By Micah Maidenberg
Dollar General Corp. and Dollar Tree Inc. are aiming to draw in new consumers who are freshly scrutinizing their spending amid higher unemployment caused by the Covid-19 pandemic.
The rival discount retail chains on Thursday both reported stronger demand for their latest quarters, performances helped along by $600-a-week federal unemployment checks, a benefit that expired last month. Dollar General said comparable quarterly sales rose about 19%, while Dollar Tree, which operates Dollar Tree and Family Dollar stores, said those sales increased 7%.
The expiration of the higher federal benefit last month and delays tied to its replacement pose a challenge for the companies. But executives from both Dollar General and Dollar Tree said they are preparing to serve shoppers who are looking for deals and lower-priced merchandise during a period of economic weakness.
“We can see that we’re getting a trade-down at a pretty good clip,” Dollar General Chief Executive Todd Vasos said on a call about quarterly results. “As we continue to watch this evolve, what we see is very reminiscent of what we saw during the Great Recession.”
Dollar Tree Chief Executive Mike Witynski said with extra unemployment benefits going away and the higher jobless rate, shoppers will be looking to his company for goods.
“Going into next year, especially when the customers are going to need us most, with … the unemployment rate where it is, we believe we’re in a great position, as we were in ’08, ’09, ’10,” he told investors.
New applications for unemployment benefits fell slightly in the week that ended Aug. 22 to one million, the Labor Department said Thursday. That is less than the recent peak in March, when companies began shedding millions of jobs as the coronavirus first shut down the economy, but still higher than pre-pandemic levels. The unemployment rate fell to 10.2% in July and some economists are warning about long-term costs to the economy due to the pandemic.
Dollar General said sales for its quarter ended July 31 jumped to $8.68 billion from $6.98 billion a year earlier. Profit rose to $787.6 million, or $3.12 a share, from $426.6 million, or $1.65 a share, for the year-earlier period.
The company reported higher demand for home products, toys and apparel, among other areas — gains it said were fueled by the pandemic.
Besides adding new consumers trading down to shop at Dollar General, the Goodlettsville, Tenn.-based company said its main customers, who live on tight budgets, likely have a bit more disposable income because they are at home more and not spending on other activities, Mr. Vasos said.
Comparable sales at Dollar General were up 15% for August through Tuesday, a lower gain than during its latest reporting period, and gains are expected to further moderate in the second half of the retailer’s fiscal year, executive said.
Chesapeake, Va.-based Dollar Tree, meanwhile, said sales rose to $6.28 billion from $5.74 billion a year earlier. The company reported earnings of $261.5 million, or $1.10 a share, for its second-quarter that ended Aug. 1, compared with $180.3 million, or 76 cents a share, for the same period last year
Comparable sales for discretionary goods rose about 29% at the retailer’s Family Dollar chain, helped along by the introduction of Hallmark-branded greeting cards and sales of a Baby Yoda toy, executives said. Overall, those sales rose 11.6% at Family Dollar, a stronger performance compared with its Dollar Tree stores.
(END) Dow Jones Newswires
August 27, 2020 13:37 ET (17:37 GMT)
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