Which Are a Better Buy: Dollar Stores or Discounters?
Wall Street Strategies submits:By Brian SozziFollowing up on my piece from September 21 titled "In this Instance, Being in the Middle is Not the Sweetspot", I just had to dive deeper into the virtues of owning shares of deep discount retailers. In the deep discount retail sector, names such as Family Dollar (FDO), Dollar Tree (DLTR), Fred's (FRED), and 99 Cents Only (NDN) rule the roost, though there are companies in rural areas that exist that are not publicly traded. In fact, Family Dollar and Dollar Tree operate in excess of 10,000 stores combined in the U.S., which is a dominating position. That dominating position has caused a sea change in how the consumer views "cheap" in terms of pricing for consumables to basic apparel. Once where Wal-Mart (WMT) dominated the price discussion, Family Dollar is in the mix selling basic apparel for under $10 and detergent for $1.00. Wal-Mart is supposedly trying to devote a portion of its store base to selling traffic driving dollar items, but I do not expect it to shift consumers away from dollar stores overnight, if at all. Below are some fun facts on the battle between dollars stores and discounters in a hyper competitive U.S. retail market. Although shares of dollar stores have risen significantly this year, the risk reward ratio of the investment in the sector remains attractive in my view.Complete Story »