It's a tough time to be a dollar store.

Once the only option in small rural areas, dollar stores are losing their grip on consumers in retail deserts.

As big box retailers and ecommerce giants build out their logistics grids -- delivery of affordable and essential goods is eating into a once reliable market.

And you can see it in stock values.

Is there relief in sight for Dollar General, the largest discount retailer in the US, in Q3?

Here's what we're watching...

Lower-income Americans (those bringing in less than $35,000/yr), who account for roughly 60% of Dollar General's sales, are feeling increased pressure from high inflation, forcing them to prioritize consumables like food and household essentials over discretionary items, which typically yield higher margins.

Last quarter, same store sales increased by half a percent, below expectations. Consumers made more trips but spent less money on each transaction as they "continue to focus their spending on the items they need most for their families."

Meanwhile, middle- and upper-middle-income consumers are not flocking to dollar stores. During its fiscal second-quarter earnings call for 2024, Dollar General noted that these customers are turning more to online shopping, where dollar stores have struggled to compete effectively. (hello massive rise of Walmart)

The stock has also felt pressure from looming impacts of potential tariffs -- Dollar General and other discount retailers rely heavily on low-cost imports. In fact, the impact of import tariffs from 2018 was attributed to the increase in DG competitor Dollar Tree's price increase from $1 to $1.25.

Feels very doom and gloom, right?

Headwinds for sure, but we do see some signs of light...

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