Markets

Family Dollar May Be Worth a Pretty Penny More If Dollar General Makes a Bid

The $8.5 billion merger of Dollar Tree and Family Dollar remains on track, and odds are that leading deep-discount chain Dollar General won't make a counteroffer -- despite continued speculation that it might do just that. The fact that the rumor persists suggests that some underlying value can still be found in these dollar store chains, but don't discount the risk that these stores may have already seen whatever growth they were going to achieve.

Source: Company SEC filings.

Since the recession, the big three deep discounters have grown their store counts from 18,000 across the country to more than 24,000 locations. Wal-Mart recognized the opportunity and is responding to it by opening up more new smaller stores than large supercenters, and other mass retailers have taken notice as well. During this time Target opened its small-format CityTarget and recently went even smaller with a prototype TargetExpress concept store.

Additionally, the convenience store has become a popular destination for consumers looking for, well, convenience and a quick-trip opportunity. These retailers have also bulked up their offerings and are becoming a growth market in their own right.

Penny for your thoughts

I don't think the dollar store concept is played out by any means yet, and a newly enlarged Dollar Tree going head-to-head with Dollar General will provide competitive benefits to consumers. Yet the stores may soon reach a saturation point that size alone might not be able to breach.

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The article Family Dollar May Be Worth a Pretty Penny More If Dollar General Makes a Bid originally appeared on Fool.com.

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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