Dollar General Takes Aim at Walmart, Beefs Up Private-Label Brands and Perishables

During challenging economic times, Dollar General continues to resonate with customers who are looking for value and convenience.

During its latest earnings report Thursday (March 16), the discount retailer credited its continued focus on its customers, and remains optimistic about its ability to meet their changing needs and to continue grow profitably.

The retailer, however, noted that one of its biggest challenges was and continues to be the financial strain its customers are dealing with, especially as food inflation and other factors continue to lead to increased reliance on savings, credit cards and borrowing. However, Dollar General has responded by focusing on its dollar price point and private brands, which have helped to drive sales even in this difficult environment.

“We’re seeing shopping behaviors indicative of this environment,” Jeff Owen, chief executive officer, said during the call. “We continue to see customers shift spending to more affordable options, including our private brands, which represent more than 20% of our total sales within consumables. Private brand growth, both in absolute dollars and penetration, was the highest in the fourth quarter.”

The company plans to increase its private brand offerings across various categories and will be offering fresh produce across 5,000 of its stores by the end of 2023 and plans to increase that footprint to 10,000 in the coming years.

The move comes at a time when inflation continues to impact spending, and consumers are looking for cheaper alternatives to cope with the impact. The combination of the two has led to an increase in demand for private-label goods, and major brands and retailers, including Colgate-Palmolive, Coca-Cola, Albertsons, and Walmart, can all testify to the trend in recent months.

Walmart, for one, which has been pushing its private-label goods to consumers while trying to combat ongoing price-increase attempts by suppliers, has been winning this battle. The retailer has vowed to keep its prices on its private-label products down as it battles inflation. In fact, Walmart CEO Doug McMillon said the retailer is “not participating in a recession if there is one.”

That said, with a demand for private labels, Dollar General is primed to take up more space in the private-label sector.

“We believe we will be increasingly important to them in the year ahead,” Owen said in regards to its customer base. “Income brackets above our core customers [are] shopping with us, underscoring our belief that our value and convenience proposition resonates with a broad spectrum of customers.”

Looking ahead, Dollar General is investing about $100 million in stores, primarily consisting of incremental labor hours to support store standards to enhance both the employee and customer experience, and will be expanding internationally.

On the call, Dollar General discussed its plans to have around 20 stores serving underserved communities in northern Mexico by the end of 2023. Additionally, the company plans to execute around 3,170 real estate projects in the U.S. in 2023, including 1,050 new stores, 2,000 remodels, and 120 store relocations. The endeavor is the retailer’s largest real estate project executed in one year.

Furthermore, the company is also looking to beef up its digital initiatives and offer its customers enhanced convenience and access. Dollar General plans to continue building engagement across its digital properties, including its mobile app, which had 4.5 million monthly active users at the end of 2022, and extend its financial service offerings, which includes a cash-back option for consumers. Dollar General partners with Ibotta, a cash-back rewards technology provider, to give shoppers rewards on thousands of items at more than 18,800 of its stores across 47 states.

Additionally, its partnership with DoorDash, which offers same-day delivery in an hour or less, has also been noted to contribute to incremental sales growth and profitability for the company.

Dollar General finished the quarter with a net income of $659.1 million, up 10.3% over the last year, and posted revenue of $10.2 billion in the three months ended Feb 3.