Dollar Tree (DLTR) has disclosed it is exploring a potential sale or spin-off of Family Dollar as the company struggles with weak consumer demand. Forrester Research Retail Analyst Sucharita Kodali joins Wealth! to discuss the state of the consumer as inflationary pressures continue to pose a challenge.
"The consumer has been feeling really down about the economy for a long time, pretty much since inflation has been prevalent… But the irony is that retail spending is at a record high, and consumers for a long time were spending at the level of inflation and then some," Kodali explains. She adds that recent data has shown retail spending cooling, which could indicate that "the consumer is finally probably at their saturation point with respect to spending on some of these discretionary goods in particular."
Many consumers are prioritizing value, and are increasingly conscious about where they’re spending. Kodali notes that Walmart (WMT) and warehouse clubs are performing well as a result of this trend, however, Dollar Tree is falling behind as the dollar channel is "incredibly saturated." She adds that the chain’s stores need renovations, and perhaps even location changes, in order to perform better. The company may not be willing to make these investments, she explains, which is why it is exploring a potential sale.
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