Rival dollar stores are now fighting to buy Family Dollar

(Image credit: CC by: Mike Mozart)

last updated 8 January 2015

Selling household products and groceries for a dollar (more or less) is apparently a lucrative business today — and like all booming industries, dollar stores are looking to consolidate. On Monday, Dollar General made an unsolicited $8.9 billion bid for Family Dollar Stores. Family Dollar has already agreed to merge with Dollar Tree, but Dollar General hopes its sweeter offer will derail rival Dollar Tree's $8.5 billion bid, announced in late July. It offered to pay Dollar Tree the $305 million breakup fee for the merger.

The three stores have similar business models but serve different areas, The New York Times reports: Dollar General tends to be in rural areas, Family Dollar in urban regions, and Dollar Tree rules the suburbs. All three are doing well financially, for better or worse. "It's fair to say that the economy is creating more of our core customers," says Dollar General chief executive Richard Dreiling, who put off his retirement for a year to pursue this deal. "The middle-income customer is getting squeezed."

Guy Berger, an economist at RBS securities, agrees — and he has the numbers. Over the past decade, weekly income for the median U.S. worker has risen 22 percent — a 3.1 percent drop when inflation is factored in; the 90th percentile has seen its weekly income rise 31 percent, or 4.1 percent after inflation. "The biggest change from five years ago is that people are less worried about losing their jobs," Berger said. "But in some ways, they are worse off than they were 10 years ago, and that's encouraging people to downsize their spending habits."

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Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.