Former director at Five Below Inc
- Trends and developments in the North America dollar store industry
- Comparative analysis across major operators including Dollar General (NYSE: DG), Dollar Tree (NASDAQ: DLTR), 99 Cents Only Stores and Five Below (NASDAQ: FIVE)
- Demand trends, unit growth and inflationary pressures
- H2 2022 outlook
What is your up-to-date perspective on the dollar store industry?
At what pace has the market been growing? What are your growth expectations for H2 2022, 2023 and over the next 3-5 years?
You talked about the industry’s ability to perform, whether in a boom or recessionary environment, and seeing that in different products. Which products perform well in dollar stores in those two environments?
You mentioned the outsized growth that the industry sees compared to the rest of the landscape. How do operators in this space think about the support level they have to build out at this pace? It’s more than other retail segments would expect or be able to handle. Why is the dollar store industry able to continue to grow the base, store count and outpace the rest of the retail market?
What are your views on the competitive landscape across dollar stores? Have you seen any notable market share shifts?
You highlighted that Five Below will have to keep an eye on the Popshelf offering. What are your assumptions behind that? Is it more of a threat to the discretionary side of some dollar store formats, or is it posing a competitive threat to other off-price retail concepts in the market?
Can players that operate in more of the wants category – as you’ve named it – gain market share in a soft economic climate from the other dollar store players that may be more needs-focused?
You highlighted the shift towards the food category and it seems fresh, refrigerated and frozen food are becoming more important across the sector. How should we think about the impact on store-level margins? If they’re not margin-accretive, how should we think about the strategic purpose of these initiatives?
You brought up the shift to multi-price points, and consumers are hearing about all the inflation going on and are perhaps more accepting of it. How important do you think the dollar price point is to the dollar discount stores? Is it just a sales gimmick or is it really important to customers?
Could you explain the components of inflation? Can you outline the potential margin pressure due to costs rising faster than price increases can be passed on?
What is your outlook on the transportation piece? How transient do you think it’ll be? You mentioned some parts of it are starting to come down. Where do the bottlenecks continue to exist there? What needs to happen to alleviate that? Where could we get to in bringing that down?
You talked about the importance of scale and being able to absorb some costs, where Dollar General might be more able to do so than 99 Cents Only Stores. Do you have any thoughts on how operators are negotiating or the conversations they’re having with their vendors? What levers do they have to flex their P&L in an environment where people are just passing on pricing?
Do you have any thoughts on the M&A market? Is any industry consolidation on the horizon?
What are the best- and worst-case scenarios for the industry over the next 12-18 months?
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