Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
US dollar stores are thriving, drawing in shoppers from all income levels as Americans seek relief in an affordability crunch.
Dollar General, the country’s largest dollar store chain, on Thursday reported a 2.5 per cent rise in like-for-like sales in the third quarter. Smaller rival Dollar Tree on Wednesday also reported strong results, with same-store sales increasing 4.2 per cent.
The stores sell an assortment of merchandise from frozen food to holiday decorations. Much of their inventory comes in modest sizes at moderate price points. Dollar Tree said 85 per cent of sales during the quarter were priced at $2 or less.
Todd Vasos, Dollar General chief executive, told analysts on Thursday that a “wide range” of customers drove sales in its latest quarter and noted “disproportionate growth coming from higher-income households” as customer counts rose.
His counterpart at Dollar Tree, Michael Creedon, on Wednesday said the Virginia-based chain had attracted 3mn new households to its roughly 100mn regular customers. Sixty per cent of them came from households earning more than $100,000 a year and 30 per cent from those with incomes between $60,000 and $100,000, he told analysts.
While “higher income households are trading into Dollar Tree, lower-income households are depending on us more than ever”, Creedon said, as their average spending per visit rose more than twice the rate as spending by wealthier households.
Kroger, the largest US supermarket chain, on Thursday said comparable sales in the latest quarter rose 2.6 per cent excluding fuel.
Executives there are “seeing a split across income groups”, Kroger chief executive Ron Sargent told analysts. “Spending from higher-income households continues strong, while middle-income customers are feeling increased pressure, similar to what we’ve seen from lower-income households over the past several quarters.”
He added those consumers are “making smaller, more frequent trips to manage budgets and they are cutting back on discretionary purchases”.
Cost of living strains had been a focal point in recent local elections, which were won in New York City, New Jersey and Virginia by Democratic candidates who made this an issue in their campaigns.
President Donald Trump has labelled talk of an affordability crunch as a “con job” and “hoax” conjured up by the Democratic party and has doubled down on his claims that prices are falling across the country.
Creedon said traffic fell 0.3 per cent at its more than 9,200 stores even as the chain gained customers because the new households were not making trips as frequently as Dollar Tree’s core consumers.
The drop occurred after store employees placed red stickers over the original prices of goods to raise their prices. The move comes as Trump’s tariffs increase the cost of goods for many US retailers.
Creedon told analysts: “We don’t love that we had to create that environment for our customer. It was a necessary evil to continue to deliver for them and give them product at a value. But it is what it is, and it’s behind us now.”
Stewart Glendinning, chief financial officer, called the process “tariff-related stickering activities”.
Kroger is trying to keep groceries affordable. “We continue to lower prices. We took down another 1,000 items in Q3 and I think we will continue to ramp-up promotions during the holidays to drive traffic as well as basket sizes,” Sargent said.
With nearly 21,000 stores mainly in rural communities, Dollar General’s traffic rose 2.5 per cent in the quarter, while the average transaction amount remained unchanged. The company’s revenue climbed 4.6 per cent to $10.6bn, while net profit rose 44 per cent to $282.7mn.
That momentum prompted the company to raise its full-year forecast for like-for-like sales growth to a range of 2.5 per cent to 2.7 per cent from 2.1 per cent to 2.6 per cent previously.
Dollar Tree also raised its comparable sales outlook.
Shares of Dollar General were 11.5 per cent higher after midday on Thursday. Dollar Tree rose 3.6 per cent after its results on Wednesday and increased a further 3.5 per cent on Thursday. Kroger dropped 5.5 per cent.
