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BB&T Capital senior analyst Anthony Chukumba on the outlook for retailers in the dollar-store sector.
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So another day another dollar.
Maybe not check up shares of Family Dollar they are getting hammered today after adding cigarettes and soft drinks.
Actually hurt the margins in the last quarter they thought maybe it would bring people end but in essence they were offering expensive products that then hurt the -- and so is the fall.
A buying opportunity for you or is it time to retreat to the sidelines won't have somebody knows about all the dollar names -- -- Fox Business exclusive with Anthony to come back.
-- is the managing director and senior analyst at BB&T.
Capital and and let's tackle.
Family Dollar first.
Obviously they are struggling today.
They have numbers out that indicated that an attempt to broaden their aperture figure out other ways to bring people in the stores hurt their margins.
What was their biggest mistake.
Well I'm not sure if I would characterize his mistake but they -- brought more consumable items into their stores more food more health and beauty care items tobacco products.
Hope help her the only assumption that would drive a lot more store traffic and that's start it's been very successful for Dollar General which essentially the market leader of the problem is.
If they're just not getting enough incremental velocity in terms of not incremental footsteps of its they're -- they're taking a hit to the gross margin they're not -- and making it up.
By leveraging their fixed expense.
I -- you could argue that they did what Wal-Mart has tried to do in the past to sort of bring in door busters where you know you're gonna lose on the margins but.
Perhaps somebody comes in to buy the expensive item where -- -- on it.
That meeting Wal-Mart might lose on it.
You would end up getting a bunch of other things in your shopping cart.
But because things are all -- dollar in many of these stores it's not such an opportunity no matter what people -- right.
Well I think that.
-- bet that really kind of is the -- you've got to get the consumer across -- you've got to get him by the higher margin.
Items when they're in the store buying those low margin consumables and so far and we -- really kind of struggle with that I mean we've seen other retailers.
Who can do that dollar general's -- -- go to that dollar tree.
Has been pretty good at that as well then we doubt seems like they're a little bit behind what you've got a hold on Family Dollar at the moment what would make you change that call.
Well I think if we start to see that they were getting some traction.
-- said we're getting consumers to each cross shop the store I needed -- much about.
Hit to their to their gross margins -- favorite name in the space.
Right now our favorite name is dollar tree for a few different reasons and one is that.
Dot -- dollar tree basically everything's a dollar we're Dollar General -- we don't have multiple price points so because of that dollar -- -- some extent.
I doubt trees insulated from competition with Dollar General -- -- -- -- doubt as well with Wal-Mart and into -- some of the other but look at our stock at this present and that well I Mena is this a buying opportunity.
I think it really it's firfer for dollar tree I mean and hoping that we relate but doctors we just feel that the company -- much better.
Long term growth potential -- mean.
If they've only got 45 or are a hundred or so stores where family -- -- over -- 500.
And Dollar General has over 101000.
Dollar tree also just recently bought a company -- and has gotten any sort of convict -- up to a thousand.
You could argue there's an there's a store -- called -- -- in all suddenly -- go in there and I see that -- -- -- lower price points there again it's not a dollar store but there's competition growing in this space.
Well you know I think competitions northern part of the game I mean I think that one of the great things about that the dollar stores offer is.
Value.
You know very low price points.
Particularly relative to -- supermarkets -- drug school -- drugstores convenience stores.
I may also offer convenience that just so many of these stores are easy to shop and they're easy to get in what.
So tell you Anthony that -- over the past year for -- while the dollar stores were outperforming the S&P retail index of all retailers and that around mid September.
He saw the crossing of of the two lines and suddenly the dollar store started to underperform.
Retail which of course is in the form of a spider retail ETF that we could show you in in -- in a way to be able to say what what happened in September.
You know it's gonna cut -- companies for a few different factors one is that Wal-Mart.
Has always been sort of the you know 800 pound -- that would go there.
Retail that -- words about.
Has started saying you know we're gonna really start to go after these -- stores now are having seven -- Internet for awhile and -- and much success with it.
-- right around that same time you -- you had dollar tree reports and disappointing numbers.
Dollar General reports and disappointing numbers -- family dollar and so I think a lot of -- -- thing you know these are great stocks hide in particularly during the Great Recession yeah and coming out of that but maybe now the trades over.
Giving it away -- I was gonna say maybe that's it actually positive sign on X dollar stores.
You cover a lot of other retail what's really -- attracting -- -- right now well.
You know one retailer accident reported very strong numbers just this morning -- Pier 1 Imports a home furnishings retailer it's a great.
So long term turnaround story where they've had new management whose complete overhaul their merchandising.
And that has led to.
Dramatic improvements in terms of sales productivity they've also got a very exciting e-commerce opportunity.
But it out candles and quicker you can never have enough of that absolutely at -- at -- debt particularly in improving housing.
Good to see you Anthony thank you very much Anthony to -- -- as the managing director and senior analyst fifteen GMT capital yeah --
