Dollar Store Declines

Is the economy in that bad a shape that even the dollar stores are hurting? Dollar General Corp., Dollar Tree, Inc., and Family Dollar Stores all missed quarterly expectations, citing rising transportation costs as the major financial drain. However, they also note a shift in spending habits from their price-sensitive customers to more basic grocery-store items from more discretionary items such as home decoration and apparel. The three still posted quarterly same-store sales boosts of 5.4%, 7%, and 4.7% respectively, but since food costs are rising, margin pressure is likely to get worse until the economy improves.

According to a Wall Street Journal article, these cost and margin pressures mimic those faced by Wal-Mart, Target, and other retailers catering to price-sensitive customers. Family Dollar already rejected one takeover bid, but likely will be targeted again.