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Dollar Stores Help Power Retail, Consumer Sector ETFs

·2 min read

This article was originally published on ETFTrends.com.

Dollar Tree (NasdaqGS: DLTR) and Dollar General (NYSE: DG) shares surged, lifting retail and consumer sector-related exchange traded funds after the discount variety store chain revealed better-than-expected profits.

On Thursday, the VanEck Vectors Retail ETF (RTH) was 4.2% higher and the John Hancock Multifactor Consumer Discretionary ETF (NYSEArca: JHMC) was up 5.6%.

Meanwhile, Dollar Tree shares surged 21.7% and Dollar General shares jumped 13.7% on Thursday. DLTR makes up 2.5% of RTH and 2.2% of JHMC. DG makes 3.3% of RTH and 2.1% of JHMC.

Dollar General's earnings beat Wall Street's muted expectations, with sales more or less flat for the quarter ended April year-over-year, compared to analyst expectations of a 1.2% decline, the Wall Street Journal reports. Dollar Tree saw same-store sales growth of 4.4% and net profit also climbed 43.2%, mostly due to the new price points at the Dollar Tree chain.

Dollar Tree-owned Family Dollar saw comparable-store sales of discretionary items decline 14.7%, but its sales of consumables increased 1.2%. Dollar General also said that consumable sales jumped 9.1%, but sales in all other categories — seasonal, apparel, and home — were down. While lower-margin consumables saw increased demand, dollar stores have done a better job of managing their bottom line compared to large retail players like Walmart and Target.

“Despite these challenges we remained focused on controlling what we can control,” Dollar General chief executive officer Todd Vasos said on a call with analysts Thursday.

“We’re already starting to see our core customers start to shop more intentionally,” Vasos added. "And we’re starting to see that next tier of customers start to shop with us a little bit more as well.”

Dollar Tree executive chair Rick Dreiling also highlighted the many challenges that consumers are facing, according to CNBC. Consequently, many consumers “are living paycheck to paycheck. “In tough times, value retail can be part of the solution to help families stretch their dollars to meet their evolving needs,” Dreiling said.

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