Business

Dollar chains thrive as COVID-19 downturn makes shoppers thrifty

America’s biggest dollar store chains reported better-than-expected quarterly profit on Thursday, as cash-strapped consumers sought lower-priced groceries and household items in a coronavirus-induced economic downturn.

Sales at Dollar General and Dollar Tree remained robust even after the panic-buying surge at the start of lockdowns, with high US unemployment pushing demand for cheaper cereals, vegetables and daily essentials.

The two dollar stores said sales of more discretionary items including clothing were also up, as households spent government stimulus checks carefully.

But with talks over the new COVID-19 stimulus package stuck in a stalemate, Dollar General warned that comparable sales could moderate from the current 15 percent growth levels in the coming months.

Smaller rival Dollar Tree remained optimistic for the year, but did not provide a sales outlook.

“We’re going to be in a good position in the back half of the year and going into next year when customers are going to need us most as the extra benefits go away and with the unemployment rate where it is,” Dollar Tree’s new Chief Executive Officer Mike Witynski said.

While shoppers are spending more at dollar stores, they are making fewer trips, which according to Evercore ISI analysts is an opportunity for Walmart and Amazon to pull away customers with their better developed e-commerce operations.

Dollar General’s second-quarter same-store sales rose 18.8 percent and beat estimates of a 15.1 percent increase, but that of Dollar Tree was not as strong, rising 7.2 percent and sending its shares down 5 percent.

Net income at Dollar General rose 84.6 percent to $787.6 million, or $3.12 per share, beating expectations of $2.44. The company said it had begun share buybacks and would repurchase an additional $2 billion worth of stock.

Dollar Tree, which owns the Family Dollar chain, said net income rose 45 percent to $261.5 million, or $1.10 per share, beating analysts’ estimate of 92 cents.

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