A sign inside a Chicago Dollar General store.
Jim Young | Reuters
Dollar General is doubling down on stone, building larger stores and expanding Popshelf, a new chain for higher-income suburban customers.
On Thursday, the discounter set aggressive plans for the fiscal year that required the company to open 1,050 stores, remodel 1,750 locations and move another 100.
As you build new stores, shoppers will see larger sales floors and more merchandise. They will also notice several brands for Popshelf, which the retailer debuted in the fall. The company tests both new locations and uses the brand to create a store within a store.
Sales of basic foodstuffs and household essentials contributed to the increase in General Dollar sales throughout the pandemic, as consumers cooked more at home and watched their budgets in a time of economic uncertainty. Its sales at the same store increased by 16.3% in the fiscal year.
However, in recent months, pandemic beneficiaries’ shares – including the General Dollar – have declined as investors bet that Americans will direct their dollars to the tables and travel once they are vaccinated. In a winning call on Thursday, dollar general Todd Vasos argued why investors should continue to bet on the company. He said the retailer can increase profits by increasing its footprint, by selling more non-consumable items that have higher margins than food and attracting a wider range of customers.
Chief Operating Officer Jeff Owen said the retailer estimates it could add up to 17,000 stores across the country – a move that would roughly double its footprint.
“Overall, our real estate pipeline remains robust and we are excited about new opportunities for significant future stores,” he said.
As Dollar General adds, remodels and moves stores, Owen said, it will increase the square footage of its sales floor to make more room for chillers and fresh meat, a larger assortment of health and beauty products, and additional payment tapes.
Vasos said Dollar General tested larger store formats in 2020 and found that they outperformed the rest of the chain with higher sales. It already has a few larger stores with a wider range of food and general merchandise.
Dollar General also plans to build at 50 Popshelf stores by the end of the fiscal year, more than the original target of 30, Owen said.
Popshelf Store
Source: Popshelf
The retailer opened the first two Popshelf stores in the fall near Nashville, Tennessee. Popshelf sells home decor, beauty items, cleaning supplies and party items, almost all items costing $ 5 or less. Its target customer has an annual household income of between $ 50,000 and $ 125,000 – higher than the annual household income of $ 35,000 to $ 40,000 of a typical Dollar General customer, according to the company.
Owen said Popshelf stores offer “a fun, accessible and differentiated treasure hunt experience, delivered through continuously refreshed merchandise.” He said the company wants to expand from the current 5 stores faster than planned because of the results it has seen.
Dollar General will launch a pilot that combines the eponymous brand with Popshelf, he said. At 25 stores, customers will see signs for both labels at the entrance. Inside, Popshelf will be visibly displayed in the center as a store-in-store, he said.
The tests will focus on areas where customer demographics are somewhere between Dollar General and Popshelf – with a household income rate of $ 50,000 to $ 75,000, Vasos said.
“If it works – and we think it will work – there could be some more that we will do in 2022 and many more as we continue to move forward,” he said.
The company’s shares have risen about 21% in the past year since Wednesday’s close. They fell by less than 5% on Thursday afternoon. Earlier, the company posted gains in the fourth quarter, which did not meet estimates, and projected sales in the same store will fall from 4% to 6% in the next fiscal year, compared to unusually high levels of sales caused by the pandemic. Looking at a two-year period, Dollar General forecasts imply annual gains of 10% to 12% of sales in the same store.