Anyone
following the financial headlines has to marvel at the game of steal the bacon being played out by three very similar companies, Dollar Tree, Dollar General,and Family Dollar Stores Their
merchandise is consumable products -- paper products, cleaners, clothing,
gadgets and chachkas and the like -- primarily aimed at low- and middle-income
consumers. Most of the goods are
imported from cut-rate factories in China or 3rd world countries. Basically,
Family Dollar Stores has been the object of takeover bids by their rivals,
Dollar Tree and Dollar General.
Although
we’re talking about a generally low margin business, there are a lot of consumers
in this category, and the owners of these businesses know it. So what is Family Dollar’s 5.36% operating
margin and almost $10 billion in sales (that’s a lot of purchases at $1.00 each:-) worth to the highest bidder, Dollar General: $9.1 billion. It’s amazing that low margin businesses can
carry this kind of price, but we’re talking about next to nothing interest
rates, so just borrow it! And of course
there is the magic of synergy.
But
if you look at the principals and the major individual stockholders of these three
businesses, making millions of dollars personally in compensation and stock
options every year, it brings up the issue of the 1% and the huge disparity of
income between them, their employees and their customers. That’s the sad
reality of the issue, the magnitude of that income discrepancy unprecedented until
Wall Street overshadowed Main Street.
Maybe
all three can get together as General Family Tree Dollar Stores? Cheap goods for the poor and riches for the
job creators! Money rules!
