Shares of Dollar General started Tuesday trading on a positive note after Goldman Sachs placed the company on its 'conviction buy' list. Analyst Stephen Grambling says the discount retailer will soon get a boost from greater spending by low-income consumers. He sees the stock (Ticker: DG) climbing to $87 from its current level of $74 and change. Grambling's target had been $80.
A new report from analysts at Moody's Investors Service says traditional supermarkets are in a position to regain some of the market share they've lost of late to big-box retailers and dollar stores such as Dollar General. Key to that growth will be cutting prices while marketing more products with health-focused appeal.
"More Americans are increasingly conscious of what they eat and are looking for both quality and value in what they put in their grocery bags," said Chadha. "Supermarkets unable to evolve to meet consumer demand are going to find it more difficult to improve profitability in an increasingly competitive landscape."
Consumers' spending on dining out appears to have turned a corner, say the researchers at TDn2K. Yes, traffic counts still are a problem and harsh weather didn't help numbers in February and March but the underlying strength "goes beyond just having some relatively favorable weather conditions during the first half of the quarter."
“For the first time since the recession, the industry has reported three consecutive quarters of same-store sales above 1 percent, and the last two quarters have both been above 2 percent, also a first in over six years,” said Victor Fernandez, executive director of insights and knowledge for TDn2K. “Though job gains slowed down during March and the unemployment rate remained at 5.5 percent, we believe our economy is already at full employment levels. Moreover, the unusually cold March experienced by many regions of the country may be an important factor behind the job growth slowdown, which hints at a recovery during April.”
Avondale Partners retail analyst Mark Montagna says Genesco's big Journeys brand looks to be off to a strong start to the 2014 holiday shopping season. Recent visits to malls in Houston and Charlotte gave him the impression that jogger pants are driving sales of men's shoes and that other parts of the "athleisure" segment are lifting women's shoe sales.
Importantly, the jogger pant trend appears to be growing across a wide age demographic of African Americans. This ethnic group tends to set the fashion trends for the rest of the teen-young adult cohort. We've seen that with snapback hats and for many, many years with performance athletic sneakers.
One caveat that might restrain Genesco shares a little bit — at least until the holiday numbers come in — is the weakness in the company's Lids hat chain. Montagna said the stores he visited last week were not busy. As of 11:15 a.m., Genesco (Ticker: GCO) was up slightly to $81.28.
The fiscal fourth-quarter results from Family Dollar disappointed investors, coming in at 73 cents versus the expected 77 cents. Avondale Partners analyst Mark Montagna points out that the miss comes despite an unexpectedly low tax rate. But Montagna's biggest takeaway is that the numbers suggest Dollar General is taking market share from the company it wants to buy for more than $9 billion: He says it appears the large majority of the 9,000 items in Family Dollar stores posted year-over-year sales drops. "With DG known to have 3%-5% lower prices and a superior assortment than FDO, we expect customers defected toward DG for those other 8000 items," Montagna wrote.
Dollar General will report its third-quarter numbers in early December.
Bonnie Riggs, a veteran restaurant analyst at NPD Group, says many consumers are still behaving like they're in recession when it comes to dining out. Her firm expects industry traffic to grow "less than half a percent per year out to 2022" — mainly because millennials, now a bigger demographic group than those famous Baby Boomers, have cut way back on their visits.
Because of that, "There will be pockets of success, winners and losers." The winners will be web-savvy and the losers look likely to come in the market segment where the average check is in the single digits. Words of advice and warning to Middle Tennessee-based restaurant chains such as Cracker Barrel, O'Charley's, Logan's and Shoney's...
Restaurant industry consultant Nancy Kruse has some good thoughts on how casual-dining brands can better hold their own in a restaurant arena that increasingly prizes fast-casual concepts as well as more authentic and artisanal experiences. Kruse says chains can be forgiven for feeling like they're "being nibbled to death by ducks" but there is a way out.
They have leverageable assets of location and market presence, not to mention strategic competitive advantages in areas like the dinner daypart, bar business and culinary innovation. But while the old chain model prized sameness, the new model rewards a localized, personalized approach. This means that they should all step away from the flatbread and take a look at what they can learn from the upstart competitors. Their new formula can’t look formulaic, and success may require a wrenching but necessary reengineering of the brand to bring it in tune with the zeitgeist.
You don't have to look far these days to find a headline about a restaurant chain struggling to attract or retain diners. But there could be a growing opportunity in luring young people: John McDuling at Quartz has an interesting read on a Piper Jaffray report detailing teenagers' increasing proclivity to gather at restaurants rather than at shopping malls.
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