Dollar General thinks physical-first
Following a record fourth quarter, Dollar General in 2018 will rely on a familiar formula of new stores and increased same store sales to drive growth while new digital initiatives could provide a bonus.
The addition of a stunning 1,315 stores throughout 2017 and a fourth quarter same store sales increase of 3.3% propelled the company to a record fourth quarter and its 28th consecutive year of same store sales growth.
Total sales during the 13 week fourth quarter ended Feb. 2 increased 2% to $6 billion compared to $6 billion during the 14 week fourth quarter the prior year. An increase in average transaction amount offset by a slight decline in customer traffic impacted the reported 3.3% increase in same store sales. Profits during the period, aided by tax reform, increased 76.5% to $2.63 from $1.49.
Gross margins expanded to 32.1% of sales from 31.6% the prior fourth quarter due to higher initial markups, less shrink and fewer markdowns offset by a higher proportion of sales attributable to lower margin consumable categories.
The company’s expenses also increased to 21.9% of sales from 20.3% due to higher occupancy costs and labor as Dollar General invested in store manager compensation and bonus pay.
“As we move into 2018, we continue to build momentum behind initiatives that we believe will further enhance our strong value and convenience proposition with consumers and drive long-term success," said Dollar General CEO Todd Vasos.
The company’s success in 2018 will again depend on physical expansion. Dollar General said it expect to open approximately 900 new stores, remodel 1,000 stores and relocate 100 stores this year.
Meanwhile, the company continues to invest in digital initiatives to complement a physical presence that now spans 14,534 locations.
Last year the company named former banking executive Rob Scruggs as Chief Digital and Customer Engagement Officer to fill a newly created position in which he will lead the strategy for customer engagement including digital experience and tools.
Scruggs' appointment followed the addition in June of Carman Wenkoff as Chief Information Officer. Like Scruggs, Wenkoff brought a non-traditional retail background to Dollar General, having previously served as CIO and Chief Digital Officer at Subway. He filled a position previously held by Ryan Boone.
“We continue to focus on enhancing our digital presence and meeting our customers when and how they decide to engage with us,” Vasos said at the time. “I’m confident with Carman’s vision we will continue to strengthen these efforts as well as leveraging technology to improve our processes, lower costs and drive a better customer experience.”
Dollar General currently operates more than 14,000 stores in 44 states and was the cover story in the May/June edition of Retail Leader.