No. of Recommendations: 7
Probably because of saturation issues, but even then 5.5%/year seems too low. That's at least what I'm most worried about. Do you have an opinion on how long the can continues to open new stores in the US? Mexico may work or not, we'll see.
I think saturation is not really a problem.
First, there is a long way to go. The western US has maybe 20% as many dollar stores per capita as the old south states.
And saturation isn't about not having more places to open stores, but about keeping an eye on when and where the marginal economics fade and to what extent.
In many cases they open stores very near each other with very little cannibalization. In other places, especially driving destinations, it's an issue.
And second, slowing store counts aren't necessarily a death knell for investors.
All that money currently going into expansion capex will go where instead? To somewhere that benefits shareholders to some high degree, generally, even if it caps the compounding effect.
People have been talking about Walmart saturation for decades, but their shareholders have done just fine.
As an aside, I lost a small fortune on a Mexican dollar chain private equity deal, so I don't have great hopes for that front : )
Mexico can be a tough place to do business, especially retail.
Jim
