Hot Topic: The Dollar Store’s Rising Value
by Christina Lee on February 11th, 2009
Major dollar store chains are reporting growth in their most recent quarters – a trend that continues from the holiday season and demonstrates that consumers still consider them highly valuable.
As the biggest of three chains, Dollar General reported yesterday a 9.4 percent same-store sales increase in its fourth quarter, amounting to $2.85 billion.
Dollar Tree had a year-to-year fourth quarter sales rise of 6.8 percent, or $1.39 billion, as annual sales totaled a record $4.64 billion in 2008. Meanwhile, Family Dollar experienced a 4.2 percent year-to-year increase in its 2009 first quarter sales, amounting to about $1.75 billion.
Performance for most dollar store categories varies between chains. Family Dollar cut apparel inventories as category sales fell by 14 percent, according to a WFAE 90.7 FM report.
On the other hand, Dollar General’s sales of basic clothing rose by 6.1 percent – a 7.8 percent contribution to overall sales. Seasonal Christmas merchandise became a major category for Dollar Tree, though it weighed down overall sales for others.
But for all three chains, sales of consumables and highly consumables – their largest and most successful product category – have driven overall increases. This trend likens them to their biggest competitor Wal-Mart, though health and beauty aid products have recently drawn the majority of its shoppers, according to BIGresearch.
Along with dollar stores, Wal-Mart has proven to be a valuable retail presence during recent times. The company continues to report modest growth, as total U.S. company sales rose by 1.8 percent in the four weeks ending January 30.
But with storefronts smaller than one-tenth of an average Wal-Mart discount store, dollar store leaders are forced to reevaluate their product lines more often. Their strategy: keep top-selling items in stock, and forego ordering lesser-profiting items.
Before Thanksgiving, Bob Sasser, president and CEO of Dollar Tree, explained that the chain had actually expanded its variety of merchandise, though it still chose to focus more on needs-based products with lower margins but higher turnover rates.
As a result of such behavior, dollar store chains have also observed some of its biggest gains during times of economic recovery.
“My expectation is that [the] trend will continue, that people who come to us for the first time seeking value will find that value. And they’ll continue to come,” Jim Kelly, Family Dollar’s president and chief operating officer, said to WFAE 90.7 FM.