Ten Threats to Dollar General (and Dollar Tree)

The conventional wisdom is that Dollar General is “Amazon Proof,” but conventional wisdom is often dead wrong about the Everything Store.

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Will Rite Aid Survive without Walgreens?

Between February 2016 and February 2017, Rite Aid’s revenues increased by $2.11 billion. The revenues rose from $30.74 billion in 2016 to $32.85 billion in 2017. There’s a lot of cash flowing through Rite Aid that might make somebody a lot of money if he can figure out how to capture it.

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Walmart’s Price cuts should scare you to Death

All this indicates that there might be millions; perhaps tens of millions of Americans, that can no longer afford to shop at Walmart. That’s a pretty frightening situation and it bodes ill for a great many retailers and their vendors.

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Surprise; Kroger’s Revenues Growing Faster than Costco’s

During third quarter 2016, Kroger’s revenues increased by $1.48 billion. Costco’s revenues grew by $880 million in the same quarter and Walmart’s expanded by $770 million. Kroger reported $112.41 billion in revenues in July that grew to $113.89 billion October; Costco reported $118.72 billion in revenues in August that grew to $119.60 billion in November, and Walmart reported revenues of $483.83 billion in July and $484.60 billion in October.

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Deflation Explains Why Kroger might be interested in Rite Aid

The danger here is that Kroger’s operating margins are very thin. The company reported a free cash flow of just $24 million; on revenues of $112.41 billion on July 31, 2016. That made for a profit margin of just 1.44%. To make matters worse Kroger has very little float it; had just $319 million in the bank on July 31, 2016, even though it reported generating $5.11 billion in cash from operations.

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Can Colgate Palmolive Survive?

Instead value investors looking to make a consumer defensive-play should consider retailers like Costco, Kroger, Walmart and Walgreen. Those companies are best poised to take advantage of the new retail realities with deep discounting and large footprints that provide the low prices today’s consumer wants.

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Ten Threats to Walmart

Much of Walmart’s success has been based upon its ability to deliver name brands at much lower price than competitors. This is threatened because Americans are no longer buying name brands. Three of the fastest growing retailers; Aldi, Costco and Trader Joe’s, base their business model on a limited selection of low-cost but high-quality private label products.

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Can Whole Foods Market Avoid the Death Spiral?

More importantly, Kroger has reported 49 quarters of same store growth as of second quarter 2016. One has to wonder how Whole Foods is supposed to be able to compete with that.

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Would Kroger Buy Supervalu?

One has to wonder, would Kroger buy it or simply buy some of the assets of all or some of the supermarket brands it owns? A Kroger play for Supervalu is a strong possibility simply because the company is extremely cheap right now. Expect to see something happen at Supervalu this year, possibly a Kroger acquisition.

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Could Aldi Kill the Dollar Stores?

Aldi is a potent force that is already changing the American grocery business. It may not threaten the big guys, but Aldi will certainly change how and where Americans shop for milk and potato chips.

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