QUOTE AND NEWS
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....
Benzinga  Oct 9  Comment 
Family Dollar Stores, Inc. (NYSE: FDO) missed fourth-quarter expectations Thursday and cited "a difficult competitive environment" for flat same-store sales. The Mathews, N.C. discounter is set to be acquired for $74.50 a share by competitor...
The Economic Times  Oct 9  Comment 
"India presently has 900 million mobile phone connections and more than 80 per cent of the population has access to mobile telephony," COAI DG said.
SeekingAlpha  Oct 7  Comment 
By Jared Billings: As of one week ago, Deutsche Bank reported that both Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) are considering placing new bids in order to win over Family Dollar (NYSE:FDO). This news comes after Dollar General has...
Motley Fool  Oct 6  Comment 
Family Dollar is the subject of a takeover battle. Is now a good time to buy?
SeekingAlpha  Oct 5  Comment 
By Daniel Jones: After the market closes on Oct. 9, Family Dollar (NYSE:FDO) is due to report revenue and earnings for the fourth quarter of its 2014 fiscal year. With shares of the business trading around their 52-week high as rivals Dollar...
SeekingAlpha  Oct 3  Comment 
By The Specialist: Right now there is a lot of attention on the pending Dollar Tree (NASDAQ:DLTR) and Family Dollar Stores (NYSE:FDO) merger, assuming Dollar General (NYSE:DG) doesn't get its way and gets its hands on Family Dollar itself. But...
SeekingAlpha  Oct 2  Comment 
By Anthony Ruben: I am troubled by today's stock market, and my own portfolio. The economy is expanding, but is also fraught with risk. Interest rates are low, but we all know they are rising. I want my portfolio to increase in value, but I don't...




 
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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