Family Dollar Stores, Inc. (FDO): Will These Retailers Survive the Pressure on Their Margins?

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Dollar Tree makes it look simple

Dollar Tree, Inc. (NASDAQ:DLTR), a retailer that utilizes a single price point on its merchandise, has constantly focused its business on selling goods at $1 to attract customers. In addition to having the best margins among its peers, the company has concentrated on selling discretionary products and has attracted customers with candies, stationery, and health care products that carry better margins than consumables. While its peers are expanding wildly, Dollar Tree has been smart and methodical with its expansion. The company is keeping its focus on productivity, which should help it to compete better.

Final words

Family Dollar Stores, Inc. (NYSE:FDO)’s management has narrowed its full-year earnings-per-share forecast to $3.77-$3.82, tightening its previous range of $3.73-$3.93. I believe that this is a clear indication that the company will find it difficult to improve its margins in the near future. Even Dollar General Corp. (NYSE:DG) is under pressure to improve margins. Going forward, if both these dollar stores fail to improve their margins then sales increases will not be enough to remain profitable.

Dollar Tree, Inc. (NASDAQ:DLTR) seems to be the best company to invest in among its peers. The company’s margins and sales are both going strong. Its stock has also performed well this year. I believe that the momentum will continue for Dollar Tree, allowing it to maintain a decent performance into the future.

The article Will These Retailers Survive the Pressure on Their Margins? originally appeared on Fool.com and is written by tarun bachhawat.

tarun bachhawat has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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