Dollar General continued its discount channel dominance, posting net sales of USD6.6 billion, an 8.5% increase for the fourth quarter ended Feb. 1 while fourth-quarter comps increased 4%, the highest quarterly comps of 2018. Net sales for the 2018 fiscal year were up 9.2% to USD25.6 billion, compared to the previous year, and closed out 2018 with total net sale comps of 3.2%.

In 2018, Dollar General opened 900 and closed 64 stores, for a total store count of 15,730 and a 5.5% growth in selling square footage. The retailer also constructed two new distribution centers: The Longview, Texas, center began shipping in January 2019, and the Amsterdam, N.Y., center is expected to begin shipping toward the back half of 2019. In 2019, Dollar General is planning to open 975 stores, an 8% increase in new store construction from the previous year. It is also planning to remodel 1,000 mature stores and relocate 100 stores in the 2019 fiscal year.

Real Estate and Category Expansion Slated to Drive Continued Growth

Of the 1,000 planned remodels for FY 2019, 500 are anticipated to be in the Dollar General Traditional Plus (DGTP) format, 40% of which will include fresh produce. Stores remodeled in the DGTP format include approximately 34 cooler doors and deliver an average comp lift of 10%-15%; in comparison, traditional store remodels have approximately 22 cooler doors and deliver a comp lift in the 4%-5% range.

The retailer is expected to expand its DGX format by approximately 10 stores, bringing the format total up to 13 stores by 2019 fiscal year end. DGX stores are tailored toward younger urban shoppers and are significantly smaller, with a footprint around half the size of a traditional Dollar General.

Two New Initiatives Look to Boost Sales and Operating Efficiencies

As it looks to grow its customer and store reach, Dollar General is doubling down on two key strategic initiatives in Q1 and beyond:

  • DG Fresh: This initiative, which launched toward the end of FY 2018, aims to reduce produce costs for shoppers and create higher category in-stocks. In the Q4 earnings call, CEO Todd Vasos said the initiative will allow the retailer to “control [its] own destiny in fresh foods” once it completes building four additional cold storage distribution centers. Fresh produce is currently available in 300 northeast Dollar General stores, distributed from the retailer’s first cold storage facility in Pottsville, Pa. DG Fresh inventory is slated to be available in 5,000 stores by the end of fiscal 2019 and across the retailer’s more than 15,000 stores within two to three years.
  • Fast Track: Dollar General’s “Fast Track” initiative looks to increase labor productivity and create a more autonomous operating model for the retailer. Implementing fundamental changes to the existing and new-construction distribution centers, Fast Track seeks to provide one-touch unloading in stores, simplifying the shelf-stocking process and creating a better in-stock experience for shoppers. Fast Track will also make self-checkout a reality as the retailer develops its frictionless capabilities, which will include its first buy online, pick up in store pilot test.

In addition to these new initiatives, the retailer plans to continue its private label product portfolio. Making gains in better-for-you, Dollar General is expanding the availability of both branded and private label offerings, specifically with its Good and Smart private label line. By the end of fiscal 2019, Dollar General will make better-for-you products available in 6,000 stores, up from the current 2,500 stores. The retailer has also announced it will roll out a new private label beauty brand, called Believe, along with a yet-to-be-named private label baby care line.

Kantar Consulting Point of View

Dollar General’s Q4 and fiscal year 2018 success highlighted the retailer’s four core operating principles:

  • Driving profitable sales growth
  • Capturing growth opportunity through tactical store base and category expansions
  • Reinforcing its position as a low-cost operator by introducing its Fast Track initiative
  • Investing in its people, seeing its lowest manager turnover on record, and creating an estimated 8,000 jobs nationwide in 2019

The Q4 results and FY2019 plans point to three implications that suppliers should prepare for:

The store base and the stores themselves will become more robust: Anticipate expansion into western geographies as macro factors indicate job growth in the western United States, and identify regionally high-performing products and categories to assist in a geographically relevant product mix.

Efficiency and productivity will redefine supply-chain norms: Plan for greater supply-chain autonomy by offering Dollar General exclusive shelf-ready packaging as it embraces its Fast Track model.

On-shelf competition will become increasingly volatile with growing private label: Embrace quality-driven brand messaging and on-shelf merchandising as Dollar General looks to continue its private label portfolio inclusive of better-for-you, beauty, and baby care.

For more information, please contact:

Catherine Lang, Analyst
catherine.lang@kantarconsulting.com

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