Dollar Stores Keep Passing the Buck

Dollar stores are riding inflation like pros.


Dollar General

DG 14.30%


Dollar Tree

DLTR 20.47%

reported better sales and profits on Thursday than Wall Street expected. Dollar General’s comparable-store sales remained more or less flat in its quarter ended April 29 compared with a year earlier, better than the 1.2% decline that analysts polled by Visible Alpha expected. Dollar Tree’s same-store sales growth of 4.4% blew past expectations, mostly thanks to its namesake chain, where consumers are responding well to its introduction of price points above $1.





dollar stores are seeing more of their consumers shift spending toward essentials. Dollar General said that while consumable sales jumped 9.1%, sales in all other categories—seasonal, apparel and home—declined. Dollar Tree-owned Family Dollar saw comparable-store sales of discretionary items decline 14.7%, while sales of consumables increased 1.2%.

Despite the shift to lower-margin consumables, dollar stores seem to have done a better job of managing the bottom line compared with retail giants Walmart and Target. Dollar General’s net income declined 18.5%, a better result than Wall Street was penciling in. Dollar Tree’s net profit soared 43.2%, in large part thanks to the new price points at the Dollar Tree chain.

Dollar General Chief Executive Officer

Todd Vasos

said on the earnings call Thursday that the company’s core customers are shopping more “intentionally” and that the chain is starting to see some higher-income customers shop at its stores. Even though employment numbers remain healthy, inflation is quickening the pace at which higher-income consumers are trading down, Mr. Vasos said.

While both Dollar General and Dollar Tree raised their sales outlook for the current fiscal year, two things are worth watching. First, there is still a possibility of a slow-burning downturn in which core customers feel pinched and spend less while high-income consumers aren’t pinched enough to trade down in droves. This, indeed, seems to be one emerging theme this week, with pricier clothing brands and department stores faring better than those with more affordable price tags.

And second, Dollar General and Dollar Tree are much bigger chains today than they were back in 2008. Both have doubled their number of stores since that time (for Dollar Tree, the count excludes Family Dollar, which it acquired in 2015). Dollar General was the “new kid on the block back then, with much lower prices than many grocery stores,”

Scott Mushkin,

equity analyst at R5 Capital, said in an email.

The competitive dynamic is different today, Mr. Mushkin said, as grocery stores have lowered their pricing in many markets where Dollar General competes. Discount supermarket Aldi’s U.S. grocery market share, for example, has grown from 1.2% to 1.7% over the last five years, according to Euromonitor data.

Dollar General and Dollar Tree stocks surged 14% and 18%, respectively, on Thursday. Year to date, the two companies are faring a lot better than retail peers, with both now trading at multiples of expected-12-month sales above their 10-year averages.

These stocks already seem to be pricing in all the upsides of an economic downturn.

Dollar General has reported 31 consecutive years of growth and is opening new U.S. stores every day. In this video, WSJ takes an inside look at how the discount retailer keeps expanding while maintaining prices significantly lower than many grocery and drug stores. Photo: Matt Disbro for The Wall Street Journal (Video from 7/1/21)

Write to Jinjoo Lee at

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