Price shopping: How discount retailers stack up

As retail sales fell for the month of January, many on Wall Street are wondering if the strength of the consumer, that was seen in previous quarters, will remain. As consumers pull back from certain luxuries, will other parts of the retail sector be hit with pullbacks as well?

Anthony Chukumba, Loop Capital Markets Managing Director, joins Yahoo Finance to discuss the changing habits of the consumer and where the consumer will continue to spend, and what investors should keep an eye on.

When asked where consumers can still feel like they're getting the best value for their dollar, Chukumba replies: "The low price leaders continue to be Walmart (WMT) on the brick and mortar side and Amazon (AMZN) on the e-commerce side. Having said that, a lot of the companies that I cover, they have kept their prices very, very competitive. So for example, you mentioned Dollar Tree (DLTR). Dollar Tree owns Family Dollar and there's Dollar General (DG) as well, and what we have found is that Family Dollar and Dollar General prices, they're not quite at price parity with Walmart, but they're usually sort of a low single-digit to mid-single-digit percentage higher than Walmart, and that's all they kind of need to be because it is a different purchase occasion."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- And we know that consumers have been pulling back on those big ticket items. But what about some of these, some of these cheaper brands. If you like a Five Below, or Dollar Tree here, are we still seeing some pullback there as well?

ANTHONY CHUKUMBA: So I mean, given the fact that the consumer, even though the macroeconomic indicators and variables are fairly strong, the consumer still has this almost like ongoing dread, and I think part of that is just the fact that even though inflation is coming down we did have a couple of years of elevated inflation rates. And so they're still looking to stretch their dollar.

And yeah, and one way that they can do that is going to a Five Below, is going to Dollar Tree. And so we are seeing that trade down from higher priced retailers to those what we refer to as deep discounters. And we expect that to continue certainly early in 2024.

- One of the things that's awesome about the work that you and your team at Loop do, is you do your own price comps as well at discount stores. Where, for consumers out there that are trying to figure out, just where is the best place to buy? Where am I actually getting the best deal from a retailer? What have you seen in market, in channel checks.

ANTHONY CHUKUMBA: Yeah. So I mean, generally the low priced leaders continue to be Walmart, on the brick and mortar side, and Amazon on the e-commerce side. Now, having said that, a lot of the companies that I cover, they have kept their prices very, very competitive. So for example, you mentioned Dollar Tree. Dollar Tree owns Family Dollar, and then there's Dollar General as well.

And what we have found is that Family Dollar and Dollar General prices, they're not quite at price parity with Walmart, but they're usually a low single digit, to a mid-single digit percentage higher than Walmart. And that's all they really that they need to be, quite frankly, because it is a different purchase occasion, it's a mid-week shopping trip. So a person is just not going to trudge all the way out to Walmart to save a low to mid single digit percentage, particularly on $15 basket size.

Amazon, like I said, is the, is the leader in terms of online. But going back to Best Buy, what we have found is that Best Buy is usually within 1% or 2% of Amazon. And Best Buy also will price match Amazon. So price transparency is as high as it's ever been, right? Everyone has a smartphone, it's really easy to compare prices. You don't have to drive from store to store to do that. So it is incumbent on retailers to make sure that even if they're not the low price leader, they are at least price competitive within spitting distance of the low price leader.