Will the healthy economy trip up the dollar store sector?
The answer mainly depends on your definition of a healthy economy. Friday's jobs report marked the second straight month that US unemployment levels were below 4%, a feat last achieved in late 2000.
Meanwhile, since the end of the last economic recession in 2009, the US economy has notched growth in 33 of the past 35 quarters.
US consumers, bruised by the recession and generally cautious in its wake, shifted more and more buying to dollar stores. And the big dollar stores—Dollar Tree, Family Dollar (now a part of Dollar Tree), Dollar General, Dollarama and 99 Cents Only Stores—responded with a massive wave of store openings. In the first quarter of 2009, in the midst of the recession, those five stores operated 19,622 outlets. As of Q1 2018, the total had risen almost 60% to 31,269 outlets.
The latest jobs report came just a day after Dollar Tree and Dollar General reported earnings that fell below Wall Street's expectations, leading some to question whether consumers will continue to favor low-price options in times of plenty.
But if dollar stores are in a difficult spot, it's not reflected in most measures. Even in recent quarters, the major chains have delivered almost unbroken strings of quarterly comparable sales gains. (See complete data in the companies database.)
In the latest quarter, Dollar General's net sales climbed 9%, while same-store sales rose 2.1%. Within those numbers was one worrisome sign: Comparable gains were driven by an increased transaction amount, as traffic declined.
At Dollar Tree, net sales gained 5% while same-store sales increased 1.4%. As with Dollar General, there was a hint of trouble: Comparables at its Family Dollar chain decreased 1.1%.
Those warning signs may signal struggles to come but are largely outweighed by the longer-term trend of same-stores sales growth amid a continually strengthening economy.