Analyst: Even Dollar Stores Struggling In ‘Obama Depression’
July 11, 2011 9:19 AM
LOS ANGELES (CBS) — More stores across the U.S. that offer deeply-discounted products are seeing their sales decline after years of growth amid America’s “Great Recession” — and one analyst said on Monday it’s another sign of even deeper downturn.
While the demand at stores like the 99-Cent Store or Dollar Tree is still relatively high, the biggest chains in the nation have fallen short of Wall Street’s expectations for several months, a trend that may prove even more ominous for the economy at large.
“I think what’s going on in those stores is that we are in a depression for 80 percent of Americans,” top retail analyst Howard Davidowitz told KNX 1070.
America’s three largest discount chains — Dollar General Corp., Family Dollar Stores Inc. and Dollar Tree Inc. — all recently missed their quarterly earnings targets.
Davidowitz pointed to the weakness of the dollar and a gloomy consumer outlook as some of the factors behind the stores’ slump.
“In those stores, somebody comes in with $12 to do all their shopping,” said Davidowitz. “The person who used to come in with $12 now comes in with $8.”
“In other words, the economy is continuing to be worse, the Obama depression continues to explode,” he added.
Analysts say rising food and transportation prices are likely eating into the profit margins of discount stores, which risk driving away price-sensitive customers with any potential price hikes.
Core customers at most U.S. discount chains typically have a household income of $40,000 or less.