Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Long Ideas

Economy Gets Worse Dollar Stores Boom

Here is yet another sign of growing income inequality and economic stagnation in America. Dollar stores are booming big time, and the boom shows no sign of ending anytime soon.

Not only do Dollar General’s (NYSE: DG) revenues now exceed Kmart’s sales as I pointed out elsewhere but some other small box discount operators are doing well as other traditional retailers struggle and stagnate. Not only are dollar store operators making money but they are growing at a staggering rate.

Here are some facts that should tell us that the claims of economic recovery are little more than fantasy.


  • Five Below (NASDAQ: FIVE), a smaller chain based in Philadelphia, just opened its 400th store and moved into its 25th state, Florida. Five Below also reported that its TTM revenue is growing at a rate of 22. Its revenues rose from $565.8 million in April 2014 to $707.94 million in April 2015. If this level of growth keeps up, the chain should hit the $1 billion mark sometime this year.


  • Big Lots (NYSE: BIG), another lesser discount chain, reported that its revenue was up slightly—$5.176 billion in April 2015 compared to $5.139 billion in April 2014. Big Lots also reported a free cash flow of $48.2 million and a net income of $143.14 million. Big Lots operates around 1,400 stores in 48 states.


  • Dollar General (NYSE: DG), which opened its 12,000th store on May 30, 2015, and touts plans to open 730 more in 2015, reported a TTM revenue of $19.31 billion on April 30, 2015, up from $17.79 billion in April 2014. That is an increase of $1.52 billion. Dollar General reported that its TTM revenue was growing at a rate of 8.77%. Dollar General also reported a net income of $1.096 billion and a free cash flow of $243.96 million. Dollar General’s revenues already exceed those of JC Penney Company (NYSE: JCP), which reported a TTM revenue of $12.39 billion on July 31, 2015, and Kohl’s (NYSE: KSS). If present trends continue, Dollar General’s revenues could exceed those of Sears Holdings (NASDAQ: SHLD), which reported a TTM revenue of $27.4 billion that was shrinking at a rate of -22.49% on July 31, 2015.


  • Dollar Tree Stores (NASDAQ: DLTR), which just merged with Family Dollar, reported a TTM revenue of $8.779 billion on April 30, 2015, up from $7.97 billion in April 2015. Dollar Tree’s revenues were growing at a rate of 8.82%. It reported a free cash flow of $62.9 million and a net income of $530.5 million. Dollar Tree claims to operate 13,000 stores in the United States and Canada.


One has to wonder what sort of economic recovery this is when low-end discounters are thriving while other discounters are struggling to maintain any sort of momentum. Walmart Stores Inc. (NYSE: WMT) reported a revenue growth rate of .09% on July 31, 2015. Target (NYSE: TGT) reported a revenue growth rate of .12% on the same day, and Costco Wholesale (NASDAQ: COST) reported a revenue growth rate of 1.19% on May 31, 2015.

Obviously, all of these bigger retailers have other problems, including online retailers like (NASDAQ: AMZN) and wage pressures, but something is obviously going on here. My guess is that dollar stores are booming because they are the only places that many Americans can afford to shop these days.

The Frightening New American Economy at the Dollar Stores

Some of the offerings that these stores advertise are absolutely frightening. Five Below was selling t-shirts for $5, printed leggings for $5, and even a sundress for $5 in its ad on August 24, 2015.  In its latest weekly ad, Family Dollar, a Dollar Tree subsidiary, was hocking women’s dresses for $10. Is that all some Americans have to spend on clothes? Dollar General was also selling dresses for $10 each. From what I have seen, I would say yes.
Now, that’s frightening, and it does not say much about the future of our economy. How are we supposed to have any sort of economic growth or consumer spending if people cannot afford to spend more than $10 on a piece of clothing?

Dollar Tree is even scarier; it sells everything for $1. That’s right. Some Americans can only afford to spend $1 on things like cleaning supplies these days.

How the Dollar Store Economy Helps Bernie and the Donald

Notice that we do not hear our political leaders talking about this wonderful new economy. Instead, all we hear them talking about is confusion over why a socialist like Bernie Sanders and a cheap demagogue like Donald Trump are doing so well in the presidential race. The answer is obvious: Sanders and Trump are the only ones addressing economic issues (make no mistake, immigration, Trump’s favorite cause, is an economic issue).


Tens of millions of Americans can now only afford to shop at the dollar store and cannot even go to Walmart. That is absolutely frightening, and things are only going to get worse. I imagine violence and political unrest are next as the Donald pits working class Americans at each other’s throats for working class jobs. One wonders how long the political status quo can last in this dollar store economy. If these keeps up, there will be blood in streets. Billionaire Nick Hanauer’s prediction that the pitchforks are coming for the Plutocrats will soon come true—if the working class can find pitchforks at the dollar store.




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