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Proprietary Data Insights Top Discount Store Stock Searches This Month
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Since May, The Juice has sounded the alarm on the scary combination of increasing consumer debt and dwindling personal savings. The latest numbers from the Bureau of Economic Analysis (BEA) shows we’re onto something. However, it’s not all bad, particularly if you’re among the financially healthy with cash on hand. With cash to invest. We’ll get to that in a minute, but first, the chart above shows personal savings continue to plummet in the US. In August, it hit $652.8 billion, a 22.8% decrease since January. And a stunning 86.5% crash from Q2, 2000’s $4.85 trillion. Here’s a look at the personal savings rate, which is the percentage of disposable income people save rather than spend. It’s at 3.5% for August, down from 4.7% in January and a pandemic high of 26.4% in Q2, 2000. US consumers are – clearly – blowing through their savings. To some extent, we expected this. Much of that savings came via government stimulus, which was meant to be spent on needs and wants during the stay-at-home portion of the pandemic. Now, with that time of our lives in the rearview mirror, it appears inflation helped intensify the savings drawdown. This directly connects to another looming problem: Consumers renewed their sultry love affair with credit cards. From a separate Federal Reserve release:
If that’s not writing on the wall for serious problems among at least a large subset of consumers, The Juice doesn’t know what is. Here’s what we do know. We still like two stocks we’ve been writing about alongside this savings versus debt conundrum. Actually, we love one and like the other. Scroll with us for an update. |
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Key Takeaways:
That’s quite a performance by the #4 and #5 most searched discount store stocks in The Juice’s Trackstar database of the tickers investors are searching for. Dollar Tree (DLTR) and Dollar General (DG) have crushed the broad market indices over the last year. Impressively, they’ve outperformed the place where many affluent consumers shop – Costco (COST). Despite recent stumbles, both stocks continue to outperform. While we’d buy both, we prefer Dollar General. Here’s why. When Dollar Tree reported (and beat) earnings at the end of August, shares tanked 10% on tepid guidance. This is because the company expects margin pressure in the second half of the year, as it prices products more competitively in response to consumer budgets and excessive inventory. Dollar General doesn’t appear to have this issue. Prior to the pandemic, the company introduced groceries to its stores and made them a focal point. What a prescient move! Because now the households most impacted by inflation are staying away from discretionary items and primarily buying necessities. In particular, groceries. Since 2019, Dollar General has grown its share of foot traffic among discount stores from 7.5% to 10%. In a game Walmart (WMT) dominates (with close to 70% market share), DG’s move is meaningful. Data from the company that keeps track of this stuff, Placer.ai, shows impressive sustained growth for Dollar General, compared to 2019. Just as impressive, Dollar General’s rate of growth beats Walmart and discount grocer Aldi. And DG is getting more aggressive. It has started carrying fresh produce at 10 Arkansas stores with plans to expand nationwide over the next few years.
The Bottom Line: While The Juice isn’t down on Dollar Tree, if we had to choose between the two stocks, we’d go with Dollar General. Hands down. Aside from the aggressive growth plans already paying dividends, Dollar General stock pays a dividend. Dollar Tree doesn’t. In fact, Dollar General has a 6-year dividend increase streak and a super low payout ratio of 17.3%, meaning it has room to continue to increase the dividend. Bottom line to the bottom line: We love companies that invest in growth and reward investors simultaneously. If they do both well, we really love them. |
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