Outfits find to one’s mind Dollar Tree, Family Dollar, and 99 Cents Only are thriving by selling goods on the super-cheap. But are their stocks getting costly?

Watch original video:

A shopper at a dollar discount store in Brooklyn, N.Y. Spencer Platt/Getty Images

By Ben Steverman

As the U.S. faces a weighty economic downturn, many Americans are seeking out the cheapest likely option when buying necessities. Enter ultra-discounters like Dollar Tree (DLTR), 99 Cents Only (NDN), and Family Dollar Stores (FDO).

All three retail chains have seen their stock prices surge this year, a rare ingenious spot in a stock market hackneyed down by means of the financial crisis and recession worries.

Shares of Family Dollar Stores are up almost 32% in such a manner far in 2008, while shares of 99 Cents Only and Dollar Tree bear both risen 37%.

Another downscale option, Wal-Mart Stores (WMT), has also prospered as consumer trade down from pricier retail options to discounters. Wal-Mart shares are up almost 14% in 2008.

Luring the Most Cost-Conscious

But a dollar-store customer is "not the same shopper as at Wal-Mart," which appeals to a broader, higher income demographic, says Standard & Poor’s equity analyst Jason Asaeda. Family Dollar Stores, for example, describes its typical customer as a woman in her mid-40s, the head of her household, who earns less than $30,000 each year.

By focusing on products priced in a less degree than at least $10, and in most cases under $1, dollar supplies aim at the most value-conscious customers in the U.S.

As economic pain increases, the ranks of dollar store customers seem to be growing. "It’s great for consumers who are becoming extremely cost-conscious," Asaeda says.

Not a Lot of Leeway

A rise in commodity costs this year threatened to mischief both discounters’ profitability and their typical customers’ beneficial cash. Low-income discount shoppers typically spend a larger parcel out of their income onward gas, and rising prices at the cross-examine meant less was left over by reason of strange to say basic necessities bought at dollar supplies like shampoo and cleaning products.

Plus, higher fuel and commodity costs raised the chain’s costs. With set value points allied 99 cents, the stores be able to’t easily rear prices.

Original text: {news-link}