No. of Recommendations: 10
For various reasons, I have been modeling the impact of a China invasion of Taiwan in my portfolio. I know that most non-grocery items in discount retail, even moreso than other sectors, are China imports.
This used to concern me, mainly as a currency exposure: dollar stores, like Walmart, could be over-simplified as a firm that buys in yuan and has revenues in US dollars--a fall in the dollar would be bad.
Tariffs are very bad, obviously, and probably a bigger risk than geopolitics. If a serious trade (or other kind of) war breaks out, I think plastic umbrellas for cocktails might not be the first goods to be halted.
But I have learned that the Chinese share is lower than I expected at the dollar stores. A large part of the reason is simply the fraction of food consumables, and they do have quite a few other suppliers including American, Mexican, Vietnamese and Indian ones.
Dollar General has said that they have been actively decreasing their China share in recent years. "We have already reduced our sourcing exposure to China this year alone by approximately 7%" (Vasos in 2019). I found an article that said Dollar Tree was around 40% Chinese goods, but even that sounds a pinch high.
Jim
