QUOTE AND NEWS
Clusterstock  7 hrs ago  Comment 
By Svea Herbst-Bayliss and Sam Forgione (Reuters) - Top U.S. hedge fund managers did some shopping for shares of discount retailer Dollar General Corp and drug store operator Walgreen Co in the second quarter. Daniel Loeb's Third Point added 1...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- Maybe after almost a year of on-and-off speculation provided by Wall Street analysts, hedge fund investors and the media, Dollar General simply isn't interested in buying Family Dollar . That appears to be the conclusion...
Motley Fool  Aug 9  Comment 
The rumor won't die that a dollar chain bidding war could erupt, but it may not be worth a wooden nickel if it does.
SeekingAlpha  Aug 9  Comment 
ByRenee Butler: Things are changing at Target (TGT). The company hasn't been meeting its sales forecasts in Canada and in the US the bulk of its sales are coming from discounted merchandise, hence the lower than expected margins. In addition,...
SeekingAlpha  Aug 6  Comment 
By Bob Ciura: Judging by its share price performance, you'd think Dollar General Corporation (NYSE:DG) didn't have much going for it. Shares of the discount retailer are down this year, and are up only slightly over the past two years. But...
Benzinga  Aug 6  Comment 
In a note released Wednesday, FBR said, despite an earlier report from Bloomberg that noted 50/50 odds, a competitive from Dollar General (NYSE: DG) for Family Dollar Stores (NYSE: FDO) has a "relatively low probability." The FBR team believes...
Benzinga  Aug 5  Comment 
For years there have been ETFs that invest in niche industries, single countries and innovative cross sections of the economy.  A groundbreaking fund provider has taken that targeted focus one step further by creating the first city-based ETF...
TheStreet.com  Aug 5  Comment 
NEW YORK (TheStreet) -- There is roughly a 50% chance that Dollar General tries a competing bid for Family Dollar after the company agreed to an $8.5 billion merger with Dollar Tree in late July, Bloomberg reported. If Dollar General does move...
TheStreet.com  Aug 5  Comment 
NEW YORK (TheStreet) -- Shares of Dollar General  are gaining 3.08% to $57.63 following a Bloomberg report that the company is weighing a bid for Family Dollar , challenging Dollar Tree's $8.5 billion takeover bid.The discount retailer is...
StreetInsider.com  Aug 5  Comment 
The following is a list of notable articles to help get you through the lunch hour: Dollar General (DG) Said to Explore Bid for Family Dollar (FDO) -> Read this! Icahn Not Interested in Whole Foods (WFM) - Yahoo -> Read this! BlackBerry...




 
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
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki