Dollar Stores in the US Hold Strong While Retail Market Shifts Around Them

In the midst of the big retailer price war waging right now, discount chains—and especially US dollar stores—have been somewhat untouched. While many analysts feared that the whole of the industry would suffer direct or collateral damage from the proverbial shootout, US dollar stores are holding strong. Indeed, major retailers—including Wal-Mart Stores Inc and Kroger Co—have had to keep slashing prices on key goods like laundry detergent and eggs, deep discount stores like Dollar Tree inc and Dollar General Corp have said they do not need to cut prices to remain competitive.

And together, Dollar Tree and Dollar General have operate more than 28,000 stores throughout the United States. Both of these companies lost a decent amount of business last year, particularly to Wal-Mart who begin slashing prices to get more market share.

However, since that time, major chains had to keep cutting prices to retain customers while those already loyal to the dollar stores simply just kept up with business as usual. These chains have been immensely popular among both price-conscious boomers and hard-pressed millennials who want to avoid big stores and are more willing to trade large packs and expensive national brands for whatever reasonable, more price-friendly alternative they can find.

Euromonitor analyst Jared Koerten puts it this way: “The big advantage that dollar stores have is that, given their store footprint and the real estate they need, they can exist … in small towns where Wal-Mart or supermarkets are not going to go.”
For now, then, Dollar General has forecast net sales will increase somewhere between five and seven percent for the year (ending Feb. 2). This will still fall below the 7.8 percent average growth it had reported over the previous two fiscal years.
Additionally, Dollar Tree has similar expectations: net sales for the year—ending in January—to also increase between 5.9 and 7.4 percent. This is also slightly below the company’s consisted reported average growth rate over the past two years, not including sales from recently-acquired Family Dollar, of 8.6 percent.

At the end of the day, Moody’s analyst Mickey Chadha notes, “Dollar stores are a convenience play. They are not grocery stores. They offer a lot of consumables that are not all private label, but also offer home products, seasonal products, electronics, apparel and accessories that are higher margin.”

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