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Discount general stores cashing in post-recession

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Thursday, Feb. 17, 2011
 

Lorraine Jones shops at Family Dollar in Carnegie about three times a week for necessities, ranging from cleaning supplies to greeting cards.

"Just about everything is going up, and that's why I come to these dollar stores," the Carnegie resident said Wednesday, adding that the converted supermarket off Broadway Avenue is clean, convenient and stocked with a wide range of items.

Retail chains with "dollar" in their names have increased their following during tough economic times -- with many budget-conscious consumers getting into the habit of stopping first at the stores, before heading to supermarkets and other discount stores to find the other items on their lists.

Family Dollar -- with more than 6,800 stores in 44 states -- has been a standout in the post-recession economy. Activist investor Nelson Peltz made a bid this week to take the Matthews, N.C.-based company private in a deal valued at up to $7 billion.

Peltz's Trian Fund is offering $55 to $60 a share for the company, a securities filing said. Trian already is Family Dollar's largest shareholder, owning more than 8 percent of its stock.

The company said its board will review Trian's proposal with its financial and legal advisers. Family Dollar closed yesterday at $53.25 a share, up $9.29.

Trian owns large stakes in a variety of businesses, including Downtown-based food producer H.J. Heinz Co.

Peltz disclosed last summer that he was buying shares of Family Dollar, which he considered undervalued.

Family Dollar, Dollar General, Dollar Tree and similar stores have dozens of locations in the Pittsburgh area.

"They are extremely popular, and my understanding is a lot of them are really giving Wal-Mart a run for its money," Duquesne University marketing professor Audrey Guskey said.

She cautions shoppers, though, to "know your merchandise. Some things aren't worth $1, and some are worth significantly more." School supplies, gift wrap and hair ribbons may be great buys, Guskey said, but consumers should be wary of medicines, snack foods and toys.

Robert Grandinetti and his family of Scott Township stop frequently at dollar-type stores in the South Hills. His wife and daughter like Family Dollar best, he prefers a Dollar General in Mt. Lebanon, and they also visit a Dollar Tree in Bridgeville.

"I've never had any trouble with anything I've bought here," he said as he left the Carnegie store yesterday with a pair of curtains and some blank videotapes. "Even though Giant Eagle and Shop 'n Save have their battles, you can find better deals in these places."

Family Dollar's profit for the September through November period rose by 10 percent to 74.3 million, or 58 cents a share, on sales of nearly $2 billion. Dollar General and Dollar Tree grew their profits by 69 percent and 36 percent, respectively, in their most recent quarters.

Deutsche Bank analyst Mike Baker said in a report this week that if Family Dollar's board is open to an offer from Trian, other bidders could emerge. He maintains a "buy" rating on the stock.

More than a third of consumers now shop at dollar stores -- the highest percentage in the nation's history, according to a recent survey by America's Research Group.

"There are a lot of things going on out there that just mystify," said C. Britt Beemer, founder of the Summersville, S.C.-based company. "Come on. A third of Americans are now shopping at dollar stores• And they expect to shop there even more this year than they did last year."

Bargains abounded at Family Dollar's Carnegie store yesterday -- an end table for $12; a large bottle of mouthwash for $2; most greeting cards for $1 each; and a women's short-sleeved knit top for $7.

"Customers got used to shopping there," Guskey said of the stores, "and even though we are getting out of the recession, they are still shopping there."

Additional Information:

The big 3

Sales are growing at these dollar-styled stores, as they attract new customers looking to pinch pennies:

-- Family Dollar, with 81 stores in Western Pennsylvania, 6,800 nationwide

-- Dollar Tree, with 46 area stores, 4,000 nationwide

-- Dollar General, with 102 area stores, 9,200 nationwide. The company said it will open 625 new locations this year.

Source: Tribune Review research

 

 
 


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