Both the major dollar store chains, Dollar General and Dollar Tree, have enjoyed substantial jumps in their sales and store traffic and thus in their stock market performance over the past five years. During the modern economic recession, customers flocked to the low price options. The retail chains seemingly have leveraged those behaviors, retaining customers even as those shoppers’ spending power improves. Dollar General expanded its price ranges, which increased its margins and allowed it to offer a broader array of slightly higher priced products. Dollar Tree acquired the Family Dollar chain, expanding its presence in various markets. Both retailers also have shifted to smaller stores, with lower overhead, and developed product assortments that feature more “luxury” or discretionary purchase items, such as decorative housewares and cosmetics. Such moves reflect the chains’ recognition of the status of their target markets: As the recession fades and unemployment rates decline, the wages of the poorest U.S. workers increased by 3.1 percent, the largest increase since 2009. Thus customers with a little more confidence in their resources are willing to spend a little more on fun purchases, even if they still need to save and take advantage of the low cost, smaller quantity options that the dollar stores provide. In turn, these retailers—and their investors—appear confident that their impressive performance will continue.

 Source: Steven Russolillo, The Wall Street Journal, August 24, 2016