Following the the economy’s dive into the recession, dollar stores like Family Dollar, Dollar Tree and Dollar General saw significant increases in sales and profits. But that successful run might be over, as all three companies failed to meet quarterly earnings targets. Hit the jump to read the rest of the story.
The weak numbers are only the latest example of American consumers tightening their belts.
Due to a variety of factors including high gas prices and stagnant wages, Americans are coming to rely on dollar stores more for essential items, like food and cleaning products, than discretionary items like apparel and home decorations, which have higher profit margins and account for much of dollar stores profits, according to the WSJ.
Dollar Tree CEO Bob Strasser recently told the Associated Press that expanding store inventory was a conscious decision that has contributed to recent successes.
But while dollar stores suffer from the belt tightening, other businesses benefit from the debt that so often accompanies hard times. Look no further than pawn shops, which have seen rising profits and stock prices. Profits for the pawn shop operator Ezcorp Inc. for example, have increased 46 percent annually for five years, while its stock has doubled over the past year.
Likewise, payday lenders and debt collectors also are enjoying substantial growth because of the dwindling financial security of Americans. Encore Capital Group, a credit card debt collection agency, has seen its profits rise by almost 50 percent over the past year. Rising stock prices of Rent-A-Center, a furniture and electronics rent to own chain, also indicate that consumers simply can’t afford to make big purchases at the moment, and instead are electing to rent.
Indeed, with the future uncertain, a recent poll by Harris Interactive confirms that many Americans are looking for any means by which to save a couple bucks. Electing to buy generic brands, often found at dollar stores, over name-brand products has become the most popular means of saving. Of those polled, 57 percent said they had lately been buying more generic brands to get as much value as possible.
The consumer patterns fall in line with a general shift in perspective, according to Mark Montagna, an analyst at Avondale Partners, who himself is one of the increasing number of high earners to shop at dollar stores. “People are broke,” he told Associated Press. “They’re all chasing value. It’s a seismic shift in mindset.”
