Cost-conscious retailers would be one clear beneficiary. Dollar stores such as Dollar General Corp. (NYSE:DG) and warehouse retailers such as Wal-Mart should continue to benefit if the economy continues along its current track.
For Dollar General, it should come as no surprise that its revenue has increased by an average of 11% since 2008. Dollar General caters to a cost-conscious consumer looking for a good deal and presents its items with complete transparency — let’s face it, the real advantage of the dollar store is you know what the price is going to be before you head in! In Dollar General’s second-quarter results released earlier this month, the company delivered 5.1% same-store sales growth and topped EPS expectations by $0.03. I would expect more of the same moving forward.
Wal-Mart’s results haven’t been nearly as strong in recent months, but I attribute that more to tax refund delays than anything else. Wal-Mart can mop the floor with its competition when it comes to undercutting them on price, and few if any retailers have the one-stop shopping experience or cash flow that Wal-Mart can offer.
Another winner here is insurers that cater to low-income households covered by Medicaid. WellPoint, Inc. (NYSE:WLP), for example, became the nation’s largest government-sponsored insurer with its purchase of AMERIGROUP for $4.5 billion last year. As the company you may know better as Blue Cross Blue Shield, WellPoint is operating in 14 state-run exchanges under the new health-care reform bill, known as Obamacare, and could eventually pick up somewhere in the neighborhood of 1 million to 2 million newly insured members under the Medicaid expansion (1.4 million alone coming from California), which is expected to reach up to 16 million new members by the end of the decade.
Finally, it might appear counterintuitive to assume that cash-strapped consumers will spend their income on discretionary products, but everyone, regardless of your socioeconomic status, needs entertainment. That’s why I think that for $8-$12 per month, streaming content provider Netflix, Inc. (NASDAQ:NFLX) could remain a solid beneficiary. Feel free to tell me where else you can find such an expansive media library to entertain your family for such an incredibly cheap price. Don’t think too hard, though, because it doesn’t exist!
The article Is the American Consumer in Worse Shape Now Than 4 Years Ago? originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends Netflix and WellPoint.
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