As Retailers Think Smaller and Leaner, Dollar General Is Going Bigger on Store Formats

While other retailers are focusing on going smaller and leaner, Dollar General is looking to go bigger.

“I am very, very pleased with the new store returns we’re seeing, also the pipeline that we have. And our format innovation really is what’s allowed us to really cater to communities,” said Jeff Owen, CEO at Dollar General, on Thursday (Aug. 31) during the company’s second-quarter earnings call. “This larger store, we like the productivity we’re seeing.”

In this context, Owen emphasized the company’s continuous investments, considering the improved value proposition in the present range of store offerings due to price adjustments. Owen also acknowledged the advancements in establishing a more stable supply chain and refining inventory management.

Among the factors that have contributed to the discount retailer’s reinforcement of its value proposition is its recent addition, DG Cash Back. Unveiled in July, this initiative, in collaboration with rewards provider Ibotta, enables shoppers to accumulate cash back in their DG Wallets.

“As customers continue to seek new ways to stretch their budgets, we’re excited to introduce DG Cash Back on hundreds of Dollar General items to help them achieve that goal,” Dollar General Chief Marketing Officer Chad Fox said at the time of the launch. “This is a strong addition to our financial offerings and services as we continue to expand incremental benefits for our customers.”

Under this program, customers have the option to enroll on the Dollar General website or through the DG mobile app. Afterward, they can incorporate available offers from the “Deals”  page into their profile and subsequently use their program earnings for forthcoming in-store transactions.

Read more: Dollar General Offers Cash Back as Consumers Hunt Low Prices

Looking Ahead

For 2023, Dollar General’s plan revolves around the execution of 3,110 real estate projects in the United States. This encompasses the establishment of 990 new stores, the renovation of 2,000 existing locations, and the relocation of 120 stores.

The company anticipates that over 80% of its new stores for the year will fall within its larger store formats, a move that has been noted to consistently drive higher sales productivity per square foot when compared to the traditional store model. Furthermore, almost all relocations are projected to be in these larger formats as well.

As for the remodels planned, approximately 80% of them are intended to adopt the Dollar General Traditional Plus format, which has more coolers and includes fresh produce sections in many stores.

Nevertheless, despite these observations, the discount retailer has opted to revise its sales projections for the year to account for the more subdued sales patterns.

Dollar General pointed out that the degradation of the shrink environment continues to affect its operations. An additional estimated shrink headwind of approximately $100 million has arisen since the last quarter’s report.

While this pressure is expected to endure over the course of the year, Dollar General said it is taking steps to alleviate these effects. These initiatives include the reduction of inventory levels, enhancement of operational procedures, utilization of advanced tools and technology, and improvements in store-level execution.

Dollar General by the Numbers

In the fiscal 2023 second quarter, Dollar General witnessed a 3.9% rise in net sales, reaching $9.8 billion. However, same-store sales experienced a slight decrease of 0.1%. The operating profit also saw a decline of 24.2%, amounting to $692.3 million. Diluted earnings per share followed suit with a decrease of 28.5%, coming down to $2.13. The year-to-date cash flows from operations stood at $726.7 million.