Stimulus checks have the potential to whipsaw expectations for many retailers, but perhaps none more so than dollar stores.
That may be part of why the two dollar store giants— Dollar General and Dollar Tree —saw share prices decline Thursday after both reporting year-over-year sales growth exceeding Walmart ’s.
Both companies outperformed sales expectations, but the rural-heavy Dollar General was the real standout, with net sales increasing 24.4% in the quarter ended July 31. Dollar Tree grew revenue by a respectable 9.4%.
While consumable goods sales such as paper towels shined in the stock-up phase of the pandemic, stimulus checks seem to have boosted sales for higher margin discretionary items for both retailers last quarter, including products such as home décor. While Dollar Tree didn’t give out specific numbers, Dollar General indicated that year-over-year sales growth in August, after enhanced unemployment benefits expired, had slowed down to 15%.
For Dollar Tree, it was a second consecutive quarter of year-over-year growth for its historical laggard, Family Dollar, which looks much more like rival Dollar General. Both Dollar General and Family Dollar sell a broad category of goods and position themselves as an alternative to big box retailers such as Walmart and Target. Family Dollar grew same-store sales by a solid 11.6% but faced the unenviable challenge of being compared with Dollar General’s breakout revenue performance.
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