Will dollar stores be the biggest post-COVID-19 winners?
Dollar stores appear to have outperformed essential retail in the first quarter and are poised to benefit as the economy struggles in the months ahead.
“When people are unemployed and they don’t have that source of income, they will need value more than ever,” Mike Witynski, enterprise president at Dollar Tree, which owns Dollar Tree and Family Dollar, told analysts last week. “And we should be in a great position to provide that for them.”
Said Todd Vasos, Dollar General’s CEO, last week “We do very good in good times and we do fabulous in bad times.”
Of the two major dollar store chains, Dollar General performed better in the first quarter as same-store sales grew 21.7 percent, about double the comp gains of 10.0 percent at Walmart U.S. and 10.8 percent at Target. At Dollar Tree, same-store sales expanded seven percent as a 15.5 percent hike at the Family Dollar banner offset a 0.9 percent dip at Dollar Tree due to a soft Easter selling season.
Beyond low prices, Dollar General believes it is benefiting because families are staying close to home. Mr. Vasos said the retailer’s 16,000 locations are within five miles of more than 75 percent of the U.S. population. The stores also offer a “convenient small-box format providing for quick in and out access and limited crowds, both of which are conducive to social distancing.”
Mr. Vasos said that consumers are already trading down to the format,as they’ve done in past downturns, and that the new customers are embracing the chain’s recent upgrades, including an expansion of cooler doors and healthier food offerings. “I’m very bullish that we’ll continue to hold onto those customers for the long term,” he said.
Mr. Witynski likewise said consumers that are trading down are discovering the H2 renovations at Family Dollar that have added Dollar Tree $1 merchandise sections, a larger party assortment and also an expanded freezer and cooler sections. He said, “With customers and communities needing us more than ever, they are being introduced into a format that has a better shopping experience when they need it most.”
- Dollar Tree, Inc. Reports Results for the First Quarter Fiscal 2020 – Dollar Tree
- Dollar General Corporation Reports First Quarter 2020 Results – Dollar General
- Dollar Tree Inc (DLTR) Q1 2020 Earnings Call Transcript – The Motley Fool
- Dollar General Corporation (DG) Q1 2020 Earnings Call Transcript – The Motley Fool
- High unemployment rates will continue to drive budget-conscious consumers to – MarketWatch
DISCUSSION QUESTIONS: Do you agree that dollar stores are now better positioned to gain market share in the months ahead? How might competing formats learn from the advantages at dollar stores that are making them popular in the current environment?