It's been a saying for a long time in grocery circles that people need to eat even during rough economic periods. Today, it is the certainty of knowing that people will purchase food even if they're not buying anything else that gives Family Dollar optimism for its prospects in the near-term.
While low-income consumers, the core customer for Family Dollar and other dollar stores, have been the hardest hit by rising energy prices and other economic disruptions in recent years, they also remain the most likely to shop a store based on price.
It is that price motivation along with the knowledge that more consumers will trade down during times when the economy is lagging that has Family Dollar believing it is ideally positioned to differentiate itself from its competitors and drive company sales and profits.
"Food has been a big part of our evolution because customers spend a lot of money on food," Kiley Rawlins, vice president of investor relations and communications, at Family Dollar told The Charlotte Observer. "For some families, it takes up 10 to 15 percent of their budget."
Edward Jones analyst Stephanie Hoff said Family Dollar is so well positioned in the marketplace that it often avoids direct competition with Wal-Mart. "They don't even really have to compete with Wal-Mart because Family Dollar is positioning itself in urban markets," she said. "Wal-Mart isn't even in 20 percent of those markets."
Discussion Questions: Does food become more of an asset for Family Dollar during slow economic periods such as the one the country is currently going through? Will Family Dollar and others see a big uptick in consumers trading down to purchase products in their stores? How can Family Dollar use food to generate sales of higher margin items even during financially challenging times?