Triangle Business Journal reported today that Family Dollar Stores, Inc. saw a 14% earnings increase for its first fiscal quarter that ended on November 29, 2008. According to the report, the chief executive, Howard Levine, attributes the profit boost to the current economic crisis, saying, “As more families face financial challenges in this environment, they are relying on Family Dollar for more of their everyday needs.” Over the past year in particular, the cost of grocery items has risen considerably. Consumers seeking to get the best value for their dollar are migrating to stores like Family Dollar to cut their grocery bills. In fact, food items were a large factor in the increase in earnings for Family Dollar.
Family Dollar not the only Dollar Store seeing an uptick in sales revenue
Family Dollar is in good company. Other dollar and discount stores are seeing an increase in revenue and are also attributing their increases to the economy. Seeking Alpha published the 3rd quarter earnings call for 2008 on its site, which shows that Dollar General is also benefiting from the downturn in the economy. According to the transcript, Dollar General’s year-to-date sales were up 9.1% from 2007. Again, consumables, such as food items, are driving the increase in sales.
Walmart released its 3rd quarter (ending October 31) earning figures on November 13, which showed a 6.6% increase over the 3rd quarter in 2007. In addition, the earnings year-to-date through October 31 show a 7.1% increase over the previous year. Internationally, Walmart is doing extremely well, posting double digit earnings increases. Similar to the rest, Dollar Tree also posted excellent sales for the 3rd quarter of 2008, showing an increase in sales of 11.6%. With earning reports like these, it is very clear that a bad economy translates into good news for discount stores. The question is, will these discount stores be able to hold onto their market share once the economy starts to turn around?
Are Dollar Stores stable stocks to own?
With such good earnings reports in a bad economy, are Dollar Store stock stable to own? Perhaps. These discount stores are filling a need for consumers at the present time, and reaping the reward of increased sales and profit margins. Considering the current economic conditions and seemingly unending notice of larger retailers filing for bankruptcy, the increase in sales lends an air of perhaps a safe harbor in owning these stocks. With the exception of Dollar General, which is privately held, the other discount stores listed in this article do have public stocks actively being traded at present time.
Dollar General privately held