Even if Wal-Mart were to change its dollar format to mimic that of Family Dollar Stores, Inc. (NYSE:FDO) and Dollar Tree, Inc. (NASDAQ:DLTR), the company is so far behind in store count that it would have to acquire a large chain in order to become a serious competitor any time soon. Wal-Mart had a notoriously difficult time entering the Japanese market because it did not adapt its stores to the culture; the company appears to be making the same mistake with its dollar store format.
Since Wal-Mart Stores, Inc. (NYSE:WMT) does not represent a viable long-term threat, Family Dollar and Dollar Tree, Inc. (NASDAQ:DLTR) may represent good investments. Family Dollar trades at 17.5 times earnings and Dollar Tree at 18.5 times earnings. Both companies’ history of double-digit per-share EBITDA growth, in addition to their solid grip on the dollar store segment, makes these multiples appealing for long-term investors.
The article Can Wal-Mart Topple the Dollar Stores? originally appeared on Fool.com and is written by Ted Cooper.
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