Dollar stores have emerged as one of the few winners amid America’s economic crunch. As shoppers across all income levels face financial strain, even wealthy consumers are turning to Dollar General and Dollar Tree in search for bargains.
The two largest dollar store operators in the U.S. saw their shares surge today (Dec. 4) after beating Wall Street estimates for the August-September quarter and raising their profit forecasts for the year. Their strong results underscore the current demand for discounted goods: roughly one-quarter of Dollar General’s items cost $1, while 85 percent of Dollar Tree’s inventory is priced at $2 or less.
Tennessee-based Dollar General reported a 4.6 percent year-over-year increase in sales, while net income soared 44 percent to $282.7 million. Virginia-based Dollar Tree reported a 9.4 percent year-over-year jump 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 a jump in customer traffic drove a 2.5 percent increase in same-store sales during the quarter. But while more shoppers are coming through the doors, they’re buying fewer items per visit on average.
“This traffic and basket composition is consistent with what we have historically observed when our core customer feels more pressured on their spending,” Dollar General CEO Todd Vasos said during today’s earnings call. “That low- to middle-end consumer continues to be stretched.”
Affluent shoppers seek out deals
The discounters also highlighted a notable shift: as higher-income households feel the sting of economic uncertainty, wealthy shoppers are increasingly turning to dollar stores. Vasos said he saw “disproportionate growth” from this segment, while Dollar Tree reported that 60 percent of its 3 million new shoppers last quarter came from households earning more than $100,000.
At the same time, “lower-income households are depending on us more than ever,” Dollar Tree CEO Mike Creedon told analysts yesterday. The average spending among customers earning under $60,000 grew more than twice as fast as that of higher-income households, he added.
Creedon hopes the company’s influx of affluent shoppers sticks around. “We want to create a very sticky relationship with them,” he said, noting that Dollar Tree aims to “wow” customers by curating a relevant assortment of items and improving in-store experiences across its 16,500 locations.
Dollar stores are the latest discounters to thrive in a challenging economic environment that has pushed consumers of all backgrounds to stretch their budgets. Walmart, another retailer renowned for low prices, reported last month that it, too, has seen a surge in affluent customers seeking cheaper options for groceries and health and wellness products.
