NEW YORK (
) -- Discount isn't dead.
Not judging by Wednesday's trading session, at least, when shares of dollar-store retailers rallied, with some names reaching fresh 12-month highs.
Family Dollar Stores'
stock, for one, hit a new peak of $41.83 Wednesday afternoon, before falling back some, while
notched a 52-week high of $30.20.
99 Cents Only Stores
( NDN) also inched higher Wednesday, even as the rest of the retail sector ended mostly in the red.
Earlier this week Paulson & Co., the hedge fund run by famed subprime short seller John Paulson, purchased 6 million shares of Family Dollar at $36.61 apiece, for an outlay totaling $220 million.
Paulson's bet may seem risky to some, as investors fear higher income shoppers who were forced to trade down during the depths of the recession will return to full-priced retailers sooner rather than later.
Just such a
seems have afflicted discount behemoth
. In its first period of 2010, the company saw yet another decline in traffic, with same-store sales slipping 1.1% -- the fourth consecutive quarter in which
in comparable sales.
Shoppers are slowly but surely opening their wallets to discretionary merchandise. Both
BJ's Wholesale Club
said traffic increased in their stores
, with consumers spending on higher-margin items and non-essentials like home goods and apparel.
In order to hold on to their shoppers, dollar stores may need to take some of these cues and upgrade their merchandise selection. Dollar General, in fact, has already started, offering more brand names like Hanes underwear and L'Oreal cosmetics.
--Reported by Jeanine Poggi in New York.
Follow Jeanine Poggi on
and become a fan of TheStreet on