In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
I think Dollar Tree could collapse because many of its customers could have no money because of the Coronavirus Depression. For instance, Statista estimates 10.74 million Americans were unemployed in November 2020. That number rose from 5.81 million in November 2019 and fell from 23.08 million in April 2020.
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Dollar General has enormous numbers of new customers, including the 55 million Americans who have filed for unemployment since March 2020. Thus, Dollar General bases its success on ordinary Americans’ misery.
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Dollar General’s problem is compounded by its biggest direct competitor; Amazon (NASDAQ: AMZN).
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A true nightmare for dollar stores would be caught in the squeeze between Automated Walmart and Amazon Go. Dollar stores are already caught in the increasingly brutal crossfire between Amazon.com and Walmart.com.
The No-Man’s land between Automated Walmart and Amazon Go would be far worse. A true nightmare for dollar stores would be both retailers using their automated stores as neighborhood fulfillment centers for same-day delivery.
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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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Despite that Dollar Tree’s revenues are still growing, they went from $18.41 billion in April 2016 to $20.92 billion in April 2017. That made for an increase of $2.51 billion but most of that growth can be attributed to the Family Dollar acquisition.
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It looks as if Sears is close to death and a chapter in American retail history is about to end. We are now living in the age of Amazon and many brick and mortar retailers are doomed.
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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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The big question to ask here is: how long can Sears operate. Theoretically it might be able to stay in business for around 21 quarters or another five years. This calculation is based on a -$1.521 billion operating loss every quarter. It would take about five years to eat through all of Sears’ revenue with a loss like that.
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Investors should pay close attention to what happens at Target and Macy’s this holiday season. Their performance; or lack of it, might show us where American retail is going and what effect Amazon is really having on the market.
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