You know you’re in trouble when you see this headline:
Dollar Stores Find Splurges Drying Up
With all the talk about bringing everybody down to the wage levels found in the troubled private sector, you’d think someone would have asked; how are we ever going to get some economic action going now?
What the dollar stores are telling us, may be even scarier than the fear mongering right wing on the debt ceiling:
WSJ: Sales and profit growth have started to slump at the deep-discount retailers called dollar stores, after a robust performance during the recession, a sign that even fairly cheap toys and other small indulgences now are a stretch for some consumers.
All three retailers cited their price-sensitive customers, pummeled by high unemployment, stagnant wages and soaring gasoline prices, are buying more food and other basics like cleaning products, which have relatively low profit margins, and fewer higher-margin discretionary products, such as apparel and home decorative items. Shoppers have become less likely to splurge, for example, even on a $5 die-cast Transformer toy or 2-for-1 children's bathing suits at $7.
Adrianne Shapira, a retail analyst at Goldman Sachs (said) "…their shoppers have a bunker mentality. With all this mounting inflation crowding out discretionary purchases, it's painful."
Dollar Tree does a brisk business in products like party goods and seasonal decorations, all for just $1. Half its new customers have family incomes of more than $70,000. "I think of Dollar Tree as a Target trade-down," said Ms. Shapira.
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