If you’re not hearing an echo this quarter in the world of retail, you might not be tuned in. The key theme this quarter has been providing customer value, and that’s the sentiment Dollar General echoed through the entirety of its latest earnings report.
“We are getting back to the basics here at Dollar General,” Todd Vasos, Dollar General’s chief executive officer said during the retailer’s latest earnings call on Thursday (Dec. 7).
To do that, Vasos noted that as consumers continue to be constrained by inflation, the company’s approach aims to accommodate such circumstances. When it comes to stores, Dollar General plans to enhance the customer experience by increasing employee presence at the front end, particularly the checkout area. The retailer is also planning to focus its inventory management processes to improve on-shelf availability.
To boost store manager retention, Dollar General said it would allocate more resources to front-end activities and store-level inventory management. Dollar General said stabilizing the store manager position would positively impact the entire store, creating a better experience for customers and improving sales and shrink results.
Vasos also address the supply chain, noting that while significant progress has been made in recovering from distribution capacity constraints, Dollar General sees further opportunities for improvement. The chain plans to focus on ensuring on-time and in-full truck deliveries to simplify work for store teams, resulting in a better experience for both customers and associates.
Specifically, Dollar General plans to optimize inventory within distribution centers, implement productivity improvement initiatives and reduce the use of temporary external warehouse facilities. These actions are expected to lower distribution and transportation costs, improve on-time, in-full rates and boost sales.
In merchandising, Dollar General said it aims to offer more discounts to customers, especially given the current economic environment. The retailer said it is evaluating ways to attract shoppers, including highlighting private brands and launching promotions. SKU rationalization is a key focus, aiming to eliminate less productive items to reduce costs, increase inventory turns and drive higher sales of essential products.
“While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units,” Vasos said in a press release.
“We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience,” he added.
Vasos also shared the retailer’s plans for real estate growth in the coming year. The company aims to open 800 new stores, renovating 1,500 existing ones and relocating 85 stores. This represents a slowdown compared to recent years, a decision the company considers wise given the current business environment. Vasos also noted that there would be an emphasis in rural areas.
In terms of the third quarter financial results, Dollar General saw a 2.4% increase in net sales, reaching $9.7 billion, but faced a 1.3% decline in same-store sales, reflecting the total dollar amount of sales in the company’s stores operating for a year or more.
The operating profit experienced a significant drop of 41.1%, totaling $433.5 million, and diluted earnings per share (EPS) also decreased by 45.9%, settling at $1.26. The year-to-date cash flows from operations stood at $1.4 billion. The Board of Directors also announced a quarterly cash dividend of $0.59 per share.
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