Dive Brief:
- Dollar General posted a net sales of $5.9 billion in the third quarter, an 11% increase compared to the year-ago period, according to a press release. The deep discounter’s same-store sales rose 4.3%, which the company attributed to both customer traffic and average ticket increases, as well as a boost from hurricane-related sales.
- Net income for Dollar General rose 7.3% year-over-year to $252.5 million, though it shrank slightly as a percentage of net sales. Sales and administrative expenses also rose slightly as a percentage of net sales, to 22.9%. Gross profit rose 11.3% to 1.77 billion. Earnings per share were 93 cents, up from 84 cents in Q3 2016.
- The company also announced plans to build 900 stores, relocate 100 stores and to remodel another 1,000 in its fleet. Dollar General CEO said in a statement that the company viewed the 2,000 total store projects “as an investment to enhance and consistently deliver on our brand promise to help our customers save time and money every day.”
Dive Insight:
Someone forgot to tell Dollar General that physical retail is dead. Next year alone the company plans to build more new stores than Macy’s, Sears and J.C. Penney combined shuttered in 2017.
Neil Saunders, managing director of GlobalData Retail, said in comments emailed to Retail Dive that the company’s Q3 numbers shows Dollar General “is finally back on track” after a (relatively) soft start to the year. And all those stores the retailer is building? They are likely a smart play for the discounter.
“We believe that Dollar General will continue to benefit from convenient smaller shopping locations, making it faster to shop than larger format discounters,” Moody’s Vice President Mickey Chadha said in comments to Retail Dive, adding that “the combination of low prices, broad assortment and convenience” will help the retailer grow.
“With well over 14,000 stores across the U.S., almost 75% of the population now lives within five miles of a Dollar General store,” Saunders said. “This makes the company the closest and most convenient general merchant for millions, especially those living in rural areas.”
Analysts at Gordon Haskett note that the recent store build out gives Dollar General a high level of visibility, helping push its comparable store sales higher, while mature stores have seen their best comp numbers in four years. The analysts also note that “the core [Dollar General shopper] is feeling a touch more upbeat” of late, which is also helping to push sales forward.
Along with the store changes and build out, the discounter has broadened its assortment and added brand-name products, helping Dollar General “to shift quality perceptions — especially among non-traditional shoppers” and also driving transaction values, Saunders said. Along similar lines, he noted that adding more fresh food to some of its stores “appears to be working well, improving both customer traffic and spending. In our view, rolling fresh out across the bulk of the estate would give Dollar General more of a destination status —although executing this in some of the smaller stores may prove challenging,” Saunders said.
It all paints a picture of a retailer trying to beef up existing stores and make itself into a destination, while building new stores at a furious clip. “The frantic activity does come with costs attached,” Saunders points out, but the strong sales numbers would seem to justify the discounter’s ambitions.
