The dollar store space has remained quite immune to the shifting consumer landscape away from bricks and mortar and toward e-commerce, for good reason. Picking up goods which are a buck, or a few bucks, online often makes little sense for retailers from a shipping standpoint, unless such items are bundled together with a larger order as add-on items.
Being insulated from behemoths such as Amazon.com, Inc. (NASDAQ:AMZN) is always a good thing; that being said, some dollar store chains will be better than others. In that regard, I would encourage investors to check out Dollar General Corporation (NYSE:DG) and avoid Dollar Tree, Inc. (NASDAQ:DLTR).
Comparing the stock prices of Dollar General and Dollar Tree, we can see that Dollar General is trading right around all-time highs, a fact which deserves merit and should be contemplated.
Dollar Tree, in comparison, currently trades approximately 30% below its high, reflecting concerns about the company's portfolio of stores and long term growth potential relative to Dollar General. Indeed, Dollar General has a more desirable footprint of store locations, perhaps the most important metric one can look at for long term success in this business.
The premium investors will need to pay for Dollar General compared to Dollar Tree (16 times earnings vs. 12 times earnings) could be explained partially by the companies' respective location mixes, but also operating metrics and better performance overall at Dollar General, making such a premium worthwhile, in my opinion, for long term investors interested in this space.
Invest wisely, my friends.
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