Wealthy Shoppers Discover Dollar Stores

Wealthy Shoppers Discover Dollar Stores

The rich have discovered frugality! Or, at the very least, they are finally realizing there is no need to splurge on expensive name-brand paper towels, paper plates and trash bags.

Indeed, middle- and high-income consumers are increasingly turning to dollar stores for their basic household needs, according to a report released on Tuesday by The Neilson Company. High income shoppers spent 18% more at dollar stores during the second half of 2008.

This, of course, bodes well for retailers such as Family Dollar Stores (Stock Quote: FDO), which has been rated a buy by TheStreet.com since July 2008, based on the company's outstanding fundamentals and recession-resistant business model.

On Monday, shares of the company were up more than 6%—on a day when most retailers were in the red.

Last month, Family Dollar said its second-quarter earnings rose 33% and its revenue 9% in the quarter. The company expects an increase of 7% to 9% in its net sales, along with earnings in the range of 54 cents to 58 cents per share in the third quarter.

"With more shoppers having positive experiences at dollar stores, there is a significant opportunity for dollar stores and consumer packaged-goods manufacturers to build loyalty and expand into new product categories, such as food and beverages and select health and beauty care," Jeff Gregori, vice president of retail services for the Nielsen Company, said in a statement. "There is also a potential growth opportunity in exploring dollar-store private label offerings in both edible and non-edible products. The challenge for dollar stores and CPG manufacturers is to get the product mix right to meet the needs of their traditional customers as well as new customers with higher incomes." Dollar Tree (Stock Quote: DLTR) also reported same-store sales were up 9.2% in the first quarter, with basic health and beauty products, household cleaning supplies, party goods and food among the best sellers.