Will dollar stores make a comeback in 2025?
It’s important to remember that what the stock market does is one thing, but what consumers are doing is another.
At a time when everyone is complaining about not having enough dollars, why do dollar stores keep disappointing investors?
Five Below, Dollar General, and Dollar Tree each reported better-than-expected earnings this week, leading to a temporary boost in their stock prices. But all three are still down over 40% this year.
Not unlike fast food, discount stores have struggled to maintain their perception of value with customers as prices everywhere have gone up. If something at Dollar Tree costs roughly the same at Walmart or Target, a customer may just go there, where they can buy a wider variety of items as well. Those stores also have more and stronger e-commerce infrastructure than dollar stores.
Dollar General, which tends to be concentrated in rural areas, said it plans to open fewer stores next year and focus on refurbishing the ones it already has. Dollar Tree said it’s making progress on its “back-to-basics work” focusing on “value and convenience.” Five Below — which mostly sells nonfood items that are $5 or less — was a bit cheerier and reported solid Black Friday sales, leading to a bump in its stock price.
These companies each appear to be in a transition period, which has included some executive shake-ups.
Dollar Tree announced this week that its chief financial officer, Jeff Davis, would resign. That comes after its former CEO, Rick Dreiling, abruptly stepped down last month. Five Below this week named Winnie Park, former CEO of Forever 21, as its new CEO.
It’s important to remember that what the stock market does is one thing, but what consumers are doing is another. Investors don’t like it when companies don’t beat growth estimates. Discount stores saw their sales grow after 2020, but now that growth has plateaued.
But consumers are in fact still spending more at discount stores than they used to. Combined, Dollar General, Dollar Tree, and Five Below made over $18 billion in sales in this most recent quarter, compared to about $13 billion in 2019.
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