An inconvenient truth for the dollar store group

|By:, SA News Editor

The great trade-up of dollar store shoppers continues as Costco, Wal-Mart, and grocery stores regain market share in some key categories from consumers better off than they were in 2009 to 2011.

The development hits at a particularly hard time for the dollar store group (DLTR, DG, FDO, FIVE) with cuts to the food stamps program and a failure of Congress to extend long-term unemployment benefits both significant demand factors.

What to watch: Sales of tobacco is providing some relief for the dollar stores, but isn't the panacea that some analysts forecast. Yesterday, execs with Family Dollar noted during the firm's earnings call (transcript) that although they were "pleased" with the company's level of tobacco sales the majority of cigarette sales occur at convenience stores.Taking tobacco market share from convenience stores could be tricky.