The economic situation in the United States and the world in general is expected to continue its recovery from the recession over the next one year (Forbes.com). Improvements are expected in key economic indicators such as gross domestic product, inflation levels, employment levels and interest rates. It is expected that in the next one year, the high rates of unemployment currently being experienced in the United States will be on the decline which the rate of inflation is also expected to reduce. However, due to the political turmoil in the Middle East, it is expected that the price of oil and its associated products may increase over the next one year. A decline in inflation and decreased rates of unemployment are indicative of a possible increase in the purchasing power of consumers and this may mean potential increase and consequently income for the Dollar Tree retail stores. The process of economic recovery may positively affect the growth of the company in terms increased sales and income for the company’s next financial year. Increased global prices of oil may however have a negative impact on the expected growth of the Dollar Tree retail chain and may work to increase the operating costs of the company and thus lowering the expected income margins.
The retail industry, in which Dollar Tree chain of stores operates, is the second largest industry in the United States both in terms of establishments and number of employees (Forbes.com). The economic recovery is expected to grow at a declining rate over the next year.
The retail industry is however expected to register a substantial growth both in sales volumes and income. The intense competition that characterizes the retail industry is expected to spur this growth as companies in the industry seek to expand their operations to counter competition and earn a greater market share. The consumer price index, the producer price index and the employment situation statistics released by various government departments indicate a growth which is expected to be replicated in the retail industry but at more pronounced growth rates. Increased consumer spending is expected for food, house wares and health and beauty products as recovery in the real estate sector picks up. Increased employment numbers and reduced inflation rates that are expected over the next year all indicate good times ahead for the industry. However, the expected growth of the industry may be undercut by rising global oil prices which usually translate to increased operating costs which may slash the expected incomes of the industry.
Dollar tree, Inc is an American company that operates a chain of retail stores across the North American continent. It currently boasts of 4009 retail stores spread over 48 states (Forbes.com). The company has its market spread all over the United States and operates a number of retail stores in Canada. The company targets the low end market segment of the retail market. It sells its merchandise at the low price of one dollar and seeks to capture and retain the low income earners as the largest part of its market share (Dollar Tree Annual Report).
The company has over the past five years been experiencing a constant growth in both sales and income. It has recorded annual growth rates of more than 30% for the last three years and is expected to continue in this rate of growth in the coming years. This constant progress can be attributed to the fact that the company has a target market of the low income earners and offers its products at relatively cheaper prices. The economic recession experienced from late 2008 to date has forced many consumers to seek for cheaper alternatives of products and Dollar Tree chain of stores offers such. Due to this, the company recorded growth in income and sales during in the last two years despite the economic recession that was adversely affecting many industries in the United States. Another factor that has contributed to the company’s growth is its policy of expansion. The company has since 2004 been expanding its operations by making new store openings, store expansions and acquisitions. The company’s number of stores has grown from 2735 in 2004 to the current 4009 (Forbes.com). This expansion has contributed immensely to the high growth rates recorded by the company over the same period in terms of sales and income.
The company, as a result of its intense expansion policy, has developed into a recognizable brand and this has played a key role in developing customer loyalty and brand awareness, factors which can be cited as some of the reasons for the company’s growth. The company is also faced with the challenge of transferring its costs to customers. Since the company offers low prices of one dollar for each piece of merchandise purchased, it is very difficult to transfer costs to customers since this would result in prices higher than the one dollar threshold of the company. This poses a challenge that may affect the company’s future growth prospects.
The Dollar Tree chain stores operate in market characterized by intense competition and which is saturated by many players (Forbes.com). Competition from larger and well established chain stores like Wal-Mart which are able to use economies of large scale to purchase their products at the lowest price offer the Dollar Tree chain stores stiff competition and this inhibit its penetration into some markets. This poses a challenge to the growth of the company. The company’s growth in the past few years may have been driven partly by the recession as many consumers sought cheaper goods from low end retail stores like Dollar Tree. This growth may be unsustainable as the recession comes to an end, and should the company fail to put in place strategies to maintain its customers, improving economic conditions may signal the end of its continued growth. This is challenge to its growth that the company needs to strategize on how to handle it so as to avoid any adverse effects on its long term growth and performance.
The Dollar Tree chain of stores offers goods which can be broadly categorized into consumable merchandise, variety merchandise and seasonal goods (Forbes.com). It offers all its merchandise at a price of one dollar and seeks to service the low end retail market in the United States. The company offers goods like candy and food, basic health and beauty products, household consumables, frozen and refrigerated food, plastics and household chemicals, all of which compose consumable merchandise. Variety merchandise such as toys, durable house wares, clothing and party goods also form a substantial part of the company’s sales. Seasonal goods such as holiday greeting cards, Easter, Halloween and Christmas merchandise are also offered by the store. The company has in the past been on a drive to introduce refrigerators in its stores. This is in an attempt to introduce new products into the stores. Principal of these intended new products are groceries, and the company hopes to start selling groceries in its store in the near future. The company and its products are an essential part of the retail industry. The company is an important player in the low income segment of the retail market and its products provide cheap alternatives to buyers seeking to avoid the more expensive high end chain stores. The company is also a huge employer employing thousands of employees in its chain stores all over the United States.
Dollar Tree Annual Report. The Dollar Tree Inc website. 8 March 2011. Web. 8 march 2011. <http://www.dollartreeinfo.com/investors/financial/annuals/>
Dollar Tree Inc. Ratios and returns. The Forbes magazine. 8 March 2011.web. 8 March 2011.<http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=dltr>