Recent retail foot traffic data suggests discount and dollar stores should remain resilient in 2023.
Despite a disappointing earnings result from Dollar General (NYSE:DG) this past week as holiday sales faltered, data from Placer.ai suggests the continued impact of inflation is likely to keep consumers bargain hunting in 2023. In fact, the data suggests Dollar General (DG) is an outlier in terms of only modest foot traffic improvements as the overall category continues to show strength.
“Though the pandemic’s impact on retail may be fading, the category has continued to see visit increases, likely due to the rising cost of living in 2022,” Placer’s report explained. “The large footprint of most dollar & discount stores puts most Americans within several miles of a store, the category’s strength is likely to continue in 2023.”
Per the data, visits to Five Below (NASDAQ:FIVE) and Dollar Tree (NASDAQ:DLTR) on a per venue basis have jumped 22.1% and 13.3%, respectively, in the month of January from the comparable period in 2020. That builds upon high-single digit to low-double digit growth for each in the calendar fourth quarter of 2022. The Dollar Tree (DLTR) owned Family Dollar showed an even greater acceleration, suggesting a revival of the brand. Foot traffic to Family Dollar locations ripped an average of 19.33% higher in the calendar fourth quarter of 2022 as compared to Q4 2019. In January, that strength continued with traffic surging 17.9% above pre-pandemic levels.
By contrast, visits to Dollar General rose only 4.4% in the year over three year comparison, which reflected some hangover from Winter Storm Elliott. Still, Dollar General was already a laggard in much of Q4 for foot traffic, according to Placer.ai’s data, emphasizing the outlier status of its Q4 sales report.
The gains for much of the discount space are even more stark on an absolute basis given the rapid expansion of both Five Below and Dollar Tree, which has been underwritten by growing demand. The now larger footprint for discount stores is expected to only accelerate foot traffic from its already elevated levels.
“The segment is on a decided upswing as it continues to attract new and returning customers with its attractive retail and grocery options,” the report concluded. “With a shift in how people shop, discount and dollar stores can hope to continue thriving into 2023.”
Read more on CFRA’s conversely bearish view on Dollar Tree in 2023.