Markets
Discount Domination: Dollar Stores are Thriving in America
The retail landscape is in a constant state of flux.
E-commerce is indisputably disrupting almost every imaginable aspect of retail, creating what has been coined as the “retail apocalypse”. As a result, certain segments of the market have had well publicized meltdowns – electronics and apparel, in particular – and the U.S. now has far more retail floor space available than any other nation.
That said, there is one type of store that’s thriving in this unpredictable landscape – dollar stores. Today, we examine data from the Institute of Local Self-Reliance, which puts the scale of the United States’ dollar store boom into perspective.
Escaping the Retail Apocalypse
The rise of e-commerce giants like Amazon has led to a relentless wave of closures for brick and mortar retailers. Department stores and consumer electronics are taking hard hits, yet a curious trend emerges through the cracks – dollar stores are multiplying like rabbits.
The persistent growth of dollar stores is the biggest retail trend in the past decade. Between 2007 and 2017, over 11,000 new dollar stores were opened; that’s roughly 93 new stores a month, or three per day. Dollar General, in particular, is reaping the rewards: the company has a market cap of over $30 billion.
Compared to mammoth retailer Walmart, Dollar General is the little store that could. Despite reporting lower sales per square foot, Dollar General outperforms Walmart in 5-year gross profit margins.
Store | Sales per square foot | 5-year gross profit margins | Cost of a new store |
---|---|---|---|
Dollar General | $184 | 30.9% | $250,000 |
Walmart | $432 | 25.1% | $15,000,000 |
Sources: Bloomberg, E-Marketer
This whopping difference in launching a new location contributes to the fast and furious spread of dollar stores. Dollar General and Dollar Tree (which now owns Family Dollar) boast 30,000 stores between them, eclipsing the six biggest U.S. retailers combined. Their combined annual sales also rival Apple Stores, including iTunes.
The Dollar Store Strategy
What makes dollar stores so lucrative? In a nutshell, they’re willing to go where others won’t.
Dollar General focuses on rural areas, while Dollar Tree and Family Dollar are more prominent in urban and suburban areas. But they have one thing in common – all three chains target small towns in rural America, resulting in a high concentration per capita, especially in the South.
Wal-Mart’s 40 miles away and we can meet those people’s needs.
– David Perdue, Former CEO of Dollar General
Dollar General’s ambitious expansion into smaller towns has proven successful. Residents can find many everyday products at prices similar to those at Walmart, but without the longer drive to a Supercenter. Despite the 3,500 Walmart Supercenters spread out across the country, chances are, there’s a dollar store even closer.
Dollar stores fill a need in cash-strapped communities, saving time and gas money during a trip to the store, and then offering an affordable and enticing products inside the store itself.
America’s Grocery Gap
The no-frills shopping experience is also a quintessential trait of dollar stores. Dollar stores focus on a limited selection of private label goods, selling basics in small quantities instead of bulk.
However, there’s also a dark underbelly to this trend. Dollar stores often enter areas with no grocery stores at all, called food deserts. In the absence of choice, dollar stores are welcomed with open arms – but the lack of fresh produce and abundance of processed, packaged foods leave much to be desired.
If you live in Whole Foods-land – not the dollar store world – it’s an invisible reality that they’re supplying a lot of the groceries.
— Stacy Mitchell, Institute for Local Self-Reliance
On the other hand, when dollar stores compete with locally-owned grocery stores in the same area, sales in the latter can be cut by over 30% in some cases – taking an enormous toll on the community.
The ILSR report suggests that dollar stores may not always be a by-product of economic distress, but a cause of it. Regardless of what perspective you have on the spread of dollar stores, it’s clear they’re here to stay.
Markets
How Disinflation Could Affect Company Financing
History signals that after a period of slowing inflation—also known as disinflation—debt and equity issuance expands.


How Disinflation Could Affect Company Financing
The macroeconomic environment is shifting. Since the second half of 2022, the pace of U.S. inflation has been dropping.
We explore how this disinflation may affect company financing in Part 2 of our Understanding Market Trends series from Citizens.
Disinflation vs. Deflation
The last time inflation climbed above 9% and then dropped was in the early 1980’s.
Time Period | March 1980-July 1983 | June 2022-April 2023* |
---|---|---|
Inflation at Start of Cycle | 14.8% | 9.1% |
Inflation at End of Cycle | 2.5% | 4.9% |
* The June 2022-April 2023 cycle is ongoing. Source: Federal Reserve. Inflation is based on the Consumer Price Index.
A decrease in the rate of inflation is known as disinflation. It differs from deflation, which is a negative inflation rate like the U.S. experienced at the end of the Global Financial Crisis in 2009.
How might slowing inflation affect the amount of debt and equity available to companies?
Looking to History
There are many factors that influence capital markets, such as technological advances, monetary policy, and regulatory changes.
With this caveat in mind, history signals that both debt and equity issuance expand after a period of disinflation.
Equity Issuance
Companies issued low levels of stock during the ‘80s disinflation period, but issuance later rose nearly 300% in 1983.
Year | Deal Value |
---|---|
1980 | $2.6B |
1981 | $5.0B |
1982 | $3.6B |
1983 | $13.5B |
1984 | $2.5B |
1985 | $12.0B |
1986 | $24.2B |
1987 | $24.9B |
1988 | $16.9B |
1989 | $12.9B |
1990 | $13.4B |
1991 | $45.2B |
1992 | $50.3B |
1993 | $95.3B |
1994 | $63.7B |
1995 | $79.7B |
1996 | $108.7B |
1997 | $106.5B |
1998 | $97.0B |
1999 | $142.8B |
2000 | $156.5B |
Source: Bloomberg. U.S. public equity issuance dollar volume that includes both initial and follow-on offerings and excludes convertibles.
Issuance grew quickly in the years that followed. Other factors also influenced issuance, such as the macroeconomic expansion, productivity growth, and the dotcom boom of the ‘90s.
Debt Issuance
Similarly, companies issued low debt during the ‘80s disinflation, but levels began to increase substantially in later years.
Year | Deal Value | Interest Rate |
---|---|---|
1980 | $4.5B | 11.4% |
1981 | $6.7B | 13.9% |
1982 | $14.5B | 13.0% |
1983 | $8.1B | 11.1% |
1984 | $25.7B | 12.5% |
1985 | $46.4B | 10.6% |
1986 | $47.1B | 7.7% |
1987 | $26.4B | 8.4% |
1988 | $24.7B | 8.9% |
1989 | $29.9B | 8.5% |
1990 | $40.2B | 8.6% |
1991 | $41.6B | 7.9% |
1992 | $50.0B | 7.0% |
1993 | $487.8B | 5.9% |
1994 | $526.4B | 7.1% |
1995 | $632.7B | 6.6% |
1996 | $906.0B | 6.4% |
1997 | $1.3T | 6.4% |
1998 | $1.8T | 5.3% |
1999 | $1.8T | 5.7% |
2000 | $2.8T | 6.0% |
Source: Dealogic, Federal Reserve. Data reflects U.S. debt issuance dollar volume across several deal types including: Asset Backed Securities, U.S. Agency, Non-U.S. Agency, High Yield, Investment Grade, Government Backed, Mortgage Backed, Medium Term Notes, Covered Bonds, Preferreds, and Supranational. Interest Rate is the 10 Year Treasury Yield.
As interest rates dropped and debt capital markets matured, issuing debt became cheaper and corporations seized this opportunity.
It’s worth noting that debt issuance was also impacted by other factors, like the maturity of the high-yield debt market and growth in non-bank lenders such as hedge funds and pension funds.
Then vs. Now
Could the U.S. see levels of capital financing similar to what happened during the ‘80s disinflation? There are many economic differences between then and now.
Consider how various indicators differed 10 months into each disinflationary period.
January 1981 | April 2023* | |
---|---|---|
Inflation Rate Annual | 11.8% | 4.9% |
Inflation Expectations Next 12 Months | 9.5% | 4.5% |
Interest Rate 10-Yr Treasury Yield | 12.6% | 3.7% |
Unemployment Rate Seasonally Adjusted | 7.5% | 3.4% |
Nominal Wage Growth Annual, Seasonally Adjusted | 9.3% | 5.0% |
After-Tax Corporate Profits As Share of Gross Value Added | 9.1% | 13.8% |
* Data for inflation expectations and interest rate is as of May 2023, data for corporate profits is as of Q4 1980 and Q1 2023. Inflation is a year-over-year inflation rate based on the Consumer Price Index. Source: Federal Reserve.
The U.S. economy is in a better position when it comes to factors like inflation, unemployment, and corporate profits. On the other hand, fears of an upcoming recession and turmoil in the banking sector have led to volatility.
What to Consider During Disinflation
Amid uncertainty in financial markets, lenders and investors may be more cautious. Companies will need to be strategic about how they approach capital financing.
- High-quality, profitable companies could be well positioned for IPOs as investors are placing more focus on cash flow.
- High-growth companies could face fewer options as lenders become more selective and could consider alternative forms of equity and private debt.
- Companies with lower credit ratings could find debt more expensive as lenders charge higher rates to account for market volatility.
In uncertain times, it’s critical for businesses to work with the right advisor to find—and take advantage of—financing opportunities.

Learn more about working with Citizens.

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