Dollar General has outrun Macy's this month as the broader retail space appears to be weakening heading into the holiday shopping season. Dollar stores in general have shown strength after getting hit hard in back-to-back months.
The IBD-tracked Retail-Discount & Variety industry group is up more than 4% in October while the Retail-Department Stores group is down more than 5% this month. Dollar General stock has led the charge, rebounding more than 19% from an Oct. 12 low.
Others, including Ollie's Bargain Outlet and China-based MINISO have shown resilience near buy points amid the market correction.
Dollar stores, which usually have a predominantly low-income household consumer base, historically tend to do well when the economy is in a downturn. They are able to maintain core customers while picking up new shoppers looking for bargains. Investors also tend to use discount and variety stocks as defensive plays, during periods when the economy is struggling or appears set to tighten.
Dollar Tree stock, for example, gained ground during the 2009 financial crisis, with same-store sales increasing 7.2%, according to FactSet.
In 2023, the eight dollar store stocks in the Retail-Discount & Variety group collectively booked consecutive monthly losses in August and September. On the year, the industry group is down more than 19%, underperforming the broader market.
In comparison, the six stocks in the Retail-Department Stores group have lost nearly 7% in 2023.
Dollar Store Stocks Flash Positives
Dollar General stock edged down 0.7% to 119.04 during Tuesday's market action. DG shares are up more than 13% in October, on pace for their first monthly gain in six months. The number of funds that hold positions in this dollar store stock was 2,041 in September, down around 15% compared to Dec. 2022.
In mid-October, Dollar General tapped former CEO Todd Vasos to return as CEO and help it navigate its current downturn. DG updated its fiscal 2023 outlook following the executive change, narrowing its net sales guidance to range from 1.5% to 2.5%, compared to its previous estimates of 1.3% to 3.3% growth.
The dollar store stock also lowered its earnings guidance to between $7.10 and $7.60 per share vs. prior expectations between $7.10-$8.30 per share.
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Resistance, Bases And Buy Points
Meanwhile, Dollar Tree is in a test of resistance at its 50-day moving average and up more than 3% this month. Like DG, DLTR was on pace Tuesday for a monthly gain after three months of declines. Institutional investor activity in DLTR has remained mostly steady since June, with the number of funds holding shares declining 2% to 1,817 in September.
Shares of Five Below advanced more than 7% in October, reclaiming their 50-day line as they try to climb the right side of a two-month-long consolidation.
China dollar store stock Miniso formed a flat base with support at its 10-week line. MNSO has a best possible 99 Relative Strength Rating. The stock has a year-to-date gain of 135%, and is 19% below a 29.92 buy point, according to MarketSmith.
Ollie's was working on its fifth monthly advance Tuesday. It shows a flat base with an 80.94 buy point. The number of institutional investors with positions in this dollar-store stock has remained relatively steady since June, between 562 and 571 funds, according to MarketSmith.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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