Dollar Stores Continue to Dominate
By Robert Ciura – May 23, 2013
Dollar stores in the United States have seen great success since the recession hit in 2008. Many consumers have scaled down their spending as a result of painfully high unemployment and stagnant wages.
Furthermore, now that the payroll tax hike and ongoing sequester are taking deeper bites out of the American consumer, it’s appearing more and more likely that dollar stores in the United States may be taking meaningful share from their retail peers.
As a result, investors interested in the retail space would be well advised to seriously consider adding one of the nation’s major dollar stores to their portfolios.
Low priced merchandise turns into big profits for these retailers
Whereas many other retailers in the United States are producing disappointing first-quarter results, blaming everything from poor weather to government spending cuts all the while missing on sales and profit expectations, these deep-discount retailers are crushing expectations and firing on all cylinders.
First, Family Dollar (NYSE: FDO) reported that for the second quarter of fiscal 2013 ended March 2, 2013, net sales increased 17.7% to $2.89 billion. Same-store sales, which measures sales only at locations open at least one year, grew almost 3% year over year, and net income per diluted share for the quarter increased 5.2% to $1.21 per share.
Even better, Family Dollar has a long track record of rewarding its shareholders with consistent dividend increases, and the fantastic operating performance enjoyed in recent months will go a long way to ensure further rewards for the foreseeable future. In January this year, the company increased its dividend by more than 23% and authorized a new $300 million share buyback program. This marked the 37th consecutive annual dividend increase for Family Dollar.
Deep discount peer Dollar General (NYSE: DG) had a fantastic year, reporting record sales, operating profit, and net income for fiscal 2012. In March, Dollar General reported same-store sales increased 3% in the fourth quarter and nearly 5% for the full year. Furthermore, the company’s adjusted earnings per share clocked in at $2.91 per share.
The company is deeply committed to providing shareholders with meaningful returns, and has demonstrated that commitment recently. Along with its fiscal 2012 results, Dollar General increased its share buyback authorization by $500 million.
Last but not least, rival Dollar Tree (NASDAQ: DLTR) reported 2.4% same-store sales growth in the fourth quarter and 15% net sales growth during the same period. Meanwhile, diluted earnings per share soared 26% during the fourth quarter.
For the full year, the company reported same-store and net sales increases of 3.4% and 11.5%, respectively. These results flowed through to the bottom line, as diluted earnings per share of $2.68 soared 33% from the year prior.
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