Dive Brief:
-
Dollar store chain Dollar Tree on Thursday reported first-quarter profit of $232.7 million. Earnings per share were 89 cents, beating analyst expectations for 80 cents per share. Dollar Tree posted Q1 revenue of $5.09 billion, versus the $5.08 billion expected by analysts. Same-store sales rose 2.3%.
-
Rival discount retailer Dollar General also beat Wall Street expectations on profit: Q1 net income increased to $295.1 million, or $1.03 per share, from $253.2 million, or 84 cents per share in the previous year. Analysts projected earnings of 95 cents per share.
-
Dollar General's Q1 same-store sales rose 2.2%, missing an expected increase of 2.4% according to research firm Consensus Metrix. First-quarter net sales grew to $5.27 billion from $4.92 billion year over year, missing analyst expectations of $5.28 billion according to Thomson Reuters.
Dive Insight:
Dollar stores are sidestepping many of the woes experienced by middle-tier retailers during the first quarter of 2016, aided by their focus on lower prices and their ability to trim costs. It also helps that they're catering to a different shopper segment than Amazon and are much less focused on apparel, which is seeing muted at sales at department stores like Macy’s and Nordstrom.
In fact, dollar stores compete most closely with Wal-Mart, which is working to keep customers coming in with promises to keep prices low and improve stores. Though it’s also making billions in investments in e-commerce, Wal-Mart has struggled to boost its online sales.
The dollar stores also see much less of their shopper activity shifting online, thanks in part to brick-and-mortar stores that are closer to urban centers and more convenient for many consumers. After making a move to compete with dollar stores, with smaller formats in more convenient areas, Wal-Mart recently abandoned that effort, a move that puzzles some.
“It’s very mysterious that [Wal-Mart is] closing stores in the best part of retailing,” Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates, told Retail Dive earlier this year, noting that the popularity of dollar stores is due to a marked decline in the middle class. "When you double the number of people in poverty, that’s why extreme value is popular."
Earlier this year Dollar General said it plans to open approximately 900 new stores in fiscal 2016 and relocate or renovate another 875 stores. The company subsequently announced plans to open approximately 1,000 additional stores over the course of fiscal 2017, also pledging to relocate or remodel 900 existing locations in the fiscal year ahead.