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

                              Jan 10, 2024 - Dollar General Plans 800 New Stores in 2024
                              • Dollar stores, discount retailers, and auto parts retailers are expected to dominate store openings in 2024, according to a new Northmarq report titled "Top 100: Tenant Expansion Trends" in Chain Store Age. The report includes Dollar General's plans to open 800 new stores and remodel 1,500 stores in 2024. The expansion plan includes more stores in rural areas and more large-format stores. The retailer's expansion plan includes 30 PopShelf brand openings and 15 new stores in Mexico. According to CEO Todd Vasos in a recent earnings call, "This is a modest slow down compared to the number of projects in recent years, which we believe is prudent in this environment." Dollar General reported higher than expected third-quarter revenue and earnings in Q3 as price-conscious shoppers seek savings but noted a problem with inventory shrink. Vasos has outlined plans to boost upfront store staff in the checkout area to curb shrink.
                              • Consumer confidence levels rose in December 2023 for the second month in a row, following three consecutive months of declines, according to data from The Conference Board. The Conference Board’s consumer confidence index increased to 110.7 in December 2023 from 101 in November 2023. According to Dana Peterson, Chief Economist at The Conference Board, “December’s write-in responses revealed the top issue affecting consumers remains rising prices in general, while politics, interest rates, and global conflicts all saw downticks as top concerns.” Peterson added that the gains in consumer confidence were largest in householders aged 35-54 and households with income levels of $125,000 and above. Plans to purchase homes, autos, and large appliances rose moderately on a month-to-month basis as interest rates moderated.
                              • Weaker consumer spending and continued high price levels are expected to limit growth in the US dollar and general merchandise stores industry, which is projected to grow at about a 3% CAGR from 2022 to 2027, according to a recent Inforum forecast. This rate is slower than the projected growth of the overall economy. The forecast follows several years of moderate growth during the pandemic, with increases of 9.5% in 2020, 7.8% in 2021, and 7.1% in 2022.
                              • Holiday spending is expected to increase 3-4% in the US in 2023 compared to 2022, according to a forecast by the National Retail Federation (NRF) in Retail TouchPoints. The 2023 projection of between $957.3 billion and $966.6 billion is growing at a slower pace than in the pandemic era but is in line with the annualized increase of 3.6% from 2010 to 2019. Online spending, which is included in the forecast total, is expected to grow between 7-9% in 2023 to a total range of $273.7 billion and $278.8 billion. According to NRF President and CEO Matthew Shay, “It is not surprising to see holiday sales growth returning to pre-pandemic levels. Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”
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