Dollar stores have emerged as one of the few winners amid America’s economic crunch. As shoppers at all levels don’t have the face of payments, even affluent shoppers turn to the standard dollar and drop when looking for bargains.
The two largest retailers in the US saw their shares adjusted today (Decred 4) after beating street estimates for the September Quarter and raising their annual profit forecasts. Their strong results underscore the current demand for discounted goods: about a quarter of a standard dollar is worth $1, while 85 percent of dollar tree inventions are available at prices of $2 or less.
Tennessee-based Dollar General posted a 4.6-year increase in sales, while revenue rose 44 percent to $282.7 million. The Virginia-based dollar drug company reported a 9.4 percent one-year increase in quarterly revenue to $4.7 billion and a 4.8 percent increase in profit to $244 million.
Dollar General, which operates more than 20,000 stores nationwide, said the jump in customer traffic was driven by a 2.5 percent increase in same-store sales during the quarter. But while more shoppers come through the doors, they buy fewer items per visit on average.
“This traffic and basket definition is consistent with what we’ve seen historically where our core customers feel more constrained in their spending,” said CEO Todd Vasos during today’s earnings call. “That the lower buyer base continues to be extended.”
Wealthy shoppers are looking for deals
The push also highlights a notable shift: As high-income households feel the sting of economic uncertainty, affluent shoppers are increasingly turning to dollar stores. Vasos said he saw “different growth” in this segment, and the dollar drug reported that 60 percent of the three million new buyers in the last quarter came from $100,000.
At the same time, “low-income homes are more affordable than ever before,” Tree CEO Mike Creedon told an analyst yesterday. Average spending among customers earning less than $60,000 is growing at more than twice the rate of those in higher-income households, he added.
Creedon hopes the company’s entry for wealthy buyers will stick. “We want to create a very close relationship with them,” he said, stressing that the dollar drug aims at customers who unwrap appropriate customers of items and improve the experience of 16,500 locations.
Dollar stores are the latest discounters to thrive in a challenging economic environment that has continued to push shoppers of all backgrounds to stretch their budgets. Walmart, another retailer known for its low prices, reported last month that it, too, has seen a surge in affluent customers seeking cheaper options for food and health and wellness products.