Let’s Make a Deal: Discount Retailers to Watch on National Bargain Hunting Week
Though August 9-15 marks National Bargain Hunting Week, those partial about the subject can tell you they don’t need a specific date to come around to shop for a good deal. Indeed, experts agree that there is a psychological reason why certain people are prone to bargain hunting. As the old saying goes, “It’s not what I’ve spent. It’s what I saved.” Even given everything happening right now, several bargain-centric brands aren’t just rebounding – they’re flourishing. This is true for a number of reasons that are certainly worth a closer look.
Based in Virginia, Dollar Tree, Inc. (Tii:DLTR) became popular for selling a wide range of different items for $1 or less. First established in the mid-1980s, the discount retailer now operates more than 15,000 stores in 48 states and Canada. The company has benefited from recent consumer trends in which shoppers make fewer visits to brick-and-mortars but spend more per trip. Although Dollar Tree racked up more than $134 million in costs related to COVID-19, profits still rose 45% during the first quarter of 2021. All told, year-over-year profits increased to $261.5 million.
Staying in the retail lane, Ross Stores, Inc. (Tii:ROST) is experiencing strong consumer demand for its wares. As a result, the largest off-price apparel and home fashion chain in the United States with 1,585 locations is in expansion mode. The retailer recently opened 22 Ross Dress for Less and eight dd’s DISCOUNTS stores across 11 different states in June and July. This is welcome news for Ross Stores after a brutal 2020 in which sales dropped from a record $16 billion for fiscal 2019 to $12.5 billion on mandated store closings and consumer reluctance to visit brick-and-mortars when restrictions finally eased. However, the company finished out the year with $4.8 billion in cash.
Another example of a bargain-centric organization enjoying a significant renaissance right now is Spirit Airlines, Inc. (Tii:SAVE), the “ultra-low cost” airline based in Miramar, Florida. First established in the 1960s, Spirit became notable for allowing passengers to customize their trips ala carte and pay extra fees for additional features they wanted. Spirit is part of the global low-cost airline market that is anticipated to grow at a compound annual growth rate of 6.8% between 2021 and 2027. Even though consumers understandably didn’t travel much in 2020, air travel has rebounded somewhat this year, and Spirit Airlines is among those experiencing increased demand as a result. Illustrating this, second-quarter revenue for the airline totaled $859.3 million, compared with $138.5 million for the same period last year.
Groupon, Inc. (Tii:GRPN) seems to be on the comeback track as well. The e-commerce marketplace reported that it experienced its highest level of quarterly global local billings since the pandemic began during the second quarter. While revenues for the period remain depressed, gross profits rose 41% to $193.9 million. With more than 25 million global active customers and 1.5 billion Groupons sold to date, the platform boasts strong customer loyalty. Nearly 60% of its customer base has been shopping on Groupon for at last three years.
When talking about discount brands, one can’t forget the bulk players. After a record fiscal 2020, BJ’s Wholesale Club Holdings Inc. (Tii:BJ) is expanding its footprint by opening six new clubs this fiscal year. The membership warehouse club retailer plans to open locations in Seabrook, N.H., Port Charlotte, Fla., Commack, N.Y., South Fayette, Pa., Ross Township, Pa. and Lansing, Mich. Target Corporation (Tii:TGT), which increased its bulk offerings over the years to compete with wholesale clubs, came off of a record 2020 performance that continued into 2021. First-quarter 2021 comparable sales grew 22.9%, on top of 10.8% growth last year. The retailer also announced that it gained more than $1 billion in market share in the first quarter, on top of a $1 billion share gain in the first quarter of 2020.
In the end, bargain hunting is more important than ever. The pandemic changed consumer behaviors dramatically, and people are more discerning with how they spend their hard-earned money than ever. Those brands that play directly into consumer demand for savings, rather than shy away from it, seem poised to come out stronger as a result.