In the wake of last week's public offering of Dollar General, more IPOs are expected to be coming down the pipeline as private equity firms seek a monetary return on investments made during the boom years. Speculation is that Toys "R" Us and Dunkin' Donuts could be next.

Toys "R" Us Inc. is owned by Bain Capital, KKR, and Vornado Realty Trust (NYSE: VNO). The world's leading dedicated toy and baby products retailer was a public company from 1978 until its acquisition by the private equity consortium in July 2005 for $6.6 billion. It has more than 1,500 stores in 33 countries, and its businesses include Babies "R" Us, eToys.com, and FAO Schwarz, the latter two acquired earlier this year. Main competitors include privately owned KB Toys, as well as big-box retailers Target Corp. (NYSE: TGT) and Wal-Mart Stores Inc. (NYSE: WMT).

Over the past few years, it's been hard to find successes in private equity. But, in the case of KKR, there is no doubt that it made a good deal in the leveraged buyout of Dollar General in July 2007 (the company had been public since 1968). The price tag was $7.2 billion.

Now, the company has filed to go public. And, in light of KKR's recent success with the Avago (NASDAQ: AVGO) public offering -- as well as the resurgence in the equities markets -- there's a good chance that Dollar General will also get a nice reception.

Shares of private equity firm Blackstone Group (NYSE: BX) surged 21% on Monday. The question is why?

Some have attributed the surge to investors buying on speculation of an upside surprise from Thursday's earnings report. Analysts surveyed by Thomson Reuters expect the New York-based company to report fiscal third quarter earnings of $0.09 per share, compared to a loss of $0.07 per share in the second quarter, but also a profit of $0.15 per share in the year-ago quarter. Revenue for the third quarter is expected to be 9.1% lower than a year ago to $341.9 million.

The market has made a nice rebound over the past few months, and one question is on every investor's lips: Can it continue?

To get an answer, it might not be a bad idea to look at what the private equity firms are planning. Remember when The Blackstone Group (NYSE: BX) decided to cash out with an IPO and it marked the exact top of the private equity boom? Take a look at how that stock has performed since then.

Well, now The Financial Times reports that "Kohlberg Kravis Roberts, the world's biggest buy-out group, is preparing up to six companies for initial public offerings worth billions of dollars, including Toys 'R Us, as it sells some of its most valuable groups back to the stock market."

At the height of the private equity bubble – in July 2007 – KKR agreed to purchase Dollar General for $7.2 billion. To pull off the deal, KKR was able to borrow $4.7 billion.

Of course, the bubble has since burst and, as a result, there are few successes for the private equity folks.

But now KKR is sensing opportunity. According to a report from the Wall Street Journal [a paid publication], it looks like the firm is in the late stages of filing the necessary legal documents to take Dollar General public.

Most mergers are driven by the notion, sometimes wildly mistaken, that the combination will bring both a competitive advantage. Some pairs of companies, however, seem so intuitively right for one another, no bottom-line considerations should be allowed to interfere with their matrimony. Like a slot machine and a blue hair with a pocket full of quarters, these two were meant for one another.

George Carlin has a famous rap (NSFW) about Americans and our love of stuff, which drives our need to build more places to put our stuff. That's always struck me as an integrated business plan. Two seemingly perfect partners for such a business are Dollar General (NYSE: DG) and Public Storage (NYSE: PSA).

Dollar General is a leader in recreational shopping for the denominationally challenged. If you have a hankering for neon-colored plastic, something covered in polyester fur, food with the half-life of uranium-235 or clothing with the style of Piltdown Man, DG is your go-to source.There you'll find shelf after shelf of non-essentials, the kind that end up in storage sheds. Currently, the 8,260-store company is in the process of merging with Buck Holdings LP.

If this deal falters, though, how about a merger with Public Storage? PSA (I'm a little uneasy with a company whose stock ticker is the name of a prostate cancer screening test, by the way) is a REIT with direct and indirect interest in over 2,000 self-storage developments in the U.S., containing, I'm sure, a great deal of material from Dollar General. The merger would be an excellent opportunity to double-down on America's seemingly inexhaustible need for more stuff.

Dollar Tree Stores (NYSE: DLTR) saw its shares decline Monday after an analyst from JPMorgan (NYSE: JPM) said the stock price for the discount retailer is already too high in light of declining consumer spending.

That's all well and good (and somewhat true), but for a retail store "where everything is a dollar," it's hard to see the core customer contingent of Dollar Tree curbing spending for all those $1 items any time soon. In fact, wouldn't logic say that more people may visit Dollar Tree for all those household goods as all those collective belts are being tightened?

Dollar Tree shares lost over 6% based on the analyst's comment, and they now stand at a little over $37 this morning. The downgrade from Neutral to Underweight caused the shares to close just over $35 on Monday, and have since recovered slightly.

The general reasons were given in the downgrade, including the macro economic environment of the U.S. spending scenario at the moment -- particularly for lower-income households (Dollar Tree's core customer) -- as Dollar Tree was mentioned along with discount retailers Family Dollar Stores (NYSE: FDO) and Wal-Mart (NYSE: WMT). Will Dollar Tree's $1 pricing model really fall under pressure soon due to so many consumer spending issues? With a 25% stock price rise this year alone, perhaps it is time for the shares to cool off a little. I'm just not convinced we'll see a flock of customers abandon $1 products.

It looks like discount retailer Target Corporation (NYSE:TGT) will be losing one of its own to Family Dollar Stores Inc. (NYSE: FDO). The dollar-store retailer has announced that Wook Lee will be filling the newly created position of senior vice president of global sourcing for Family Dollar. Lee was formerly global vice president of production service at Target Corp. and will take over the reigns at Family Dollar in the areas of developing the company's sourcing strategy.

It's kind of hard to think that a senior sourcing expert inside one of the recent success stories in discount retailing (Target) would leave to join Family Dollar, but it's plausible -- and I'm sure Family Dollar paid handsomely to get Lee on board. Are the sales of dollar-type stores going to be on the rise soon? Most likely, yes. When researching retail pricing at Dollar General, Dollar Tree and Family Dollar, I'm amazed that the pricing is so low compared to even Wal-Mart's pricing structure.

According to the Wall Street Journal, discount/single-price point stores like Family Dollar Stores Inc. (NYSE: FDO), Dollar Tree Stores Inc. (NASDAQ: DLTR), and the soon to be KKR owned Dollar General Corp. (NYSE: DG) are growing in popularity [subscription required] with consumers, reporting solid same-store sales growth and expanding sales of food products. According to Family Dollar CEO Howard Levine, "The low-income customer is always stressed and always strained. When things like a minimum-wage increase happen, that's a great benefit to them. When gas prices come down, that's a great benefit to them, and conversely when they go the other way, that has a negative impact."

Because of sky-high real estate prices in my area, we have no dollar stores. There used to be one in a local mall but it got replaced by a jeweler. I'm not kidding. However, anytime I'm traveling, I go to a dollar store, not because I'm "always stressed and always strained," but because it's fun. I was recently driving with my brother and we passed a Family Dollar and I practically ordered him to turn the car around. He reluctantly agreed with only this protest: "You are such a loser."

Discount general merchandise retailer Dollar General Corp. (NYSE: DG) had the kind of earnings in 4Q 2006 one would expect from a company closing over 400 underperforming stores and liquidating that inventory. Although the short term numbers are not good, they are more or less in line with what Dollar General forecast it would cost to shed that much baggage. Last week, Dollar General reported fourth-quarter net income of $50 million, or $0.16 per share. This compares with 4Q 2005 net income of $145.3 million, or $0.46 per share. For the full year 2006, Dollar General reported net income of almost $138 million, $0.44 per share, compared with full year 2005 net income of $350 million, $1.08 per share.

Dollar General marked down over $279 million worth of inventory, and had closing related costs of almost $33 million. It is not surprising its earnings were not favorable. Despite these factors, 4Q net sales were still $2.5 billion, up 3% from 4Q 2005. Net sales for 2006 were $9.17 billion, an increase of almost 7% over 2005. Dollar General also repurchased 4.5 million shares of its common stock for $80 million.

Dollar General still has very strong cash flow and continues to operate over 8,000 neighborhood stores. These factors convinced affiliates of Kohlberg Kravis Roberts & Co. (KKR) to purchase Dollar General for $22 per share, a slight premium over the closing price of $21.11 on 4 April 2007, but at a 31% premium at the time of the deal in March.

One of the land's dollar store chains has been sold, as Dollar General (NYSE:DG)has agreed to be taken private by equity firm Kohlberg Kravis Roberts & Co. for $6.9 billion. KKR plans to speed up the chain's existing plans to close stores in order to boost profit.

Dollar General is the retailer with the most stores open in the U.S., with about 8,260 discount stores all across the nation. Many stores are located in rural towns and sell food, cleaning supplies and household goods. Yes, there are towns where Wal-Mart (NYSE:WMT)and Target (NYSE:TGT)stores don't exist --- and Dollar General's strengths are in those markets. The problem is not all are making the chain a decent enough profit.

In the last seven years, Dollar General has literally doubled its store count, and with that came slower and declining profits. Wal-Mart starting pecking away at Dollar General's profit as more and more customers apparently opted to shop at only one discounter for all their needs. Dollar General also said late last year that it would close down about 400 stores and slow its expansion. This LBO will allow Dollar General to do what they need to in order to restore profit without quarterly results pressure from the market. I believe this is a good move.

A week ago I wrote an article comparing the two best known dollar stores. "The battle of the dollar stores" was my attempt to decide which of those two discount operations might provide better growth in 2007. A quick review of their respective performances amidst the current market downturn indicates that while not performing spectacularly, Dollar General (NYSE:DG) appears to be weathering the storm. What prompted me to write this current mention of DG was a couple comments which I witnessed on a message board. A couple of emotional writers exchanged swipes in regard to DG and I find them quite humorous. The comments linked to here reflect common sentiment towards DG right now, that being that the company's share value is deflated well below expectations.

It is my opinion that positions held in stocks which were undervalued prior to the markets turning south is a good spot to be in right now. Historically it's the positions in stocks which consensus declared were overvalued which have taken the biggest pounding in market down turns. So if you are holding shares of Dollar General and you purchased them prior to the market slide during the period in which they've been deflated, in my thinking you now hold a pretty safe position in which to ride out the storm.

See my declarations regarding the market's bearish turn here, here and here.

I thought it might be interesting to present a comparison between the two best known dollar store operations. Both Family Dollar (NYSE:FDO) and Dollar General (NYSE:DG) are well known for their penny pinching product packed stores but in a financial sense how are these two discount chains faring within the far flung retail world and how do they compare to one another? With reckless abandon I have chosen to dive deep into the darkest reaches of the Internet to draw some insight on the dollar store world.

Dollar General, a Fortune 500 discount retailer, has been in operation since 1955 and currently operates 8,309 stores. The Dollar General website predicates the company's mission upon the statement, "Dollar General stores offer convenience and value to customers, by offering consumable basic items that are frequently used and replenished, such as food, snacks, health and beauty aids and cleaning supplies, as well as a selection of basic apparel, housewares and seasonal items at everyday low prices."

Family Dollar began operations in 1958 and is a part of the Fortune 500 Index. Currently, Family Dollar operates over 6,200 stores which are especially located to serve Family Dollar's middle to lower income target clientele. Their mission statement as presented on the Family Dollar website is a three part declaration of value: "For our customers, a compelling place to shop . . . by providing convenience and low prices. For our associates, a compelling place to work . . . by providing exceptional opportunities and rewards for achievement. For our investors, a compelling place to invest . . . by providing outstanding returns."

Both of these dollar store operations appear to make it clear that it is their intent to offer discounted retail merchandise in first class fashion. Both companies have a drive and focus which place the average American at the heart of their mission and both companies also seek to present their investors with consistently healthy returns. And the more I read about these two compact discount retailers, the more I get the message that they are far less concerned about competing with each other than they are about trimming the edges off of their mutual competitor Wal-Mart (NYSE:WMT).

Is America one big boring cliche after another? To many foreigners it is, since most of our shopping -- a very big reason for tourism anywhere -- is done at cookie-cutter chain stores. Whether it be home furnishings, consumer electronics, food or baby clothes, there is a chain store (and many different ones at that) dedicated to feeding the commerce need we have for every possible segment of living. Capitalism at its best, you might say. Or, its worst, if you're into the "experience" of shopping rather than the "task" of shopping.

For the most part, done are the days of the "mom and pop" store. The chains are everywhere, ready to sell, serve and provide anything they possibly can while collecting as much information about you as they can. Now, I'm not necessarily against chain stores; as the biggest force in the world's largest economy (at least two-thirds of it) runs from the same consumers who keep these chain stores humming night and day.

Chains like the following list are present in almost every large American city (get ready...deep breath) Bed Bath & Beyond; Linens-n-Things; Barnes & Noble and Borders; PetSmart and Petco; Circuit City and Best Buy; Lowe's and Home Depot; CVS and Walgreens; Wal-Mart, Target and Costco; Dollar General, Family Dollar and Dollar Tree. Need more? How about the Apple Store and Pottery Barn, the Gap and Ann Taylor, Banana Republic and DSW, Starbucks and McDonald's. Now that's a lot of chain stores. What would we do without all these chain stores? Probably we'd all pay higher prices while actually enjoying the shopping experience again. We might even form social attachments to our local merchants again. But, the American consumers' motto continues to be "price, price, and -- well -- price."

That's why we have chain stores.

Looks like yet another vague stock downgrade has come from a major ratings house, as analysts at HSBC have downgraded shares of low-price retailer Dollar General Corp. (NYSE:DG) from "neutral" to "underweight" with a target price of $14 per share.

After having looked at the "dollar" landscape recently -- which includes Dollar Tree Stores, Inc., Family Dollar Stores, Inc. and Dollar General -- I was amazed to see that of the 19 items I picked up at a Dollar General store on a research visit were marked much higher than $1 -- the prices ranged from $4 to $19.

Yet, at Dollar Tree, every single item was marked for $1 for all 15 items I picked up to research -- making it a "true" dollar store. Now, the range of goods inside Dollar General were a step above those at Dollar Tree, but some of the bargains were not hat impressive really, although many were. Perhaps "Dollar General" should be "$10 Dollar General."