Dollar General's results as a barometer for the state of the low-income American consumer under Bidenomics

Dollar General (DG) released its Q423 and FY23 financial results today. The numbers reveal why so many Americans are worse off after 3 years of Bidenomics and associated Democratic policies.

Dollar General operates over 20,000 small-box "discount stores" across the United States,?more locations than any other American retailer. These stores sell basic everyday grocery, drugstore, and household goods, supplemented with a variety of general merchandise, at "everyday low prices." DG's strategy is to locate its stores in low-income, rural communities that are too small to support a WalMart or Costco or Safeway (such locations are often referred to as "food deserts").

I know from personal experience where DG locates their stores. My family has a?cabin in Northern California on Lake Almanor in Plumas County, historically one of the poorest counties in the state. In the vicinity of the Lake, there are 3 small towns, Chester, Greenville, and Westwood, each of which used to support a thriving lumber mill that provided reasonably well paying blue collar jobs to the residents. For example, in the?1930s, the Red River Lumber Company in Westwood was the largest pine lumber mill in the world, occupying more than 100 acres and employing more than 5,000 people.?These lumber operations have shrunk dramatically over the decades (Collins Pine in Chester is the only remaining mill), as cutting forests, even sustainably, has become anathema to the delicate environmental sensibilities of the mostly Democratic Californians who now vacation (as I do, although I am a Republican) in the area. As good jobs have disappeared, the economies of the towns have suffered accordingly, with poverty endemic along with the inevitable opioid and fentanyl addiction that follows in its wake. These are just the kind of towns that Ohio Senator J.D. Vance described in his book Hillbilly Elegy. (In the general vicinity of the town where Hillbilly Elegy is set, Middletown, OH, there are 7 Dollar General stores.) Plumas County voted for Donald Trump in 2020 by a margin of 17 percentage points. (In Butler County, OH, where Middletown is located, the margin was 24 points.) Dollar General has located one of its stores in each of these 3 towns.

DG's reported financial results reveal:

• Customer traffic increased in 2023.
• The average transaction amount ("basket") decreased.
• Gross profit was reduced by the fact that sales in the consumables category increased but, sales in the home products, seasonal, and apparel categories all decreased; that is, customers spent more on low-margin basic necessities (e.g., toilet paper), and less on higher-margin discretionary items (e.g., Halloween or Christmas decorations or a cute onesie for the new grandkid).
• Gross profit was also reduced by an increase in "shrink" and inventory markdowns, and a decrease in inventory markups; "shrink" is the term the retail industry uses to refer to shoplifting or the misrecording of items at self-checkout.
• Interest expense increased 3.1% year over year.
• As a result of all these factors, DG's net income was down 31.2% in FY23.

The picture couldn't be clearer and it is not a pretty one. In low-income, rural, MAGA communities across the United States, shoppers are feeling the pinch of the cumulative (now 18%) Bidenflation. Although they are still frequenting discount stores (traffic is up), nevertheless, they are spending less (decreased transaction/basket amount) and limiting their purchases to basic necessities (consumables), while forgoing more expensive discretionary items. Stressed by the economic environment, they cheat at self-checkout, either not scanning some items in their basket at all, or, if they need to enter the stock keeping unit (SKU) of the item they are scanning, selecting the less expensive SKU, rather than the more expensive one (for example, if they are purchasing apples and they are given a choice between entering the SKU for, say, the more expensive organic apples or the SKU for the less expensive non-organic apples, they will enter the SKU for the less expensive apples, regardless of which apples they are actually buying). The problem with cheating at self-checkout has gotten so bad that DG is removing self-checkout stations from its stores. DG is often forced to mark merchandise down so that customers can afford it and can't mark merchandise up because there is no customer demand for it. In addition, DG is forced to?pass along to its?customers the increased interest expense that results from the higher interest rates the Fed is using to tamp down Bidenflation.

In sum, Dollar General's results provide a wonderful barometer for the stressed state of the low-income, rural American consumer under Bidenomics.?Will it be any surprise when Chester, Greenville, and Westwood (along with Middletown, OH) reject Bidenomics?in November?and vote once again overwhelmingly for Trump?