Discount chains count on budget shoppers

Cost-conscious consumers look for value

Shoppers are spending more and recent monthly retail sales have trended up. However, some of this growth is due to inflation. While shoppers are spending more money, they may be getting the same or less in return. 

Advanced monthly sales - Retail and Food Services
 

The good news is that inflation appears to be slowing. In October, it fell to 7.7%.  But consumer confidence is still low, and shoppers are out looking for bargains. As retailers look to attract price-conscious shoppers, some chains are showing more success than others.

Discount department stores see slow and steady demand growth

Shoppers are still buying much of what they need at the big discount department stores. Walmart reported store comp growth of 8.2% in the third quarter. Shopper visits increased by 2.1% and average ticket size grew by 6%. The retailer says shoppers are still looking for value, especially in its grocery aisles.  Meanwhile, Target saw 2.7% comp growth in its third quarter, also driven by more foot traffic and a bigger ticket size. 

Discount grocers offer 2019 price flashback 

Inflation is especially difficult for grocery shoppers. Small format discount grocers ALDI and Lidl are each advertising low prices to win shoppers away from traditional grocers. In November, ALDI announced a “Thanksgiving Price Rewind” in which it matched 2019 prices on holiday staples like stuffing, wine, and rolls. Lidl publicized pricing which would allow shoppers to cook a full Thanksgiving dinner for up to ten people for under $30.

Store visit change - YoY
 

We don’t yet know how many additional November shoppers headed to ALDI and Lidl, but in October ALDI saw 4.98% growth in store visits compared with the same month in the previous year, according to data from Placer.ai.  At the same time, Lidl saw a -5.05% fall in visits. This variance could be due to footprint and distribution.  While Lidl operates about 170 stores in nine east coast states, Aldi has 2,200 stores in 38 states. Thus, regional trends could have more of an impact on Lidl.

Consumables drive dollar store growth

Budget shoppers have also been heading to dollar stores for affordable daily needs items. Dollar General saw same store sales grow 6.8% in the most recent quarter. The chain also continues to lead in store growth, with plans to build 1,050 new U.S. stores in 2023.

Dollar General comparable quarterly store sales
 

Dollar Tree has also seen growth in the sale of consumables. In Q3, Dollar Tree stores saw 8.5% growth in same store sales.  Family Dollar grew 4.1% in the same period. 

Discount apparel sees mixed demand

With less discretionary spending, there are worries that apparel stores could take a hit. So far, the story has been mixed. Shoppers looking for new work or occasion clothing boosted sales at Banana Republic by 10%. But at discount apparel retailers, the results are not as strong.

• Marshalls and T.J. Maxx combined store comps grew 3% in the fiscal quarter ending on October 29th.
• Ross store comps fell by -3% in the third quarter.
• Burlington saw comps fall by -17% in the third quarter.

Yet discount apparel is still an engine of new store growth.

• In the third quarter Ross added 28 new stores, TJX added a net 5 T.J. Maxx stores and 14 Marshalls stores.
• Burlington has grown by 53 net new stores so far this year.
• Primark announced plans to grow its number of U.S. stores to 60 by 2026 and will have opened three New York metro stores by the end of this year.