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

                              Mar 14, 2024 - Wages, Employment Up
                              • According to the Bureau of Labor Statistics (BLS), producer prices for other general merchandise retailers, which include dollar and general merchandise stores, have increased by nearly 20% from 2019 to 2023. However, producer prices have fallen by almost 4% from December 2022 to December 2023. Employment and wages have grown for general merchandise retailers, with a rise of 8.5% and nearly 3%, respectively, from December 2022 to December 2023. In a competitive labor market, wages for the industry have increased by around 20% from 2019 to 2023, per the BLS.
                              • According to a new ConsumerWise report from McKinsey, consumers continue to “trade down,” changing the type or quantity of purchases for better pricing and value, in Q1 2024. About 76% of respondents reported engaging in trade-down actions in Q1 2024, compared to 77% in Q4 2023. Younger consumers tended to trade down more often than older consumers, while low and middle-income consumers traded down more frequently than high-income consumers, per the report. The report also shows that the percentage of consumers using the “buy now, pay later” option has remained mostly the same in Q1 compared to the previous quarter. Additionally, fewer consumers are delaying their purchases, with only 30% doing so in Q1 compared to 35% in Q4.
                              • 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 fell in February 2024 after increasing for three consecutive months, according to data from The Conference Board. The Conference Board’s consumer confidence index fell to 106.7 in February 2024 from 110.9 in January 2024. According to Dana Peterson, Chief Economist at The Conference Board, “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000.” Peterson added that the decline in consumer confidence was largest in householders over 55 and those under 35. Plans to purchase homes, autos, and large appliances decreased slightly on a six-month basis.
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