Things are looking up in the dollar store economy
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Illustration: Aïda Amer/Axios
Dollar stores are suddenly in the conquest businesses, capturing a new cohort of customers as stretched Americans look to save.
Why it matters: When inflation was hot and people were spending on experiences, the dollar store industry had been in a prolonged slump. Now, three bullish earnings reports from the leading dollar-store chains show their newfound momentum as shoppers look to pinch pennies.
Driving the news: Dollar General on Thursday raised its full-year profit outlook after quarterly sales and earnings beat expectations, sending its stock up 12% midday. Comp sales rose 2.5% based on an identical percentage increase in foot traffic.
- Dollar Tree topped earnings expectations and raised its full-year outlook Wednesday, restoring momentum for the company that had faced myriad leadership and quality issues.
- Five Below soared past expectations on sales and profit when it announced earnings after the bell Wednesday. The company's same-store sales jumped 14%, exceeding the expected 7.4%, per the Wall Street Journal.
Zoom out: The dollar-store surge "partly underlines the fact that Americans are turning to value retailers to get more bang for their buck," says GlobalData Retail analyst Neil Saunders.
Many of those customers are coming from higher-income brackets.
- For example, 3 million additional households shopped at Dollar Tree in the third quarter, compared with the same period a year earlier.
- Of those, about 60% had household income of more than $100,000, CEO Michael Creedon Jr. said on an earnings call.
- At Dollar General, "disproportionate growth" is also coming from higher-income households, CEO Todd Vasos said Thursday on an earnings call.
The bottom line: Dollar stores often thrive when the economy is experiencing turbulence.
