QUOTE AND NEWS
Wall Street Journal  Oct 17  Comment 
Activist investor Elliott Management thrust itself into bidding war over discount chain Family Dollar, launching an effort to take over the company’s board and pressing it to accommodate a bid from rival Dollar General.
Jutia Group  Oct 17  Comment 
[Reuters] - Activist investor Elliott Advisors UK Ltd nominated seven candidates for election to Family Dollar Stores Inc's board as it looks to push for a sale of the dollar store operator to bigger rival Dollar General Corp. Dollar General's...
Jutia Group  Oct 16  Comment 
[Business Wire] - Dollar General Corporation today announced plans to build a new state-of-the-art distribution center in San Antonio, Texas. It will be the 13th facility in the retailer’s Read more on this. Dollar General Corporation (DG),...
The Economic Times  Oct 16  Comment 
India had made it clear that it would not ratify the Trade Facilitation Agreement until a permanent solution was found on the food security issue.
The Hindu Business Line  Oct 14  Comment 
As more than 90 per cent of India’s trade by volume and 70 per cent trade by value moves by sea, maritime transport is crucial.
Market Intelligence Center  Oct 14  Comment 
MarketIntelligenceCenter.com’s patented algorithms have chosen the Jan. '15 $57.50 call for a couple of hedged-trading ideas on Dollar General (DG). A traditional covered call on Dollar General yields 5.37% (20.63% annualized, for comparison...
Market Intelligence Center  Oct 13  Comment 
For a hedged play on Dollar General (DG) MarketIntelligenceCenter.com’s patented trade-picking algorithms recommend the Jan. '15 $57.50 covered call for a net debit in the $55.14 area. That is also the break-even stock price for the covered...
SeekingAlpha  Oct 11  Comment 
By Marshall Hargrave: Family Dollar (NYSE:FDO) posted 4Q14 earnings results that had earnings coming in at $0.73/share (missing consensus of $0.77) and sales marginally beat at $2.61bn. And the company didn't provide any guidance for 2015 citing...
Wall Street Journal  Oct 10  Comment 
Family Dollar Stores Inc. and Dollar General Corp. have received requests for additional information from the Federal Trade Commission regarding Dollar General’s unsolicited bid to buy the discount retailer.
Yahoo  Oct 9  Comment 
Discount retailer Family Dollar Stores Inc (FDO.N), which is trying to ward off a hostile bid from rival Dollar General Corp (DG.N), said its fourth-quarter profit slid 66 percent hurt by inventory markdowns, restructuring charges and merger fees....




 
TOP CONTRIBUTORS

Dollar General Corporation (NYSE: DG) is the largest discount retailer in the United States by number of stores.[1] Dollar General competes with other discount retailers, such as Family Dollar Stores (FDO) and Dollar Tree Stores (DLTR), as well as wholesale retailers such as Wal-Mart (WMT) and Target (TGT). In fiscal 2010, DG posted net sales of $13 billion and net income of $627.9 million.

Discount retailers are poised to succeed during recessionary economic conditions, as consumers try to buy their everyday items at lower prices. Dollar stores struggle when operating costs increase, as such stores cannot raise prices of goods sold, and thus cannot pass costs on to consumers. The increased demand for discount retailers has exceeded costs of operations, which has lead to Dollar General to have double-digit net sales growth in each of its last two fiscal years.

Company Overview

Business Growth

Dollar General launched its Initial Public Offering (IPO) in November 2009, selling $34.1 million shares at $21 per share.[2]

Fiscal Year 2010 (ended January 28th, 2011)

  • DG posted net sales of $13 billion, a 10.5% increase compared to fiscal 2009.[1]
  • Net income increased 85% to $627.9 million.[1]

Business Segments

  • Consumables (71.6% of fiscal 2010 net sales)[1]
  • Seasonal (14.5%)
  • Home Products (7.0%)
  • Apparel (6.9%)

Geographic Presence

Dollar General operates only in the United States. The firm has 9,414 retail stores located in 35 states, with the top 10 states (by number of stores) listed below:

  • Texas (1,080 stores)
  • Georgia (541)
  • Alabama (512)
  • Florida (505)
  • Ohio (510)
  • North Carolina (536)
  • Tennessee (489)
  • Pennsylvania (421)
  • South Carolina (375)
  • Louisiana (369)

Trends and Forces

Discounters Experience Difficulty Passing on Cost Increases to Customers

Because Dollar General’s low-income customer base is highly sensitive to price and because the company competes largely with merchandise prices fixed to be under $2, input cost increases (such as inventory, overhead, and marketing) are difficult or impossible to pass on to consumers. Although the company has been able to raise some prices - changing an item that was 2 for $1 to 59 cents apiece, for example - the prices of the vast majority of its goods cannot be increased. Macroeconomic and company specific changes to cost structure, including higher freight costs, rising energy prices, and supplier or distributor consolidation increases the risk of large margin decreases that cannot be offset by price increases.

Stiff Competition and Low Competitive Advantages in a Mature and Saturated Market

Family Dollar competes against discounters with wider selection and significant cost and scale advantages in its local markets. A Family Dollar store operating within a few miles of a nearby Wal-Mart or Target, for instance, will struggle to compete on value and selection, and may instead gain customers via convenience and location. It also faces competition faces other “dollar stores,” that have similar or identical value propositions, such as Dollar Tree Stores (DLTR), Family Dollar Stores (FDO), and 99 Cents Only Stores (NDN). With low barriers to entry and few natural competitive advantages to gain, the industry has become flooded with dollar stores and collectively, these companies are approaching U.S. saturation. While Family Dollar has some competitive advantage in the southern US states, there is substantial risk of lower margins due to increased overhead expenses as well as stiff competition as other discounters pursue the same strategies.

Dollar General Thrives During Economic Crisis

Dollar General sells similar products as wholesale retailers Wal-Mart (WMT) and Target (TGT), but typically at lower prices. Because of this, during harsh economic conditions, many consumers may make the change of shopping at Dollar General instead of a regular wholesale retailer.

Competition

Off-Price Retailers

  • Dollar Tree Stores (DLTR) Dollar Tree operates 3,806 stores in the United States. The company sells all of its products for $1.[3]
  • Family Dollar Stores (FDO) Family Dollar offers similar products as DG and also sells all of them for $1.
  • 99 CENTS ONLY STORES (NDN) 99 CENTS ONLY STORES operates 275 stores in the United States. The company sells all of its products for 99 cents or less. Food and grocery sales account for more than half of the company's annual revenue.[4]

Wholesale Retailers

  • Wal-Mart (WMT) Wal-Mart sells brand-name products that DG sells, and at higher prices.
  • Target (TGT) Target sells brand-name products that DG sells, and at higher prices.
  • Costco Wholesale (COST) Costco offers similar products as DG, but in bulk quantities.

References

  1. 1.0 1.1 1.2 1.3 DG 2010 10-k
  2. Reuters, "Dollar General IPO prices at low end," 11/12/2009
  3. DLTR 2009 10-K pg. 8
  4. NDN 2010 10-K pg. 3
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