The buck stops at Dollar Tree (NASDAQ:DLTR). The leading dollar store chain wrapped up a healthy fiscal year, as thrifty shoppers continue to flock to its empire of more than 2,500 stores. For the year, the company earned $1.54 a share as sales jumped 18% to a record $2.8 billion. Dollar Tree earned $1.27 a share the previous year.
Even in improving economic times, we all love a bargain. Whether the savings are real, as they are at low-cost, rapid turnover freaks like Wal-Mart (NYSE:WMT) or Target (NYSE:TGT), or merely perceived, as at dollar stores like Dollar Tree or 99 Cents Only (NYSE:NDN), doesn't seem to matter.
Wait! Did I say perceived? Of course, I did. Dollar Tree may be selling goods for pocket change, but it nonetheless managed gross margins of 36% this past year. In other words, your typical dollar purchase runs the company just 64 cents. Sure, 99 Cents Only may have a price point that's a penny lower, but its gross margins through the first nine months of 2003 were a hefty 40%.
Wal-Mart's gross margins by comparison were just 22%. Granted, that's weighed down by the scant markups on groceries, but the point that dollar stores are no bargain hunter's nirvana stands.
Then again, isn't that what makes these companies worthy investments? Of course it is. That's why Motley Fool Hidden Gems recommended Overstock.com (NASDAQ:OSTK) last year. Sure, it's comforting to know that Overstock is able to turn another merchant's surplus into treasure, but the real kicker is that it was able to grow its revenues by 160% last year alone.
It pays to be thrifty. Sometimes it pays even better to cater to the thrifty. Speaking of thrifty, you can try a free trial of Motley Fool Hidden Gems with just one click.
What do you think of dollar stores? Are they great places to find bargains or is all that just cheap junk? Do you have some better ways to acquire low-priced presents or crafty ideas to stretch your disposable income? All this and more -- in the Living Below Your Means discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz thinks that a penny saved means that he has to wash his hands before dinner. He does not own shares in any companies mentioned in this story.
