USA: Dollar General pushes ahead with brick-and-mortar expansion

Discount Retail Chain Dollar General (listed NYSE: DG) continued to drive growth in its store base in announcing increased sales for the fiscal 2022 first quarter. Dollar General's net sales for the first quarter ended April 29 rose 4.2% to $8.8 billion from $8.4 billion a year earlier, driven mainly by sales contributions from new stores and partially offset by a dip in same-store sales and store closings.


Comparable-store sales decreased 0.1% compared to the first quarter of 2021, driven by a decline in customer traffic, partially offset by an increase in average transaction amount. Same-store sales in the first quarter of 2022 declined in each of the seasonal, apparel, and home products categories, offset by an increase in the consumables category.


Over 2,300 Dollar General stores offered fresh produce as of Q1's end, and the retailer expects that number to rise to more than 3,000 by the end of 2022 and to 10,000-plus over time.


During first quarter of 2022, Dollar General opened 239 new stores, remodeled 532 locations and relocated 32 stores. The company closed out the quarter with 18,356 stores in 47 states.


“With more than 18,000 stores located within five miles of about 75% of the U.S. population, we believe we are well-positioned to continue supporting our customers through our unique combination of value and convenience, especially in a more challenging economic environment,” Dollar General CEO Todd Vasos told analysts in a conference call on Thursday. “Looking ahead, we remain focused on advancing our operating priorities and strategic initiatives as we continue to strengthen our competitive position, while further differentiating Dollar General from the rest of the retail landscape.”


For the full 2022 fiscal year, Dollar General reaffirmed plans to open 1,110 new stores and complete 1,750 remodels and 120 relocations.


“We expect approximately 800 of our new stores in 2022 to be in our larger 8,500-square-foot store format as we respond to our customers' desire for even wider product selection,” Chief Operating Officer Jeff Owen said in the call. “With about 1,200 square feet of additional selling space compared to a traditional store, these larger formats allow for expanded high-capacity cooler counts, an extended queue line and a broader product assortment, including NCI [non-consumables initiative], our larger health-and-beauty offering and produce in many stores.”


On the consumables front, Dollar General completed the chainwide rollout of DG Fresh — its program to shift to self-distribution of frozen and refrigerated foods and beverages and boost sales in those categories — last year and is now delivering to more than 18,000 stores from 12 facilities.


“Looking ahead, we expect to realize additional benefits from DG Fresh, as we continue to optimize our network, further leverage our scale, deliver even wider product selection and build on our multiyear track record of growth in cooler doors and associated sales,” Owen explained. “And while produce is not included in our initial rollout, we continue to believe that DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time. To that end, we offered produce in more than 2,300 stores at the end of the first quarter, with plans to expand this offering to a total of more than 3,000 stores by the end of 2022.”


In the first quarter, Dollar General we deployed more than 17,000 cooler doors across its store base, and the retailer expects to install another 65,000 cooler doors during 2022. “Importantly, despite the meaningful improvements we have made to date as a result of DG Fresh, we believe we still have significant incremental opportunity to drive additional returns with this initiative in the years ahead,” Owen added.


Self-checkout also will become more prominent in Dollar General stores as part of the company’s Fast Track initiative. As of the end of Q1, self-checkout was available in over 8,000 stores, and Owen said customer adoption rates have been strong.

“As a result of the success of self-checkout and popularity with customers, we have recently launched a pilot of stores that are entirely self-checkout,” he noted. “While our associates will remain available to assist customers if needed in these stores, we believe this 100% self-checkout option could further enhance the convenience proposition, while enabling our associates to dedicate even more time to serving customers. We plan to ultimately test this layout in about 200 stores throughout 2022.


“Looking ahead,” Owen added. “we are on track to expand our self-checkout offering to a total of up to 11,000 stores by the end of the year, as we look to further extend our position as an innovative leader in small-box discount retail.”


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