QUOTE AND NEWS
Jutia Group  Aug 22  Comment 
[Zacks] - Family Dollar Stores Inc. (FDO) rejected the bid by its rival Dollar General Corporation (DG) citing difficulty to win over antitrust regulatory concerns and has decided to stick with Dollar Tree Inc. ... Read more on this. Dollar...
SeekingAlpha  Aug 22  Comment 
By The Specialist: Well, I didn't see that coming - at least not that fast. Anti-trust issues? Family Dollar Stores (NYSE:FDO) and Dollar General (NYSE:DG) sell bubble gum, shampoo, frozen burritos and notebooks. I have trouble believing combining...
New York Times  Aug 22  Comment 
Bank of America's $16.65 billion settlement may cost the bank significantly less. | Wall Street banks are digging deeper to keep top talent. | Family Dollar rejected Dollar General's takeover bid. | A judge in New York scolded Argentina for its...
SeekingAlpha  Aug 22  Comment 
By Jordan Flannery: On August 21st, Family Dollar Stores (NYSE:FDO) announced its rejection of Dollar General's (NYSE:DG) $78.50 per share all-cash offer for the company made on August 18th. Family Dollar stores reaffirmed its commitment to...
Jutia Group  Aug 21  Comment 
[at TheStreet] - Hedge fund investor Trian Management may be the deal breaker in Dollar General’s battle against Family Dollar. Read more on this. Dollar General Corporation (DG), with a current value of $19.26B, started the session at $63.02. ...
Wall Street Journal  Aug 21  Comment 
Family Dollar rejected Dollar General's $9 billion cash offer, opting to stick with Dollar Tree's $8.5 billion cash-and-stock deal that is worth less but may have an easier time passing muster with antitrust regulators.
Wall Street Journal  Aug 21  Comment 
Bloomberg  Aug 21  Comment 
Motley Fool  Aug 20  Comment 
Dollar General has outperformed the market since the Great Recession ended, but there are three reasons it could disappoint in the year ahead.
Jutia Group  Aug 20  Comment 
[Benzinga] - Family Dollar (NYSE: FDO ) on Monday confirmed it received an offer to be acquired by Dollar General (NYSE: DG ) for $8.9 billion. Family Dollar said in a statement hat it "remains subject to the ... Read more on this. Dollar General...
Benzinga  Aug 20  Comment 
Family Dollar (NYSE: FDO) on Monday confirmed it received an offer to be acquired by Dollar General (NYSE: DG) for $8.9 billion. Family Dollar said in a statement hat it "remains subject to the merger agreement with Dollar Tree, and the...
Benzinga  Aug 20  Comment 
Below are the discount, variety stores stocks on the NYSE in terms of revenue. The trailing-twelve-month revenue at Wal-Mart Stores (NYSE: WMT) is $480.48 billion. Wal-Mart's operating margin for the same period is 5.53%. The...




 
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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