Buying (At) Discount Stores?

Sebastien Callebaut -

Rising Prices Are Pushing U.S. Consumers To Discount Stores

Spending at discount stores increased by 65% in the week ending November 7 compared to the same period last year, according credit and debit card transaction data from Facteus which was first reported by Bloomberg. That was the biggest increase in bargain shop spending since March, when millions of Americans received government stimulus checks.

  • According to Facteus, spending at discount stores increased by 21% from the previous week
  • Bargain businesses - such as Dollar General and Dollar Tree - witnessed the highest growth in spending in the retail sector, demonstrating that buyers choose deals and discounts in today's inflationary economy
  • Additionally, the data does not account for all cash-paying customers, which is prevalent at low-cost establishments

Pricing Pressures

Discount retailers usually do well in difficult economic times. They are in a strong position to benefit as the annual rate of inflation increased at its quickest rate in more than 30 years in October. Nonetheless, as their overheads rise, these chains are under pressure to keep prices low and remain competitive.

  • Dollar Tree, the only large retailer to stick to its $1-and-under commitment, announced in September that it would also start adding additional items at the $1.25 and $1.50 pricing points
  • It justified the higher pricing points at the time by claiming that they would allow it to provide a greater range of products
  • Earlier earnings calls, however, revealed that increasing shipping and raw material costs were straining revenues, and that the firm was more susceptible to these expenses than its competitors due to its $1 pledge

BENCHMARK'S TAKE

  • We're reviewing several U.S.-based discount chains and reviewing which one is better set to thrive in this inflationary environment
  • Next to providing more affordable food and clothing, discount chains are also making a foray into the health business

"Dollar General has rapidly expanded in the United States over the past decade, in large part by undercutting independent and chain drug stores and snatching away some of their shoppers. The discount giant is particularly well-positioned to capitalize on CVS' planned closings." By Nathaniel Meyersohn for CNN Business

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Markus Spiske on Unsplash.