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Budget-friendly retailers are having a banner year and that’s not a good sign for everyday Americans.
Dollar General reported quarterly results on Thursday that reinforced the trend, beating expectations across the board.
Both Dollar General and Dollar Tree are up nearly 50 percent year-to-date, handily beating the S&P 500 and Nvidia, the name at the center of the AI boom.
That’s good news for shareholders, yet it does underscore how more consumers are looking to stretch their dollars after years of compounding inflation and high interest rates.
The pair of dollar stores have similarly outperformed other retailers including Kohl’s, Walmart, TJX, Target and even Amazon.
All this points to a broad flight to value for shoppers. Ultra-discounted stores have thrived while traditional big-box retailers plus the world’s favorite online retailer have lagged.
Depending who you ask, some commentators believe the economy — and so, the consumer — remains in good shape.
And certain pockets of data confirm that view, such as still-solid retail sales.
That said, large pools of capital are betting on sustained outperformance by companies that benefit most from cash-strapped consumers.
If shoppers are trading down from Walmart and Amazon — options that many consider “budget-friendly” as is — for even cheaper stores, that underscores tight household budgets and shrinking discretionary spending.
Now, Dollar General and Dollar Tree emerging as standout stocks isn’t a foolproof recession indicator.
But when investors are effectively betting on the ongoing strain for low- and middle-income consumers, it’s worth paying attention.
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