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Dollar General New Store Concept Adds New Leaf to Growth Story

Better pricing, private label offerings, effective inventory management, and merchandise initiatives have helped Dollar General Corporation DG in carving out a niche in the retail space. The company has been focusing on both consumables and non-consumables categories to drive traffic. Undeniably, the company’s differentiated product range resonates well with customers’ spending habits. To engage further with customers, the company announced a new retail store concept “popshelf.”

Dollar General’s executive vice president and chief merchandising officer, Emily Taylor said, “Building on the success, learnings and insights from Dollar General’s non-consumables initiative (NCI), we are excited to unveil popshelf following our work to research, create and define the brand and merchandising offerings." The company’s first two “popshelf” locations will be opened near Nashville, TN this fall.

This Goodlettsville, TN-based company plans to open approximately 30 locations by the end of fiscal 2021. These stores will offer on-trend seasonal and home décor, health and beauty, home cleaning supplies, party goods, entertaining needs and much more. The company informed that approximately 95% of items will be priced at $5 or less. The stores will initially target female customers located in diverse suburban communities with total household annual income between $50,000 and $125,000.

Industry experts believe that with economy on slow track even affluent customers are looking for price and value, and “popshelf” may emerge as a likely go-to destination for shopping. Dollar General highlighted that each store — of size 9,000 square feet — will offer continually-refreshed merchandise, seasonal specials and limited-time items.

Few Aspects to Know

Amid the pandemic, people have been showing a preference for discount stores for essentials and other household needs. No wonder, the strategy to sell products at compelling prices has helped industry players expand customer base. Thanks to its status of “essential retailer,” Dollar General has been benefiting from coronavirus-induced spike in demand.

The company’s same-store sales surged 18.8% year over year during the second quarter. This followed an increase of 21.7% in the preceding quarter. Notably, consumables, Seasonal, Apparel and Home categories favorably impacted the metric. Since the end of the second quarter, it has continued to witness “elevated demand” across its stores. Consequently, from Aug 1 through Aug 25, same-store sales have risen roughly 15% compared with prior-year period.

Dollar General has been making prudent investments related to store infrastructure, openings, expansions, remodels and relocations, and construction and improvement of distribution centers to drive revenues. The company incurred capital expenditures of $424 million during the 26-week period ended on Jul 31. For fiscal 2020, it anticipates capital expenditures to be $1-$1.1 billion. The company intends to open 1,000 new stores, remodel 1,670 stores, and relocate 110 stores in fiscal 2020.

Wrapping up

Cumulatively, aforementioned factors have been aiding Dollar General’s performance, which shares space with Target TGT, Costco COST and Dollar Tree DLTR. Notably, shares of this Zacks Rank #3 (Hold) company have advanced 41.4% so far in the year compared with the industry’s rally of 15.7%. The stock has fared even better than the Retail – Wholesale sector and the S&P 500 index that have risen 39.8% and 9.8% in the said period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Target Corporation (TGT): Free Stock Analysis Report
 
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