As families stretch every dollar, Family Dollar and Dollar Tree are surging, with both hitting 52-week highs yesterday. Family Dollar, the No. 2 dollar store by revenue behind Dollar General, is the best performing retail stock in the S&P 500 this year and nearing an all-time high.
"Americans are becoming more frugal, some by choice, some by circumstance,” said Brian Kelly, co-founder of Kanundrum Capital. "Not everybody can dine on caviar and lobster after they have finished shopping for socks at Neiman Marcus."
Despite the disappointing consumer data, stocks were stable today as earnings from Pfizer and Dow Chemical exceeded estimates and Research In Motion unveiled a new phone. That’s the tale of the 2010 tape. Global players and niche products doing well while U.S. consumer muddles through this jobless recovery. The S&P 500 is about unchanged on the year.
Family Dollar shares got an extra boost last week after Trian’s Nelson Peltz announced nearly a 7 percent stake in the company. Peltz, an activist investor known for turning around companies in the restaurant and food business, believes even more value can be unlocked in the shares.
"The reasons why Trian has acquired this large position are in-line with the key investment themes supporting our ‘outperform’ rating,” wrote Raymond James analyst Dan Wewer in a note following the disclosure. “Dollar General today generates significantly higher sales per foot, operating margin, unit growth and ROIC (return on invested capital). Importantly, there is not any inherent reason why Family Dollar cannot generate the same operating results as already being delivered by Dollar General."
Dollar General shares have doubled since their IPO last year. Family Dollar shares thrived even during the depths of the recession, gaining in value during 2008 and 2009. It seems even as the economy technically recovers, Americans are rediscovering their thrifty roots.
Dollar stores attracted folks when things were really scary,” said Pete Najarian, co-founder of TradeMonster.com and a ‘Fast Money’ trader. “Now they are holding them and building out the product.”
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John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team