Dollar and General Merchandise Stores

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 7,850 dollar and discount stores in the US sell a wide variety of merchandise at low, fixed price points, often in dollar increments. Merchandise includes everyday necessities and impulse items. By offering a limited number of items per merchandise category, firms maintain purchasing power and keep costs and prices low.

Low Prices Limit Flexibility

The value proposition of a dollar store is based on low, fixed retail price points (“Everything’s $1!”), which limit a company’s flexibility when costs rise.

Inventory Shrinkage and Theft

The operating model for dollar stores, which is based on small stores, crowded shelves overflowing with merchandise, a high number of cash transactions, and minimal staffing, makes operators vulnerable to inventory shrinkage and crime.

Industry size & Structure

The average dollar and discount store company operates out of a single location, employs about 55 workers, and generates about $9 million annually.

    • The dollar and discount store industry consists of about 7,850 firms that operate over 40,000 establishments, employ 430,000 workers and generate about $75 billion annually.
    • The industry is highly concentrated; the top 50 companies account for over 90% of industry revenue.
    • Large firms include Dollar Tree (Family Dollar), Dollar General, and Five Below.
                              Industry Forecast
                              Dollar and General Merchandise Stores Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Dec 5, 2022 - Inflation Eases But Remains Elevated
                              • Foot traffic at dollar and general merchandise stores may decrease if inflation continues to slow. The price of gasoline has fallen in early December 2022 to levels not seen since February. Gas price tracking company GasBuddy projected it could drop below $3 by Christmas. Chicken wings are suddenly a bargain, and retailers drowning in excess inventory are looking to make a deal. “The worst of the inflation is behind us,” said Steven Blitz, chief U.S. economist for TS Lombard in New York. “The question is where does inflation settle?”
                              • Inflation, as measured by the US Bureau of Labor Statics' Consumer Price Index (CPI), increased 0.4% month over month in October, the smallest increase since July, and 7.7% year over year. The CPI measures what consumers pay for goods and services. Foot traffic at dollar and general merchandise stores may increase if consumers look to cut expenses further. Consumer spending, the economy’s main engine, grew more slowly in the third quarter than in the second, after adjusting for inflation and seasonality. The year-over-year inflation increase was the smallest since January. June’s 9.1% year-over-year inflation rate was the highest in four decades. “A strong labor market and strong job growth supports strong demand, which allows inflationary pressures to stay elevated,” said Blerina Uruci, US economist at T. Rowe Price. “You’ve got more demand chasing goods and services, the supply of which is being impaired at the moment.”
                              • Bargain chains and off-brand goods have increasingly replaced premium alternatives in recent months, according to PYMNTS. The payment research firm cites 40-year-high inflation levels as the key driver of changing consumer behavior. About 70% of consumers surveyed said that they cut back on nonessential goods, and over half (53%) shopped at bargain retailers. About 60% of consumers surveyed reduced nonessential grocery expenditures, with 45% switching to cheaper grocers, “suggesting that consumers are generally considering retail to be more subject to pullbacks than groceries,” according to the firm's latest Consumer Inflation Sentiment report.
                              • A massive shortage of truckers continues to be a bottleneck for supply chains, according to Bank of America (BofA) Global Research. The shortage is causing skyrocketing shipping costs that affect industries including dollar and general merchandise stores. Shippers surveyed by BofA noted fleet capacity availability drops and elevated prices across the industry, with nearly 60% of respondents expecting shipping rates to rise and 30% expecting capacity to be lower.
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