Dollar General is seeing a shift as higher-income households increase their spending, which appears to be driven by rising economic concerns.
In a recent call about first-quarter earnings, CEO Todd Vasos noted that new customers this year are making larger purchases per visit compared to new customers from the previous year.
Interestingly, these shoppers are also devoting more of their budgets to discretionary items.
“I think these trends indicate we’re drawing in more high-income customers who want to maximize value while shopping for necessary and desired items,” Vasos shared.
The company has attracted a notable number of middle and higher earning customers.
According to Vasos, during the quarter ending in May, the percentage of these customers was the highest observed in the last four years.
“We’re thrilled about this growth across a diverse customer base and look forward to expanding our reach with them,” he mentioned.
However, Vasos did admit that many of their core customers are still feeling the financial pinch.
A recent survey revealed that around 60% of these customers felt they would have to cut back on essentials in the following year.
Arun Sundaram, an equity analyst at CFRA Research, conveyed that more affluent households are shopping at discount stores and clubs due to increasing price sensitivity that accompanies ongoing inflation and economic uncertainty.
Sundaram pointed out that while economic strain is a key issue, retailers are also actively trying to cater to a broader income demographic.
“Dollar General is joining forces with Doordash, which enhances access for high-income families through delivery options,” he explained.
Similarly, Dollar Tree is also appealing to wealthier customers by implementing a multi-price point strategy, including more discretionary items priced at $3 and $5.
Vasos also referred to Walmart’s subscription service, Walmart+, stating it fits well with the expanding e-commerce trend.
Walmart has consistently attracted higher earners over several quarters as well.
