Stronger Dollar Stores: Low-Price Retail Chains Targeting Upper Valley
The parking lot outside the Dollar Tree store is reflected in its windows in West Lebanon, N.H., on Jan 31, 2014. Valley News - Jennifer Hauck Purchase photo reprints »
With a couple of boxes of envelopes in his hand, Sam Hanford, of Orford, N.H., leaves Hill's 5 and 10 in Bradford, Vt., on Jan. 30, 2014. Hanford said a Dollar General store in Fairlee would be convenient for him , but he does not shop in dollar stores. "We have enough of those stores" he said.
Valley News - Jennifer Hauck Purchase photo reprints »
At Hill's 5 and 10 in Bradford, Vt., owner Ed Wendell helps customer Morgan Movelle, of Orford, N.H. Movelle said she works in Bradford and often picks up supplies at the store for work.
Valley News - Jennifer Hauck Purchase photo reprints »
Fairlee — A Dollar General store planned for Route 5 is part of the national chain’s strategy to target rural areas across the country and is the latest in the steady proliferation of small-box dollar stores in the Upper Valley.
If Dollar General receives final approval from the Fairlee Development Review Board this month, it will be the company’s fifth store in the Upper Valley and the 14th national dollar store to compete for the region’s targeted low- to moderate-income customer.
And there likely will be more of the stores coming to the area if the three competing national chains follow their announced strategies to spur growth through building new 7,000- to 9,000-square-foot stores, primarily in rural areas.
Dollar Tree, Dollar General and Family Dollar have shown rapid growth over the last decade, posting revenue increases of 180.4 percent, 150.6 percent and 108 percent respectively, according to an article published online last week by The Motley Fool.
Although the dollar stores, like other national retailers, contribute to what many see as the homogenization of the Upper Valley’s shopping experience, they likely will not have a devastating impact on sales at the area’s independent, locally owned stores, said Praveen K. Kopalle, a marketing professor specializing in retail pricing and tactics at the Tuck School of Business at Dartmouth.
“They really appeal to customers who are a lot more price sensitive, who want their dollars to go further. The recession has made people more aware of that, and the dollar stores have been meeting that demand,” he said. “Mom-and-pop stores are entirely different. They have a more local feel, and they offer local products and service. Dollar stores may sell some of the items that mom-and-pop stores carry, but not so many that they can’t adjust. And dollar stores are really low-service. They’re not likely to put local stores out of business,” he said.
The Family Dollar store that opened in Bradford, Vt., last year has had some impact on the business at Hill’s 5-Cent and 10-Cent store on Main Street, said owner Ed Wendell, whose family has run the business since 1959.
“We’ve seen some difference in sales after they opened, but they sell food and (cleaning) supplies. We sell more toys and housewares and better grade merchandise than they do. And our customers are friends, and we tend to be part of the community,” he said.
“I think people come to Vermont because our landscape is different, and the experience is different than other places. These stores are just like everywhere else, and they could hurt our tourism business if that’s all that’s here. I’d hate to see that happen,” Wendell said.
The dollar stores are in competition with Wal-Mart and some other big-box chains, Kopalle said, noting that Wal-Mart and Target are coming out with a line of small express stores in rural and urban areas to regain some of the market that has been lost to the dollar stores.
So far, Wal-Mart has opened 20 Walmart Express stores in mostly rural areas and revenues have been positive. Target is opening its first TargetExpress in Minneapolis in July. If successful, the chain plans to open more, initially in or near college towns.
In a recent Securities and Exchange Commission filing, Family Dollar, headquartered in Matthews, N.C., revealed much about the company’s strategy to attract targeted customers, combat the fierce competition with the other chains and to overcome the challenges of a sluggish economy and a deadlocked Congress.
During the last fiscal year, the company’s revenues were hurt by persistent fiscal cliff issues, payroll tax increases, tax refund delays and slow job growth. Those factors played into a reduction in discretionary spending by core customers, who the company expects to spend an average of $10.50 per visit.
To meet the challenges, the company has increased consumable items and is building more 7,500- to 9,500-square-foot stores to be closer — within three to five miles — of customers “who rely on Family Dollar for weekly fill-in shopping trips for essential needs or periodic trips to stock up on household items.”
The Fairlee Development Review Board has held two public hearings on the proposed Dollar General, which is planned for just south of Wings Market, board Chairman David Fracht said.
The property is zoned for commercial use, and the five-member board’s limited role is to make sure that the store is compatible with abutting property, which is primarily residential, he said.
“So far, the developers have done a very good job trying to accommodate our concerns. Some of the abutters are unhappy, but I think they’ve tried to make the store conform the best they can.
“In our first meeting, there were a lot of concerns from people about not believing the business was suitable or in keeping with the town. That wasn’t within our scope, so we had to limit discussion on those lines. If people want to stop these kinds of businesses from coming in, they could change the zoning, but that’s a slippery slope and probably wouldn’t hold up in court,” Fracht said.
On Feb. 11, the board will meet again and deliberate. If approval is given, then Dollar General, based in Goodlettsville, Tenn., could begin construction on the 9,100-square-foot store in the spring and be open by August, he said.
Wing’s owner, Mary Davenport, attended the first public meeting, but didn’t speak or object to the Dollar General plan, according to the minutes. Davenport is in Florida and couldn’t be reached for comment last week.
Dollar General, which is the largest of the three chains, traces its roots back to 1939. The company has a market capitalization of $18.03 billion and operates more than 11,000 stores in 40 states. The company opened 650 new stores in 2013 and remodeled 550 more. Each store sells between 10,000 and 12,000 items. Dollar General earnings per share are expected to be $3.22 during the 2013 fiscal year, and the company announced a $1 billion buyback of its stock last week. Operating profit is expected to exceed $1.7 billion last year. Dollar General Stock sells on the New York Stock Exchange and was trading last week in the $55 range on a daily average volume of 3.5 million shares.
Despite the positive earnings, some analysts were reporting last week that speculators were selling the stock short — apparently questioning growth strategies and noting the growing competition from Wal-Mart and others. Stock prices trended downward, and volume was up about 1 million shares on Thursday and Friday.
During the coming fiscal year, Dollar General plans to build 700 new stores, including the one in Fairlee, and remodel or relocate 525 more, recent SEC filings show. The company operates stores in Windsor, Springfield, Vt., Newport, Claremont, Randolph and North Haverhill in the Upper Valley.
Out of the three dollar store chains, the only one that sells most of its items for a dollar is the 26-year-old Chesapeake, Va.-based Dollar Tree, which has stores in West Lebanon and Claremont and seven others within a 50-mile radius. However, all three do sell national and store brand items at deep discounts.
Dollar Tree operates about 5,000 stores in 48 states and five Canadian provinces. About 340 new stores were built last year and 75 were remodeled or relocated. The company has a market capitalization of $10.6 billion. Earnings per share were $2.68 were in the 2012 fiscal year. Third quarter sales in 2013 were up by 9.5 percent over the previous year, the company reported. The company’s annual report is not due out until later this month. The stock was selling last week on the Nasdaq exchange in the $51 range on a volume of 3.1 million shares.
Family Dollar started in 1959 in Charlotte, N.C., and now has 7,900 stores in 46 states and a market capitalization of $7 billion. The company built 500 stores last year and remodeled, expanded or relocated 830 others. Some 525 additional stores are planned for this year, its annual report says.
Despite a “challenging” year, Family Dollar increased sales by 11.4 percent to a record of $10.4 billion with earnings per share of $3.83. The stock was trading down last week in the $61 range with an average volume of 1.3 million shares.
In addition to Bradford, the company has stores in the Upper Valley in Lebanon, Claremont, Newport, Springfield, Vt., and Randolph.
By comparison, Wal-Mart, which has a take-no-prisoners attitude toward its competition, has a market capitalization of more than $200 billion, greater than all the dollar stores combined, and the company is moving aggressively to roll out the Walmart Express stores to recapture some of that lost market share.
“They are going for the shoppers who want the convenience of getting in and out that they can’t find in the big Wal-Mart stores. They know they have to compete for the price-sensitive customers, and they know how to compete,” Kopalle said.
Warren Johnston can be reached at email@example.com or 603-727-3216.