Dollarama : Third Quarter MD&A

DOLLARAMA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS Third Quarter Ended October 28, 2018

December 6, 2018

The following management's discussion and analysis ("MD&A") dated December 6, 2018 is intended to assist readers in understanding the business environment, strategies, performance and risk factors of Dollarama Inc. (together with its consolidated subsidiaries, referred to as "Dollarama", the "Corporation", "we", "us" or "our"). This MD&A provides the reader with a view and analysis, from the perspective of management, of the Corporation's financial results for the third quarter ended October 28, 2018. This MD&A should be read in conjunction with the Corporation's unaudited condensed interim consolidated financial statements for the third quarter ended October 28, 2018 and the audited annual consolidated financial statements and notes for Fiscal 2018 (as hereinafter defined).

Unless otherwise indicated and as hereinafter provided, all financial information in this MD&A as well as the Corporation's unaudited condensed interim consolidated financial statements for the third quarter ended October 28, 2018 have been prepared in accordance with generally accepted accounting principles in Canada ("GAAP") as set out in the CPA Canada Handbook - Accounting under Part I, which incorporates International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). The information on numbers of outstanding common shares and options to purchase common shares as well as earnings per share presented in this MD&A for the 13-week and 39-week periods ended October 29, 2017 has been retrospectively restated to reflect the three-for-one share split of the Corporation's outstanding common shares implemented on June 20, 2018 (the "Share Split").

The Corporation manages its business on the basis of one reportable segment. The functional and reporting currency of the Corporation is the Canadian dollar.

0B Accounting Periods

All references to "Fiscal 2017" are to the Corporation's fiscal year ended January 29, 2017; to "Fiscal 2018" are to the Corporation's fiscal year ended January 28, 2018; and to "Fiscal 2019" are to the Corporation's fiscal year ending February 3, 2019.

The Corporation's fiscal year ends on the Sunday closest to January 31 of each year and usually has 52 weeks. However, as is traditional with the retail calendar, every five or six years, a week is added to the fiscal year. Fiscal 2017 and Fiscal 2018 were both comprised of 52 weeks whereas Fiscal 2019 is comprised of 53 weeks.

DOLLARAMA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

December 6, 2018

1BForward-Looking Statements

This MD&A contains certain forward-looking statements about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or other future events or developments. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Specific forward-looking statements in this MD&A include, but are not limited to, statements with respect to:

• • expectations on net new store openings and general capital expenditures;

• • expectations on a sustainable gross margin;

• • the impact of minimum wage increases on administrative and store operating expenses;

• • the liquidity position of the Corporation; and

• • the potential accretive effect of the normal course issuer bid.

Forward-looking statements are based on information currently available to us and on estimates and assumptions made by us regarding, among other things, general economic conditions and the competitive environment within the retail industry in Canada, in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, the following factors which are discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's most recent annual MD&A and annual information form for Fiscal 2018, both available on SEDAR atwww.sedar.com:future increases in operating costs (including increases in statutory minimum wages), future increases in merchandise costs (including as a result of tariff disputes), inability to sustain assortment and replenishment of merchandise, increase in the cost or a disruption in the flow of imported goods, failure to maintain brand image and reputation, disruption of distribution infrastructure, inventory shrinkage, inability to renew store, warehouse and head office leases on favourable terms, inability to increase warehouse and distribution centre capacity in a timely manner, seasonality, market acceptance of private brands, failure to protect trademarks and other proprietary rights, foreign exchange rate fluctuations, potential losses associated with using derivative financial instruments, level of indebtedness and inability to generate sufficient cash to service debt, changes in creditworthiness and credit rating and the potential increase in the cost of capital, interest rate risk associated with variable rate indebtedness, competition in the retail industry, general economic conditions, departure of senior executives, failure to attract and retain quality employees, disruption in information technology systems, inability to protect systems against cyber-attacks, unsuccessful execution of the growth strategy, holding company structure, adverse weather including but not limited to the impact on sales, natural disasters and geopolitical events, unexpected costs associated with current insurance programs, product liability claims and product recalls, litigation and regulatory and environmental compliance.

These factors are not intended to represent a complete list of the factors that could affect us; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's financial performance and may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this MD&A are made as at December 6, 2018 and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.

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DOLLARAMA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

December 6, 2018

2BGAAP and Non-GAAP Measures

This MD&A, as well as the Corporation's unaudited condensed interim consolidated financial statements and notes for the third quarter of Fiscal 2019, have been prepared in accordance with GAAP. However, this MD&A also refers to certain non-GAAP measures. The non-GAAP measures used by the Corporation are as follows:

EBITDA	Represents operating income plus depreciation and amortization.
EBITDA margin	Represents EBITDA divided by sales.
Total debt	Represents the sum of long-term debt (including accrued interest as current portion) and other
bank indebtedness (if any).
Net debt	Represents total debt minus cash.
Adjusted retained	Represents deficit plus the excess of (i) the price paid for all common shares repurchased
earnings	under the Corporation's normal course issuer bids from inception in June 2012 through
October 28, 2018 over (ii) the book value of those common shares.

The above-described non-GAAP measures do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-GAAP measures provide investors with a supplemental measure of our operating performance and financial position and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP measures. With the exception of adjusted retained earnings, these measures are used to bridge differences between external reporting under GAAP and external reporting that is tailored to the retail industry, and should not be considered in isolation or as a substitute for financial performance measures calculated in accordance with GAAP. Management uses non-GAAP measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets, to assess the Corporation's ability to meet future debt service, capital expenditure and working capital requirements, and to evaluate senior management's performance. Management uses total debt and net debt to calculate the Corporation's indebtedness level, cash position, future cash needs and financial leverage ratios. Adjusted retained earnings is a non-GAAP measure that shows retained earnings without the effect of the excess of (i) the price paid for all common shares repurchased under the Corporation's normal course issuer bids over (ii) the book value of those common shares. We believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Refer to the section entitled "Selected Consolidated Financial Information" of this MD&A for a reconciliation of the non-GAAP measures used and presented by the Corporation to the most directly comparable GAAP measures.

3BRecent Events

4BAmendment to Normal Course Issuer Bid

On December 5, 2018, the Corporation received approval from the Toronto Stock Exchange (the "TSX") to amend the 2018-2019 NCIB (as hereinafter defined) in order to increase the number of shares that may be repurchased thereunder over the 12-month period between June 20, 2018 to June 19, 2019 from 16,386,351 to 30,095,056 common shares (now representing 10.0% of the Corporation's public float as at June 6, 2018). The other terms of the 2018-2019 NCIB remain unchanged.

Issuance of Fixed Rate Senior Unsecured Notes

On November 5, 2018, the Corporation issued $500.0 million aggregate principal amount of fixed rate senior unsecured notes due November 6, 2023 (the "3.55% Fixed Rate Notes") by way of private placement in reliance upon exemptions from the prospectus requirements under applicable securities legislation. The 3.55% Fixed Rate Notes were issued at a price of $995.37 per $1,000.00 principal amount of 3.55% Fixed Rate Notes, for an effective yield of 3.652% and aggregate gross proceeds of $497.7 million. The 3.55% Fixed Rate Notes bear interest at a fixed rate of 3.55% per annum, payable in equal semi-annual instalments, in arrears, on the 6th day of May and November of each year over the five-year term. The net proceeds of the offering of the 3.55% Fixed Rate Notes were used to repay the 3.095% Fixed Rate Notes (as hereinafter defined) which matured on November 5, 2018, repay indebtedness outstanding under the Credit Facility (as hereinafter defined) and for general corporate purposes.

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DOLLARAMA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

December 6, 2018

5BSettlement of Bond Forward Sale Derivatives

On October 29, 2018, immediately after the pricing of the 3.55% Fixed Rate Notes, the Corporation settled the bond forward sale derivatives which were entered into in January 2018, March 2018, May 2018, June 2018 and July 2018 to manage the exposure to interest rate risk in advance of the financing. The realized gain on the settlement of the derivatives was $2.3 million and will be amortized in net financing costs over the term of the 3.55% Fixed Rate Notes.

6BOur Business

As at October 28, 2018, we operated 1,192 stores in Canada, and we continue to expand our network across the country. Our stores average 10,193 square feet and offer a broad assortment of consumer products, general merchandise and seasonal items, including private label and nationally branded products, all at compelling values. Merchandise is sold in individual or multiple units at select fixed price points up to $4.00. All of our stores are corporate-owned and operated, providing a consistent shopping experience, and many are located in high-traffic areas such as strip malls and shopping centers in various locations, including metropolitan areas, mid-sized cities and small towns.

Our strategy is to grow sales, net earnings and cash flows by offering a compelling value proposition on a wide variety of merchandise to a broad base of customers. We continually strive to maintain and improve the efficiency of our operations.

16BKey Items in the Third Quarter of Fiscal 2019

Compared to the third quarter of Fiscal 2018:

• • Sales increased by 6.6% to $864.3 million;

• • Comparable store sales(1) grew 3.1%, over and above 4.6% growth the previous year;

• • Gross margin(1) was 38.9% of sales, compared to 40.1% of sales;

• • EBITDA(1) grew 3.5% to $214.6 million, or 24.8% of sales, compared to 25.6% of sales;

• • Operating income grew 3.0% to $195.0 million, or 22.6% of sales, compared to 23.3% of sales; and

• • Diluted net earnings per common share increased by 7.9% to $0.41 from $0.38(2).

During the third quarter of Fiscal 2019, the Corporation opened 14 net new stores, compared to 10 net new stores during the corresponding period of the previous fiscal year.

17BKey Items in the First Nine Months of Fiscal 2019

Compared to the first nine months of Fiscal 2018:

• • Sales increased by 6.9% to $2,488.8 million;

• • Comparable store sales(1) grew 2.7%, over and above 5.1% the previous year;

• • Gross margin(1) was 38.8% of sales, compared to 39.2% of sales;

• • EBITDA(1) grew 6.7% to $610.6 million, or 24.5% of sales, compared to 24.6% of sales;

• • Operating income grew 6.3% to $553.1 million, or 22.2% of sales, compared to 22.4% of sales; and

• • Diluted net earnings per common share increased by 9.6% to $1.14 from $1.04(2).

During the first nine months of Fiscal 2019, the Corporation opened 32 net new stores, compared to 40 net new stores during the corresponding period of the previous fiscal year. The Corporation still plans to open 60 to 70 net new stores by fiscal year end.

(1) We refer the reader to the notes in the section entitled "Selected Consolidated Financial Information" of this MD&A for the definition of these items and, when applicable, their reconciliation with the most directly comparable GAAP measure.

(2)

Earnings per common share for the 13-week and 39-week periods ended October 29, 2017 reflect the retrospective application of the Share Split.

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DOLLARAMA INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

December 6, 2018

Outlook

A discussion of management's expectations as to the Corporation's outlook for Fiscal 2019 is contained in the Corporation's press release dated December 6, 2018 under the heading "Outlook". The press release is available on SEDAR atwww.sedar.com and on the Corporation's website atwww.dollarama.com.

Factors Affecting Results of Operations 18BSales

The Corporation recognizes revenue from the sale of products or the rendering of services as the performance obligations are fulfilled.

All sales are final. Revenue is shown net of sales tax and discounts. Gift cards sold are recorded as a liability, and revenue is recognized when gift cards are redeemed.

The Corporation may enter into arrangements with third parties for the sale of products to customers. When the Corporation acts as the principal in these arrangements, it recognizes revenue based on the amounts billed to customers. Otherwise, the Corporation recognizes the net amount that it retains as revenue.

Our sales consist of comparable store sales and new store sales as well as sales to third parties.

Comparable store sales represent sales of Dollarama stores, including relocated and expanded stores, open for at least 13 complete fiscal months relative to the same period in the prior fiscal year. The primary drivers of comparable store sales performance are changes in the number of transactions and the average transaction size. To increase comparable store sales, we focus on offering a wide selection of quality merchandise at attractive values in well-designed, consistent and convenient store formats.

Sales to third parties represent mainly sales of merchandise to Dollar City, an independently-owned and operated value retailer with operations in El Salvador, Guatemala and Colombia founded in 2009. The Corporation, through Dollarama International Inc., shares its business expertise and acts as Dollar City's main supplier of merchandise, either as principal or as intermediary, pursuant to an agreement entered into in February 2013.

Historically, our highest sales results have occurred in the fourth quarter, with December representing the highest proportion of sales. Our sales also generally increase ahead of other holidays and celebrations, such as Easter, St. Patrick's Day, Valentine's Day and Halloween, but we otherwise experience limited seasonal fluctuations in sales and expect this trend to continue. Refer to the section of the annual MD&A dated March 29, 2018 entitled "Risks and Uncertainties" for a discussion about the risks associated with seasonality.

19BCost of Sales

Our cost of sales consists mainly of inventory, store occupancy costs, and transportation costs (which are largely variable and proportional to our sales volume) as well as warehouse and distribution centre operating costs. We record vendor rebates consisting of volume purchase rebates when earned. The rebates are recorded as a reduction of inventory purchased at cost, which has the effect of reducing the cost of sales.

Although cost increases can negatively affect our business, our multiple price point product offering provides some flexibility to react to cost increases on a timely basis. We have historically reduced our cost of sales by shifting most of our sourcing to low-cost foreign suppliers. For the first nine months of Fiscal 2019 and Fiscal 2018, direct overseas sourcing accounted for 56% and 57% of our purchases, respectively. While we still source a majority of our overseas products from China, we currently purchase products from over 25 different countries around the world.

Since the Corporation purchases goods in currencies other than the Canadian dollar, our cost of sales is affected by fluctuations in foreign currencies against the Canadian dollar. In particular, we purchase a vast majority of our imported merchandise from suppliers in China with U.S. dollars. Therefore, our cost of sales is impacted indirectly by the fluctuation of the Chinese renminbi against the U.S. dollar and directly by the fluctuation of the U.S. dollar against the Canadian dollar.

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