Dollar Tree and Family Dollar last week announced an $8.5 billion merger that, when completed, will create the largest dollar store operator in the United States.
The store footprints of Dollar Tree and Family Dollar certainly complement one another. Dollar Tree stores are located primarily in suburban areas while Family Dollar targets urban and rural locations. Assuming that the new combined entity would not be forced to sell off an inordinate amount of stores to please trade regulators, that would make Dollar Tree/Family Dollar the new leader by store count.
Dollar Tree and Family Dollar currently have a combined 13,326 stores, and Dollar Tree averaged $1.6 million in revenues per store over the trailing 12 months, according to eMarketer research, down 1% year over year, while Family Dollar brought in an average of $1.3 million per store, down 4.8% over the trailing 12 months.
Dollar General, with 11,338 stores, averaged $1.6 million in revenue per store in the trailing 12 months as well, up 2.3% year over year. Dollar Tree brought in $149 in sales per square foot over the trailing 12 months, down 0.9% in that time, according to eMarketer, while Family Dollar took in $150 per square foot, down 5% year over year. Dollar General averaged slightly higher sales per square foot — $179, up 1.5% — during that time frame.
Combined, Dollar Tree and Family Dollar collected $18.4 billion in total revenues in the trailing 12 months. Dollar Tree's revenues were up 5.8% year over year, while Family Dollar's revenues grew just 3.3% during that time. The combined revenues of the two companies were just larger than Dollar General, which took in $17.8 billion in the trailing 12 months, up 8.8% year over year.
The marriage could mean sharper competition for Dollar General, still considered king of the dollar store hill. But it's important to consider the sharp growth trajectory at Dollar General. It continues to grow where it counts and its store continue to gain in productivity, in same-store sales growth, sales per sq. ft., and sheer store count. Dollar General will add in excess of 700 stores this years. Prior to the announcemet, Family Dollar had planned to add 525 stores this year; Dollar Tree had planned to add 375.
"First and foremost, Dollar General has clearly benefited from Family Dollar’s struggles over the past decade, particularly in 2012/2013 when the company retreated from its hybrid EDLP model," suggested Chuck Grom, Sterne Agee analyst. "With a new sheriff in town, Family Dollar will be a much sharper competitor going forward, creating margin pressure in the process."
DSN believes there is a lot of room for growth for both companies in the dollar channel. That's because the economy continues to make more of its core customer everyday. That doesn't seem to be changing any time soon, so look for massive growth from both companies in the years ahead, and stiffer competition for the low-income consumer — which, of course, has always been Walmart's domain.