Wal-Mart's win doesn't tell all about low-income consumers

The combined powers of minimum-wage hikes, low fuel prices and job creation are expected to have lifted sales at dollar stores during the first quarter, as the low-income shopper finally started to feel some relief from the economic recovery.

Expectations were even higher following low-price retailer Wal-Mart (WMT)'s big beat last week , when it topped U.S. comparable sales estimates with a 1 percent gain.

Yet as Wal-Mart executives attributed much of the company's beat to internal changes, investors were trying to gauge how much of its growth was the result of a healthier base of low-income shoppers, and how much was a case of it stealing share.

Analysts pointed to several macro factors that may have trickled through to Dollar General (DG) and Dollar Tree (DLTR)'s top lines.

In a report analyzing weekly earnings by wage band over the past two years, Jefferies analyst Daniel Binder said that in the quarter ended March, year-over-year gains among the bottom decile and bottom quartile of consumers outpaced those belonging to the median-income group.

That made it the second-straight quarter when those two wage groups grew their weekly earnings at a faster clip. Prior to December, gains among those two income groups hadn't both outpaced those at the median level since June 2014.

In that vein, Wal-Mart executives said last week that the pay increases the company has doled out to its store employees resulted in more of them shopping in its stores . The retailer likewise saw a lift in sales of more discretionary categories, including apparel and toys, hinting that its customer base is feeling more confident.

Job creation and cheap gasoline prices, which have a tighter correlation with the budgets of cash-strapped shoppers, are also expected to spur discretionary spending in dollar stores.

"The core dollar store shopper is healthy today, with spend driven by employment and wage gains and less impacted/swayed by market volatility and political fear-mongering," Deutsche Bank analyst Paul Trussell told investors on Monday.

Both Dollar General and Dollar Tree report earnings on Thursday. Thomson Reuters forecasts are calling for same-store sales gains north of 2 percent at each chain.

Yet not everyone is as confident in the low-income shopper's spending power. Following Wal-Mart's earnings report last week, Moody's analyst Charlie O'Shea said the low- to middle-end consumer remains "stressed."

Even though retailers' sales comparisons are no longer vulnerable to the reduction in food stamp benefits that took effect in late 2013, shoppers who relied on those funds haven't replaced that flow of income.

"The money didn't come back," he said.

Another change to food stamp qualifications that is being rolled out in some states this year is also expected to take a chunk out of some beneficiaries' wallets. The changes, which pertain to waivers tied to unemployment rates, are not expected to be as big of a blow as the last round of cuts.

Meanwhile, though fuel prices remain low, new AAA data released Monday found the national average for a gallon of gas has hit a 2016 high.

Goldman Sachs earlier this month predicted that low energy prices will provide less of a padding to consumers' wallets as the year progresses and will become a headwind in 2017. The firm expects energy to become a drag on essential spending during the third quarter, which would mark the first time in two years that it hurt these types of purchases.

Adding to dollar stores' list of challenges, analysts predict a new rule regarding which workers qualify for overtime pay is likely to take a toll on their profits .

"The combination of labor headwinds, Wal-Mart's success and upcoming price investments, as well as rising gas prices present a more difficult setup near-term," Trussell said.

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