Family Dollar Stores, Inc. (FDO), Dollar General Corp. (DG) & Dollar Tree, Inc. (DLTR): Don’t Get Too Excited by the Prospects for the Dollar Stores

The last point is the key, because Dollar Tree, Inc. (NASDAQ:DLTR) has already managed to do this in 2013, while Dollar General Corp. (NYSE:DG) was punished by the market in early June when it lowered guidance thanks to weakness in its discretionary sales. In addition, Family Dollar is somewhat playing catch-up because its discretionary merchandising decisions were below par in 2012. In short, Family Dollar Stores, Inc. (NYSE:FDO)tried to increase sales with discretionary items like clothing, but found it a tough sell to its customers.

Why you shouldn’t get too excited

In putting these points together, it’s hard not to be puzzled as to why the market dragged the other two dollar stores up in sympathy. Family Dollar didn’t have many good things to say about the economy. In addition, if it really is winning market share, then the other dollar stores could be missing out.

Also, the dollar stores have tended to report similar trends in same store sales (as shown in the graph below), but they have tended to differ in how they deal with sales mix issues and getting their discretionary sales right.

In conclusion, if these results were all about Family Dollar Stores, Inc. (NYSE:FDO) adjusting to a slower sales environment, then there isn’t a strong reason to think that Dollar Tree, Inc. (NASDAQ:DLTR) and Dollar General Corp. (NYSE:DG) are about to shoot the lights out in their next reports. Don’t get too excited.

Lee Samaha has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Don’t Get Too Excited by the Prospects for the Dollar Stores originally appeared on Fool.com.

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