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Dollar General (DG) Poised to Tap Rising Demand Amid COVID-19

Discount stores dealing in essentials and other household needs have emerged as favorite shopping destinations for customers amid the pandemic. Evidently, Dollar General Corporation DG has been benefiting from coronavirus-induced spike in demand, courtesy of its better pricing, private label offerings, effective inventory management, and merchandise initiatives. Certainly, the company’s differentiated product range resonates well with customers’ spending habits.

Few Factors to Know

In order to drive traffic, this Goodlettsville, TN-based company has been focusing on both consumables and non-consumables categories. The company has also been offering better-for-you products at affordable prices. To engage further with customers, the company introduced a new retail store concept “popshelf.” Additionally, it has been expanding cooler facilities to enhance the sale of perishable items.

During the first three quarters of fiscal 2020, the company installed approximately 49,000 cooler doors across its store base, and plans to install roughly more than 60,000 cooler doors in the year. Notably, the company has been expanding DG GO! mobile checkout. Moreover, the company’s DG Pickup initiative, which is buy online and pickup in store, is available across its stores.

Management has introduced two transformational strategic initiatives — DG Fresh, designed to enable self-distribution of fresh and frozen products, and Fast Track, an in-store labor productivity and customer convenience initiative. By the end of fiscal 2020, the company plans to operate 10 DG Fresh distribution facilities, which will serve roughly 14,000 stores.

Additionally, the non-consumable initiative offering was available across 5,200 stores at the end of the third quarter. The company plans to expand the offering to more than 5,600 stores by the end of fiscal 2020.

Decent Same-Store Sales Run

Dollar General’s impressive same-store sales growth story continued in fiscal 2020. After increasing 21.7% and 18.8% in the first and second quarters, same-store sales rose 12.2% year over year during the third quarter, primarily owing to rise in average transaction amount. Consumables, Seasonal, Apparel and Home categories favorably impacted the metric. Among these categories, home products registered the highest increase.

Also, consumer behavior driven by the pandemic significantly benefited net sales and same-store sales. Since the end of the third quarter, the company has been witnessing elevated demand across its stores. Hence, same-store sales rose around 14% from Oct 31 through Dec 1, 2020.

Bottom Line

Cumulatively, aforementioned factors have been aiding Dollar General’s performance, which shares space with Target TGT, Costco COST and Dollar Tree DLTR. We note that shares of this Zacks Rank #3 (Hold) company have advanced 34.8% in a year compared with the industry’s growth of 21.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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