Dollar General, Dollar Tree Tap ‘Retail Down’

We have seen a series of “big” trends emerge from the pandemic. There was the big digital shift, the big quit, the big churn, and now the big downtrend in 2022 exchanges joins the list.

This, as consumers show an increased appetite for bargain brands and the retailers that carry them, as they seek to stretch their limited dollars in the face of reduced purchasing power.

PYMNTS has tracked spending trends and analyzed changes in consumer behavior in the face of runaway inflation, finding that bargain chains and off-brand products have increasingly replaced high-end products in recent months, as prices hit a 40-year high.

In the PYMNTS report “Consumer Inflation Sentiment: July 2022 — Consumers Pull Back and Prepare for the Long Haul,” based on a survey of nearly 3,800 consumers, 70% of retail shoppers said they were discounting goods non-essential, and more than half (53%) purchased from discount retailers.

Additionally, 60% of consumers in the report have cut back on non-essential grocery spending, with 45% switching to less expensive grocers, “suggesting that consumers generally view retail as more prone to setbacks than grocery shopping. Additionally, 77% of consumers said they were eating at home more often to mitigate rising restaurant prices, while 48% of consumers said they were staying home more often to combat the rise. transportation costs and gasoline prices.

Redefining “good business”

Those sentiments were crystallized by the nation’s major dollar store chains this week as their revenues reflected greater price sensitivity among their customers.

At its 18,000 stores, Dollar General CEO Todd Vasos told analysts on a second-quarter earnings conference call on Thursday, August 25: as business activity increased downward.

“During the second quarter, customers appeared to compromise on some of their food choices, contributing to an increase in private label penetration within our consumables business,” Vasos said. “We also saw growth in the number of higher income households shopping with us, which we believe reflects more consumers choosing Dollar General because they are looking for value.”

Responding to an analyst’s question about these effects, Vaso put a positive spin on it from a low-priced retail perspective, saying “the declining trade is coming from income levels above $100,000 , which really encourages us to see a younger consumer, a little more affluent, and again, very comfortable with digital and technology.

This aligns with data from PYMNTS, specifically the August study “New Reality Check: The Paycheck-to-Paycheck Report: The Consumer Savings Edition,” a collaboration of PYMNTS and LendingClub.

“Seventy-eight percent of consumers earning less than $50,000 and 60% of those earning $50,000 to $100,000 a year were living paycheck to paycheck in June 2022, compared to 73% and 54%, respectively, in June 2021,” the report said. “Among consumers earning more than $100,000 a year, 45% reported living paycheck to paycheck in June 2022, compared to 39% in June 2021.”

Read more: Households over $100,000 saw the largest paycheck-to-paycheck increase in life

With 16,000 locations, Dollar Tree is seeing declining trading behavior even among its cost-conscious buyer base. During his second quarter earnings call Thursday, August 25, President and CEO Mike Witynski said “there are signs of commerce in our stores, and we’re focused on the value proposition for both banners in this environment. Like many retailers, we are seeing a shift in consumables preferences as many shoppers switch to consumables as needed, impacting our margin through product mix. »

Although he said it had “modestly raised expectations” for the company’s 8,200 Family Dollar stores, it seems even budget retailers aren’t immune to the lower trade effect.

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