Nomura Securities on Dollar Stores: The Consumables Gravy Train - Full Steam Ahead
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Price: $103.84 -9.15%
Rating Summary:
45 Buy, 13 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
45 Buy, 13 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Nomura Securities on Dollar Stores: The Consumables Gravy Train - Full Steam Ahead
Analyst, Aram Rubinson, said, "Consumables have proven inexhaustible as a growth strategy, at least for certain channels. Conventional wisdom dictates that the Dollar Store channel has been taking share in Consumables from drug stores, mass merchants and grocery. Surprisingly, our analysis shows each of the channels is performing well in Consumables. We estimate Mass Merchants (Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Sears Holdings (Nasdaq: SHLD)) have averaged annual 3.6% total sales growth driven by 9.0% growth in Consumables over the past seven years. If 100% of Consumable growth at Dollar General (NYSE: DG) / Family Dollar (NYSE: FDO) / Dollar Tree (Nasdaq: DLTR) came from Drug, Mass and Grocery, it would suggest the channel needed to steal only 0.4% of market share. Through that lens, Consumables growth at DG/FDO/DLTR seems quite sustainable. Our forecasts suggest that DG/FDO/DLTR would need to steal a similar share from the broader peer group in order to sustain future growth. DLTR is the least dependent upon Consumables for growth. DLTR reports Q4 results on Wednesday February 22. Our $1.57 EPS estimate is only in line with consensus, but flat margins and 5% comps are not overly aggressive."
Analyst, Aram Rubinson, said, "Consumables have proven inexhaustible as a growth strategy, at least for certain channels. Conventional wisdom dictates that the Dollar Store channel has been taking share in Consumables from drug stores, mass merchants and grocery. Surprisingly, our analysis shows each of the channels is performing well in Consumables. We estimate Mass Merchants (Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Sears Holdings (Nasdaq: SHLD)) have averaged annual 3.6% total sales growth driven by 9.0% growth in Consumables over the past seven years. If 100% of Consumable growth at Dollar General (NYSE: DG) / Family Dollar (NYSE: FDO) / Dollar Tree (Nasdaq: DLTR) came from Drug, Mass and Grocery, it would suggest the channel needed to steal only 0.4% of market share. Through that lens, Consumables growth at DG/FDO/DLTR seems quite sustainable. Our forecasts suggest that DG/FDO/DLTR would need to steal a similar share from the broader peer group in order to sustain future growth. DLTR is the least dependent upon Consumables for growth. DLTR reports Q4 results on Wednesday February 22. Our $1.57 EPS estimate is only in line with consensus, but flat margins and 5% comps are not overly aggressive."
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