Sense on the Dollar

If you listen closely, you can hear the sounds of lawyers and government watchdogs salivating.

It’s about a potential merger between the two big guns in the value market—Dollar General Stores and Family Dollar, a move that is likely to garner more ink than Cerberus (re: Albertsons) acquiring Safeway.

Billionaire hedge fund manager Carl Icahn’s $650 million purchase of 9.4 percent of Family Dollar is a pretty good sign that the financially beleaguered chain is undervalued. More than that, he is aiming to disrupt the market with a new force that will cause retailers more sleepless nights than a Walmart opening in your living room.

The popularity of the dollar store segment is a legacy of the last recession and the fastest-growing segment of convenience shopping with just the big three—Dollar General, Family Dollar and Dollar Tree—operating nearly 25,000 stores across the U.S., with the potential to get to 40,000 over the next several years. But they also have a growing portfolio of food products and upgraded product lines and stores are appealing to a very broad demographic—not just low-income shoppers.

What do we call this in the trade? C-O-M-P-E-T-I-T-I-O-N! Every major chain, including Walmart, is trying to come up with their own “dollar formula” with limited success.

Something tells me that this will be the talk at FMI and many of them will now be redoubling their efforts.

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