No-frills dollar stores are proving their appeal, at least in terms of enticing low-income and other bargain-hunting shoppers.
Dollar General, the leader in the space, and Dollar Tree both saw their shares jump Thursday after they reported better-than-expected sales. At Dollar General, fiscal Q1 comparable sales, a closely watched performance metric that excludes the impact of newly opened and closed stores, rose 3.8% in the quarter that ended May 3. That followed 29 years of straight annual gains.
"We operate in the most attractive sector of retail," Todd Vasos, Dollar General’s chief executive officer, said on a conference call Thursday, adding that independent research showed the company had gained market share. "Our core consumers continue to come in more often and spend more. We are (also) attracting the higher-end consumer."
In fact, he said, those who "make a little more money" than the chain's average low-income shoppers represent the fastest-growing customer segment for Dollar General.
At Dollar Tree, same-store sales rose 2.2%, the 45th straight quarterly increase. Growth was led by its eponymous chain as the retailer attempts a turnaround at Family Dollar, its lagging acquisition.
Dollar General shares shot up 7.2% to close at a record high. Dollar Tree stock closed up more than 3%.
At a time when retailers including Victoria’s Secret and Gap are shrinking their physical footprints and others like Payless ShoeSource are liquidating, Dollar General, which had nearly 15,600 stores as of May 3, is still expanding.
The company has said it plans to open 975 stores this year and remodel or relocate 1,100 stores.
"Amidst a sea of uncertainty across retail, particularly in both apparel and at the high end, we prefer the low end today," Gordon Haskett analyst Chuck Grom said in a report.
