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Wednesday August 11, 2010
Family Dollar (FDO): Recession beneficiary
by Jim Powell, editor Global Changes and Opportunities Report  Family Dollar Stores (FDO), with 6,600 stores in 44 states, is one retail chain that is benefiting from the recession.Most of us have driven by Family Dollar stores but have probably given them little notice. However, they are very popular with several million consumers of modest means. As its name suggests, nothing in a Family Dollar Store costs more than a dollar. The store's shelves are packed with everyday items most people need on a daily basis. 
The list includes cleaning supplies, toiletries, clothing, shoes, school supplies, cosmetics, and many other items. It's a smart business model. When the recession began, FDO wisely added grocery items to its product line. As with other merchandise it sells, the company emphasizes basic white bread items including Campbell's soup, Kraft foods, low cost packaged meals and the like. Family Dollar is benefiting from the 'shopping-down' trend that always occurs during economic squeezes. Afluent customers go from stores such as Nordstrom's and Bloomingdale's to J.C. Penney and Sears. Many members of the latter group -- which is huge -- find their way to super-deep discounters like Family Dollar. And customers who use food stamps are welcomed. One caution is in order. In the Southwest, FDO gets a lot of business from illegal immigrants from Mexico. In the unlikely event that illegal aliens are forced to go home, the company's profits would suffer. However, I don't think any such move is politically possible. During ordinary economic conditions, I would not expect Family Dollar Stores to do more than generate a 'nice' return. However, if I am right in my poor economic outlook, FDO should see several years of very attractive growth. Learn more about this financial newsletter at Jim Powell's Global Changes and Opportunities Report. |
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