As Food Inflation Sticks Around, Dollar Stores Are Recording Huge Profits
Dollar stores, once the go-to choice for bargain hunters and budget-conscious families, have broadened their appeal to shoppers across the board. Dollar discount chains unsurprisingly increased grocery selections during and after the 2008 recession, per The New York Times, positioning themselves well for current food-inflation woes. That effort seems to be paying off.
The average shopper may be unaware that dollar store chains such as Dollar Tree, Dollar General, and Family Dollar offer food. But the industry has been purposely preparing for times of economic duress and food inflation. Dollar Tree began installing freezers and coolers in hundreds of its stores during the widespread 2008 economic recession, notes The New York Times. It also increased the acceptance of food stamps, currently known as the SNAP nutritional assistance program. Family Dollar expanded food aisles and stocked them with more prepackaged foods, including name brands such as Oreo cookies. In the decade since, some Dollar General stores have even experimented with carrying high-end food products, including canned Starbucks Frappuccino drinks and Keurig K-Cups, according to Fortune.
These days, food budgets for most households are slimming down, but profits for dollar stores are only going up — way up.
Grocery investments pay off
Based on second-quarter 2022 earnings reports, both Dollar Tree and Dollar General announced considerable profit increases. Dollar General, in particular recorded accelerated growth in "consumables," stating that a greater portion of overall sales came from this category, helping to offset losses in other areas. As a result, it contributed to a 9% company increase in overall net sales, reaching $9.4 billion for the quarter. Grocery Outlet earlier pointed out the 2021 Dollar General investment in frozen and refrigerated food categories, buoyed by the expansion of its DG Fresh self-distribution capacity. According to Chief Operating Officer Jeff Owen, this move increases profits by saving as much as 20% in transportation costs over using third-party delivery trucks. It also plans a deeper focus on fresh vegetables and fruits through 2022, with a goal of fresh-produce access at 3,000 stores by year's end.
Dollar Tree, which also operates stores under the Family Dollar brand, reported solid second-quarter results for 2022. Consolidated net sales increased 6.7%, to $6.77 billion, compared to the same time period in 2021. In addition, operating profits shot up more than 25%, which President and CEO Mike Witynsk credited to inflationary concerns over rising costs for food, fuel, and essential needs such as housing, per Grocery Dive.
While dollar stores have been around for many years, players in this market segment have undeniably prospered in 2022. Strategic positioning and proactive awareness of food inflation broadened customer bases and legitimized dollar stores for grocery shopping.