Analyst Says Dollar General Is Winning the Tariff War — 5 Ways You’re Saving More
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Karen Doyle
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Rebekah Evans
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With tariffs driving prices up and layoffs squeezing consumers even further, there is a bright spot in retail: discount stores. Dollar General may be winning the tariff war and you may be saving more than you think. Below is what you need to know.
Size Matters
Dollar General is the largest dollar-store chain in the United States, making it well-positioned to capitalize on the shift toward discount retailers as tariffs raise prices across the board. Even though Dollar General imports many products, its food items and low prices overall give it an edge in inflationary times, according to NPR.
During Dollar General’s first-quarter earnings call with analysts, company CEO Todd Vasos indicated that more consumers were shopping at the discount store and implied that tariffs may be the reason, according to ModernRetail.com.
Volume Can Absorb Some Increases
Vasos admitted on the recent earnings call that price increases are possible, but they are a last resort. And an increase in foot traffic may mitigate the need for some increases.
As more and more customers shop at Dollar General and as they spend more on each trip, the chain’s purchasing power with its vendors increases. While it’s unlikely that the increase in costs due to tariffs will offset this entirely, as Vasos notes, it will likely keep prices lower than they would otherwise be.
Cost Sharing and Substitutes
Due to the company’s purchasing power, it is hoping to be able to push back on suppliers to absorb some of the tariff-related costs, according to NPR.
The chain will also attempt to substitute products that are less expensive because they are made in the U.S. or in countries that are less tariff-burdened than China.
A Better Experience May Attract More Shoppers
Kelly Bania, analyst at BMO Capital Markets, told NPR that Dollar General is simply carrying plans out better than other retailers. In fact, the company plans to renovate over 4,000 stores this year and is raising wages to reduce employee turnover. Bania pointed to the shopping experience being better.
Sales Are Expected To Increase But Pressure May Persist
Dollar General raised its net sales guidance for the year at the first-quarter conference call to 3.7% to 4.7% from 3.4% to 4.4%. The company noted, however, that the increase is based on the assumption that they will be able to mitigate some of the increases from tariffs, but that consumer spending could still be impacted by increases related to the tariffs.
When overall prices increase or real income declines, discount stores like Dollar General tend to play a larger role in the retail landscape. Consumers try to save money on necessities wherever they can and discount stores are often the beneficiaries.
The increase in traffic to stores like Dollar General allows them to negotiate better prices from suppliers and take advantage of quantity discounts, which can then be passed on to consumers.
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