5 Ways Dollar General is Growing, Beyond Opening 1,000 Stores

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5 Ways Dollar General is Growing, Beyond Opening 1,000 Stores

By Jamie Grill-Goodman - 12/17/2019

More on Dollar General

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While other retailers are closing doors or moving business online, Dollar General continues to rapidly expand its physical footprint year after year.

The discount retailer has 1,000 new stores planned for 2020 compared to 975 openings this year;

1,500 store remodeling projects planned, compared to 1,000 this year; and will relocate 80 stores. This brings the grand total to nearly 2,600 real estate projects in 2020.

In its third quarter of 2019, Dollar General saw its best customer traffic and same-store sales increases (up 4.6%) in nearly five years, as well as double-digit growth in both operating profit and diluted EPS. The retailer raised its full-year financial guidance.

“We continue to execute well on many fronts, while maintaining our focus on delivering value and convenience for our customers,” CEO Todd Vasos said in a statement.

 “We continue to see a significant number of opportunities to serve more customers and communities with our innovative mix of store formats,” he also noted. “The sustained positive results we are seeing from our portfolio of real estate projects further validates our belief that our ongoing investment in high-return real estate projects, along with our strategic initiatives, is the best use of our capital as we look to continue delivering long-term shareholder value.”

Dollar General expects more than 1,100 of the future remodels to be in the Dollar General Traditional Plus (DGTPformat or DGP format, with the remainder of the remodels primarily in the traditional format. Traditional remodel stores have an average of 22 cooler doors and deliver a 45% comp lift on average.

“Investing in our mature store base to incorporate our best and most impactful initiatives is an important component of our real estate strategy, as we continue to leverage recent learnings and format innovation to capture additional market share,” Vasos said on the retailer’s recent earnings call.

Dollar General also plans to accelerate the rollout of its small-format DGX stores next year, planning to open about 20 new stores to bring the total amount of DGX locations to 30 by end of 2020. The remainder of new store openings will primarily be in the traditional format, the majority of which will include higher capacity coolers.

In addition to its bold retail footprint plans, here are five more things the discount retailer has been up to.

Fresh Merchandise

Dollar General is expanding its non-consumable initiative (NCI), which consists of a new and expanded assortment in key non-consumable categories including home, domestics, housewares, party and occasion. The NCI offering was available in more than 2,100 stores at the end of Q3 and the retailer expects to expand the assortment to approximately 2,400 stores by the end of 2019. It also plans more than double that number, rolling out the NCI assortment to about 5,000 stores by the end of 2020.

I’m very pleased with the sustained positive sales and margin performance we are seeing across our enhanced product categories,” said Vasos. “We also continue to see a positive halo effect in consumable sales. Overall, this performance is contributing to improvements in both total sales and gross margin rate in these stores.”

Additionally, merchandise inventories were $4.5 billion at the end of Q3, an increase of 13% overall and up 6.9% on a per store basis.

We continue to believe the quality of our inventory is in great shape and remain focused over time on driving inventory growth that is in line with or below our total sales growth,” said CFO John Garratt.

DG Fresh

Three current goals of DG Fresh are to drive on-time deliveries higher, increase in-stock levels and eventually expand the assortment offering. Dollar General also plans to begin shipping out of its fifth DG Fresh facility by as early as fiscal year end 2019.

“We believe this positions us well to capture additional benefits as we move into next year and as we expect DG Fresh will be accretive to both gross margin and operating profit rate in 2020,” said Vasos.

The retailer also added produce to 65 stores during the quarter, bringing the total number of stores carrying produce to more than 600.

digital

Dollar General’s digitally engaged customers checkout with an average basket twice as large as the company average, thus the retailer is pursuing opportunities to expand customer relationships. To that end, the retailer expanded its cart calculator in app shopping and budgeting tool to 15,000 stores up from about 12,000 stores at the end of Q2. It also consolidated its DG GO app into its primary Dollar General app, bringing all of its customer facing digital tools together to deliver a frictionless shopping experience. DG GO checkout allows customers to use their phones to scan items as they shop and then skip the line by using the DG GO checkout. It’s available in more than 700 stores.

BOPIS

Dollar General plans to pilot DG Pickup, buy-online-pickup-in-store (BOPIS), during the fourth quarter.

“Our digital efforts are focused on making things easier for our customers by providing an even more convenient, frictionless and personalized shopping experience,” said Vasos. “Importantly, these efforts will continue to be tailored specifically to the Dollar General customer and remain an important component of our long-term growth strategy.”

Fast Track

The retailer is investing in Fast Track, with the goal of increasing labor productivity in stores, enhancing customer convenience and improving on-shelf availability. One component Fast Track is self-checkout, which Vasos said is meant to improve speed of checkout, while also reducing the amount of labor hours needed.

Dollar General recently launched a pilot in select stores and Vasos said the retailer is “pleased with the early results.”