Stocks That Thrive In Tough Times: Dollar Tree
May 28, 2008 by Tisa Silver
Filed under Finance
Shares of discount retailer, Dollar Tree, have provided over a 700 percent return on investment since their public debut in 1995. Last year, the rate actually peaked over 1,000 percent.
Today Dollar Tree surprised Wall Street by reporting a quarterly sales increase of eight percent and a profit increase of fourteen percent. The company posted sizable gains on the sale of food, cleaning products and health-care items as consumers sought relief from sky-high gas and food prices.
Shares traded up about seven percent on today’s good news. The company warned that fuel prices will impact profits in upcoming quarters, but that is a systematic risk that should already be reflected in the stock’s price.
BTW, I could buy a no-name soda, cotton balls, or a dish rag but there are just some things I can not bring myself to buy from dollar stores. I guess I had or heard about a few not-so-great dollar store experiences in my college days… generic Drano that turned out to be water…a can of biscuits which, when opened, revealed dough leaning up and to the left…and what about expired toothpaste with prescription levels of fluoride?
Ignoring my product bias, it is clear that Dollar Tree is doing something right!
As the impact of the credit crunch and rising fuel costs continues, consumers look to reduce spending on luxury goods and are more willing to shop at discount retailers. That’s why the likes of Dollar Tree are currently a good investment and are likely to remain so for some time to come.
I wonder how Family Dollar is doing as well…
After reading an article in Consumer Reports about some of the items at discount stores (toothpaste was a main offender) being of clearly inferior quality, and maybe dangerous, I’m rather leery of discount stores.