Dollar Stores Attract Higher Income Shoppers Seeking Inflation Relief

Dollar Tree and Dollar General both posted higher sales and profits last quarter.

August 29, 2022

ALEXANDRIA, Va.—Dollar Tree and Dollar General both noted that their customers are cash strapped, as both retailers reported higher sales and profits in the latest quarter, reports the New York Times. Additionally, both companies are seeing higher income shoppers amid high inflation.

The majority of new customers at Dollar Tree over the past year had an annual household income of more than $80,000, and on a recent earnings call, Dollar General’s CEO Todd Vasos said the discount retailer has seen more higher income shoppers and that more consumers are “seeking value.”

“The consumer is trying to make ends meet, and when you have limited funds in your wallet, the dollar stores provide the ability to do that,” Joseph Feldman, a senior analyst at Telsey Advisory Group, told the Times.

Feldman told the Times that consumers are still shopping at big-box retailers such as Walmart to stock up on essentials, but they’re also buying miscellaneous items at dollar stores to cut costs.

Dollar Tree’s CEO Mike Witynski also noted on its recent earning call that it has seen a “huge shift from cash into credit, which tells us the customer is pressured.”

The company also said shoppers are shifting spending to need-based purchased, reports the Wall Street Journal. Dollar Tree had fewer customers this last quarter, but they spent more each visit. Last year, the company upped the cost on many of its products from $1 to $1.25.

“Our second-quarter performance reinforces the relevance of our brands for millions of households pressured by higher costs for food, fuel, rent and more,” Witynski said in a news release.

Dollar Tree’s revenues was up close to 7% in the latest quarter, and profits rose 27%. Revenue at Dollar General was up 9%, and profits grew over 6%. Dollar Tree lowered its profit forecast for this year, mostly because it marked down inventory at its Family Dollar stores to stay competitive, as other retailers like Walmart and Target lower prices to get rid of excess stock. Walmart’s inventory is up 25% over last year, and Target’s is up 36%.

Dollar Tree’s inventory is also up by 50% compared with last year, while Dollar General’s was up 25% year over year; however, the company said it has a handle on its product amount.

“We were well ahead of any inventory issues that may pop up unlike some of our competitors out there,” Vasos said on the call. “We canceled orders as early as December because we saw where the customer was headed.”

Dollar General raised its sales forecast for the year and maintained its profit outlook.

“I’ve never felt better about our positioning,” said Vasos on the earnings call. “We are here to help that customer through probably the toughest time she’s seen in quite a while.”