The New York Times reports that dollar stores are thriving as consumers look to pinch pennies: "The nation's dollar stores, those once-dowdy chains that lured shoppers by selling some or all of their merchandise for $1, are suddenly hot. They are busily opening new stores, outfitting existing stores with refrigerators and freezers, and sprucing up their aisles with better lighting, fresh paint and new signs."
Shares of Dollar Tree Inc. (NASDAQ: DLTR) have been strong performers as the company's same-store sales numbers have been terrific and the company plans ambitious new store opening plans. KKR's $7.3 billion acquisition of Dollar General in March of 2007 looks like one of the few good buyout deals to have come at the peak of that boom.
But for investors, the question is whether there is still money to be made with shares of companies like Dollar Tree. A reader recently asked the USA Today's Matt Krantz whether Dollar Tree was still a good investment and he replied that "There are many examples of winning stocks one year becoming bum investments the next."
The problem with Dollar Tree is that it could suffer from an economic rebound or, at the very least, not benefit the way that the beaten down shares of struggling companies are. Dollar Tree shares have held firm while most other retailers have tanked, so the valuation is looking relatively rich.
For long-term investors, Dollar Tree may still be a good bet. But the "recession-proof" short-term play is probably over.
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Reader Comments (Page 1 of 1)
5-03-2009 @ 5:35AM
al coholic said...
There are a bunch of new Dollar General stores here in upstate South Carolina. They are clean, the merchandise is well organized, and there are great deals galore. I shop there for many small household goods that are priced well below grocery stores, CVS, and believe it or not, even (gasp!) Wal-Mart.
These days people who would never have stooped to going to Dollar General without a disguise are bragging to their friends about the deals.
I think this segment of retail has a long, profitable run ahead of it.