May 13

Image: Fix Price

A five-year global growth trend in value retailers couldn’t have been better preparation for the pandemic’s cash-strapped consumer. And financial markets haven’t let it go unnoticed.

Consumers hit by unemployment and dimmed economic prospects are spending stimulus checks on necessities. Paradoxically, stimulus-driven financial markets are booming. While Wall Street and Main Street are forking in different directions, value retail seems to remain at least one business that connects the two.

This is hardly a secret. Discount retail names like Dollar General in the U.S., Dino in Poland, Dollarama in Canada and Benelux-based Action have all done well and are set to continue to thrive.

Dollar General, which has a market value of almost $50 billion, is headed for another strong year after value-minded consumers juiced sales in 2020 and the company presses ahead with strategic development, Barrons reported citing Loop Capital.  While the pandemic has brought a boost to sales, steady share price growth over the past five years shows a fundamentally strong business already well into development.  

Value retail can be very compelling as a business as it provides a consumer the item they need at the best price. Sales tend to be both cyclical and counter-cyclical with regards to overall economic growth. In boom times, luxury brands may surge, yet value stores benefit from increased overall consumption. During economic downturns consumers shift their spending to the maximum value.

Given market gains, some see the moment as an appropriate time to take their company to market. With aestablished businesses, strong valuations and strong growth prospects – they may be right.

Fix Price, which has pioneered the low-price retail model in Russia, has announced it is considering an initial public offering in London. Fix Price has delivered 16 straight quarters of double digit like-for-like sales growth through the end of 2020. It believes it is one of the fastest-growing value retailers globally.

Russian luxury spending has certainly grabbed media attention in the form of Premier League football clubs or elite real estate. Yet, the bulk of the 250 million consumers served by Fix Price across the former Soviet space are very much seeking no-frills, low-price necessities. That’s a trend that the company banks on continuing. Some studies suggest that value retail will triple in size by 2027 after the market has already doubled in size over the past five years. Fix Price generated over $2.6 billion in revenue in 2020.

Dino, based in Poland, is mostly a food discounter, yet it serves an Eastern European market similar to the Russian one, made up of extremely value-conscious consumers. Share price growth dynamics are virtually identical with those of Dollar General.

It’s unclear how stock markets will act in the future as each individual company pushes its business proposition amid job losses and government stimulus. That said, value retail meets the needs of a large cross-section of consumers globally and targets a very real demand for necessity items at low cost. That doesn’t appear to be going away anytime soon, pandemic or not.

By Stephen Bierman

Stephen Bierman is an energy markets journalist and the editor of New Economy Observer.

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