Consumers squeezed by rising fuel prices

By Jonathan Birchall

updated 4:46 p.m. ET Aug. 26, 2005

NEW YORK - America's low cost "dollar store" retailers are providing increasing evidence that poorer shoppers are becoming the first to feel the squeeze from higher fuel prices.

The Dollar General and Dollar Tree chains both say their largely low-income customers were making fewer visits to their stores and spending less, as a result of having to set aside more money for fuel.

Together, the two retailers operate more than 10,000 stores across the U.S., many of them located in rural areas or poorer urban neighborhoods.

Bob Sasser, chief executive of Dollar Tree -- which prices all its goods at one dollar -- said its customers "continue to feel the strain of rising fuel costs, and they are responding with fewer shopping trips".

"We're not assuming that gas prices will drop or even level off any time soon," said David Perdue, chief executive of Dollar General, who added that the chain was "looking for ways to give our customers some attractive discretionary choices within their limited budget".

Petsmart and Petco, the two largest U.S. pet supply stores, also said this week that energy costs were depressing store traffic and sales, following a similar warning earlier this month from Wal-Mart, the largest U.S. retailer.

In a further indication of anxiety over energy costs, the University of Michigan's final consumer confidence index for August, released yesterday, showed a larger than expected fall. The final index dropped to 89.1, from a preliminary reading of 92.7, against 96.5 in July.

Perdue at Dollar General sought some solace, saying that high energy prices were at least bringing in new, more prosperous customers, looking for bargains.

"We believe high-gas prices are driving these higher income customers to seek out value," he said.

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