Dollar Stores Thrive in Any Environment

By Jonathan Hipp, President & CEO, Calkain Cos.: Why net lease investors should consider dollar stores, especially in an uncertain economy.

By Jonathan Hipp, President & CEO, Calkain Cos.

Hipp-Jon-01-print-headshotDuring the dark days of the recession, it only made sense that dollar stores would thrive. While other retailers pared back their store counts (or shut down altogether), chains like Dollar General were doing fabulous sales and opening new locations.

Why wouldn’t they do well when consumers were cutting back and landlords were looking to replace vacant space?

Well, we are, by all accounts, out of a severe recession, and dollar stores are continuing to perform well.

Dollar General, for example, is opening 1,900 stores in the next two years, bringing its store count to a whopping 14,000 units. To put that in perspective, Walmart counts 4,573 units in its U.S. portfolio.

Meanwhile, Dollar General is also rolling out a smaller format that it plans to open in urban and rural areas. The new prototype will be 6,000 square feet, as opposed to its usual 7,200-square-foot stores. There is a test of 30 beta sites across the country, and 80 new ones will open this year.

Dollar General’s main competitor, Dollar Tree, which owns the chain that shares its name as well as Family Dollar, saw its total sales in the fourth quarter hit $5.37 billion, on a 1.7 percent same-store sales jump. Between the two chains, Dollar Tree operates about 14,000 locations and is planning to open more this year.

As a net-lease investor, it’s important to know that dollar stores, which were once looked upon as low-credit tenants, are extremely important, despite how the economy performs.

Dollar stores are now becoming higher-credit tenants in the eyes of commercial real estate investors. These companies adapt strongly to the changing needs of the consumer in incredible ways. They sell very inexpensive over-the-counter drugs, grocery items and other daily required home needs.

In an uncertain economy, there is no reason why people wouldn’t want this option in the future, especially since consumers are becoming used to shopping at several places for different needs.

Dollar General and others have expanded at a rapid rate for a number of years now, and there is no reason to think this trend will reach an end.