The Wall Street Journal, otherwise known as the official newspaper of "the Market," had a little fun with its readers last week. Perhaps it was softening us up for its impending, sure-to-be-unforgettable April Fool's Day prank. Then again, maybe its writers just plain missed the point here.
Either way, the paper's Feb. 27 issue contained one of the most illogical assertions I have ever seen in that illustrious paper: that a poor economy and high unemployment will drive low-income shoppers away from Dollar General (NYSE:DG).
Here's a quote: "...stubborn unemployment levels in the U.S. are putting a strain on the lower-income consumers who flock to Dollar General's stores... The worry for the stock is if unemployment rises or the economy peters out."
Fools, that just makes no sense. Whether unemployment explodes or the economy collapses, both scenarios would help, not hurt, discount retailers such as Dollar General and similar modern-day five-and-dimes such as Family Dollar (NYSE:FDO), 99 Cents Only (NYSE:NDN), and Dollar Tree (NASDAQ:DLTR).
The logic is so obvious that I hesitate even to spell it out, but here goes: Say you normally shop for detergent and milk at Safeway (NYSE:SWY). Then, one day, your engineering job gets outsourced to India and suddenly you have to save some dough. I will bet you a greenback that, when times get tough, you are more likely to try saving a buck at Dollar General than at Whole Foods (NASDAQ:WFMI).
It is simple common sense.
Then there is the story that the Journal seems to have skipped the chance to explore, despite observing that "more-affluent customers... enjoy the treasure hunt" offered by dollar stores' varied and ever-changing merchandise. The Journal at least did not opine that a bad economy would make Dollar General unaffordable to six-figure income earners.
But how much more insightful would it have been had the authors taken the next step and argued that a bad economy could attract high-income shoppers to, as well as retain low-income shoppers at, dollar stores! For when money is tight, and you suspend your weekend antiquing hobby until better days, dollar stores offer treasure hunts to the formerly wealthy on a budget.
In the final analysis, the Journal made two bad calls: It fumbled the story it aimed to write and missed the story it could have written.
Motley Fool contributor Rich Smith owns no shares in any companies mentioned here. He subscribes to The Wall Street Journal and thinks the Journal's writing is generally so good that he is willing to overlook the occasional slipup.
