code to the bread price-fixing scandal.
If this were the inflationary period a few years ago, Loblaw goes S all day. Today it goes in B tier. I think it’s the best grocer in North America (excluding warehouse clubs like Costco), but it’s expensive. Not expensive enough that I’d run from it, but expensive.
Canadian Tire (TSX: CTC.A): D Tier
Canadian Tire is a barometer for the Canadian consumer. It owns Canadian Tire, Mark’s, SportChek, Helly Hansen and a credit card bank, and sells a lot of discretionary items like camping gear, seasonal goods and sports equipment. It’s about a C$10 billion company that has gone roughly nowhere in five years, which is a negative real return once you count inflation.
Retail is about 62% of the business, financial services about 30%, and CT REIT the rest. The Canadian Tire stores themselves are the problem, and they’re the biggest piece of earnings. Same-store sales fell 2.3% in Q1 and 0.8% in Q2, blamed on weather. You can do that once or twice, not indefinitely. Automotive is strong, with 24 straight quarters of growth.
SportChek is the surprise. Its comps grew 8% in Q2, and while about half of that was World Cup merchandise, the trend has been strong for a while.
Mark’s is growing around 4.2%, and both banners are taking share from weakened rivals and former Hudson’s Bay locations.
The bank is weaker than a big bank’s card business. Write-offs run about 7.2%, roughly $550 million a year, more than double what the big banks see on credit cards. A one-point rise in write-offs would cost about $77 million. Management says they’ve stabilized. On the positive side, Triangle Rewards has about 12 million members and drives 57% of sales, and the new Tim Hortons and WestJet partnerships are, I think, quietly very good. Scan your Triangle card at Tim’s, earn Canadian Tire Money, and you have a reason to walk into Canadian Tire.
The retail business carries very little debt, about $277 million net of cash. Most of the debt sits in the bank, which funds card balances. Normalized earnings grew 18.6% in 2025, and most of the True North restructuring savings are still to come. For dividend investors there’s a 3.5% yield, 16 straight years of raises, and a payout of about 50% of earnings and 63% of free cash flow. On my system it’s cheap under about $212, and it’s trading right around there.
The problem is growth. Earnings per share today are only slightly above 2019. Every macro recovery gives it a cyclical boost, and the next downturn washes it away.
Canadian Tire goes in D tier. I can’t imagine buying it over Couche-Tard, which I’m not even bullish on, let alone Loblaw or Dollarama.
Aritzia (TSX: ATZ): S Tier
I’ve owned Aritzia since 2019 and have made a lot of money on it, though I’ve trimmed some along the way. A quick word on fashion stocks: a lot of investors say never invest in fashion. I’ve been doing this 16 years and haven’t lost money in fashion, with Lululemon and Canada Goose before Aritzia. But fashion is not set-and-forget. You have to watch it, and when things go wrong you have to get out. I will sell Aritzia one day. It’s not now, because the results are wild.
Revenue grew 44%, the stock is up about 67% over the past year and more than 500% over three years, and yet it sits around the 37th percentile of its valuation history, because earnings have grown even faster than the price.
The main bull case is the US. When I bought in 2019, the US was about a third of revenue. Now it’s about two-thirds, and Canada is still growing. US boutiques went from 42 in July 2022 to 79 at the end of the second quarter, and management sees room for 180. Apply Canada’s stores-per-capita to the US population and you’d get about 550. They won’t build that many, but it shows how much room is left.
Canada has 67 boutiques and is basically saturated, even though it grew 20% last quarter. Digital is 34% of sales, with over 2.5 million app downloads, and digital revenue grew 68% last year. That’s a strong sign of brand trust: nobody orders a $200 or $300 jacket online from a brand they don’t know. About 97% of what Aritzia sells is its own brands.
The balance sheet is excellent: C$528 million of cash, no debt, no dividend, and $270 million of buybacks so far this fiscal year (mostly offsetting stock-based compensation). Cash should reach around C$1 billion by year end. A new store costs about $4 million and pays back in 12 to 18 months, so Aritzia could fund the entire US build-out with cash on hand. Same-store sales have grown 19% or more for seven straight quarters, including 30% plus this quarter on top of 22% a year ago, and return on invested capital is about 28%.
The bear case: the stock is up 513% in three years, and growth is already slowing, with Q3 guided to roughly half the Q2 growth rate. The tariff refund helped Q2. About 67% of revenue is US, and we’ve seen what happened to Lululemon’s and Nike’s US comps. Fashion risk is real.
At around $149, it sits between fair value and expensive on my system, and it’s in the top 1% of the 6,000+ stocks I cover with a 7.6 overall grade. It goes in S tier. It was close with Dollarama, but Aritzia’s growth relative to its valuation is on another level. If you’re risk averse, this probably isn’t the stock for you. It has the biggest multi-bagger potential on the list, and the biggest potential drawdown. At its peak, Lululemon was six times Aritzia’s size today.
Dollarama (TSX: DOL): A Tier
I think Dollarama is the best retailer in Canada, and arguably North America. The one reason it isn’t S tier is valuation: 41 times earnings and the 94th percentile of its last decade. It has rarely been more expensive.
The business is still executing. There are 1,734 stores, same-store sales are up 5.4% and traffic is up 3.7%, and fiscal 2027 guidance was raised in the second quarter. Dollarama owns 60.1% of Dollarcity in Latin America, is running a pilot in Mexico, and bought Australia’s Reject Shop, where it’s renovating stores and getting the product mix right before putting the Dollarama name on them.
Margins are some of the best of any dollar store operator in North America, above 25% and about three times what Dollar Tree earns. To be fair, that’s cherry-picking: Dollarama doesn’t operate in the US, and it hasn’t yet proven the model works outside Canada. Whether it can repeat this in Australia and Latin America is what drives the stock from here.
The most underrated part of Dollarama is how it handles price. When a supplier’s costs rise, Dollarama keeps the shelf price and shrinks the pack: four cups become three at the same $5. Shoppers don’t notice right away, so Dollarama looks like a store that never raises prices, and traffic holds up.
It throws off a ton of cash. Leverage is about 2.1 times, and the share count is down about 28% over ten years while earnings per share grew 4.7 times.
The bear case is price, the Australian business dragging on margins for years, and the $5 price cap, which limits how much inflation it can pass through. (People said they’d stop shopping there when it went above a dollar, too.) It’s still in the top 2% of the stocks I cover. I’d want a better entry, but this is a company that can grow into its valuation.
Dollarama goes in A tier.
The Final Board
| Stock | Ticker | 3-Year Price | Valuation Percentile | Tier |
|---|---|---|---|---|
| Aritzia | ATZ | +513% | 37th (P/E) | S |
| Dollarama | DOL | +118% | 94th (P/E) | A |
| Loblaw | L | +148% | 99th (EV/EBITDA) | B |
| Couche-Tard | ATD | +14% | 17th (EV/EBITDA) | C |
| Canadian Tire | CTC.A | +47% | 55th (EV/EBITDA) | D |
| Pet Valu | PET | -22% | 7th (P/E, since IPO) | E |
Aritzia is the highest-risk name here, and the one I own. Dollarama’s valuation kept it out of S; at 30 times earnings it probably goes to the top. Loblaw is the best grocer in North America at a decade-high price. Three years ago Couche-Tard goes S all day, but I think the long-term thesis for outperforming the market is broken. Canadian Tire just doesn’t move the needle for me, and Pet Valu is the weakest business of the six.
FAQ
What is the best Canadian retail stock to buy?
On this board, Aritzia ranks highest (S tier) for its US growth runway and debt-free balance sheet, followed by Dollarama (A tier), which I consider the best retailer in Canada but expensive at about 41 times earnings.
Is Loblaw stock overvalued?
Loblaw trades in the 99th percentile of its ten-year EV/EBITDA range and around 27 times trailing earnings. It’s a high-quality business, but on my system fair value tops out around $60 a share.
Why is Couche-Tard stock down?
Adjusted earnings have been flat for three years, same-store merchandise sales are weak, profits lean on high fuel margins, and leverage is set to rise to about 3 times EBITDA after the Żabka acquisition.
Is Pet Valu’s dividend safe?
Dividends and buybacks together are running at about 115% of free cash flow, which isn’t sustainable. The company needs to pick one.
Is Canadian Tire a good dividend stock?
It yields about 3.5% with 16 straight years of increases and a payout of about 50% of earnings, so the dividend looks solid. The issue is growth: earnings per share are only slightly above 2019.
Get Every Tier List in One Report
If you want every tier list from this series in one place, grab my free Canadian Stock Tier List Collection. It has every board, the reasoning behind every grade, and the returns since each call. It’s eight-plus hours of video in a 10 to 15 minute read: [LEAD MAGNET LINK]
Nothing in this article is investment advice. Do your own research before buying any stock.
