Dollar General Corp. (DG): This Dollar Store is Growing Fast

Dollar stores are one of the fastest growing segments of the U.S. retail industry. If we include the top three players, they combine to have 21,311 stores, which is more than the store count of many leading U.S. brands.

Dollar General Corp. (NYSE:DG) recently opened its 10,000^th store in Merced, CA, and is looking ahead with its aggressive store expansion strategy. It reported its first quarter results, and its total sales increased by 8.5% despite the tough weather and macro conditions. Its Phase 5 merchandising initiative and tobacco rollout across its stores is going to drive sales growth this year. Now, let’s discuss its initiatives for growth in detail.

Store expansion with new format stores will drive sales growth

Dollar General has indicated that it will increase its store base with 636 new stores and 550 store remodels and re-locations in the fiscal year 2013. These store openings and the remodeling process will lead to 7% increase in the selling space this fiscal year. It will open 50 more stores in California after the 50 stores expected to be opened by the end of last year.

It will also open 20 Dollar General Plus stores and 40 Dollar General Market stores this year. DG Plus stores are larger than traditional stores and will keep more coolers and freezers in stores. These stores will help it to keep more fresh products and meat in stock.

Phase 5 initiatives of merchandise assortment will drive comparable sales

Dollar General Corp. (NYSE:DG) is offering a wide range of products including major national brands and some private label products of the company. In its Phase 5 merchandising initiative, it has focused on putting in the most productive planograms with the right SKU set.

It has increased inventory level in the high margin categories like health and beauty aids. It will add SKUs in under-penetrated categories like auto, hardware, laundry and apparel. It will expand its Phase 5 initiative to 4200 legacy stores, which are expected to drive comparable sales growth this year.

Tobacco rollout to all stores will drive comparable sales

It has tested tobacco in Nevada and Florida markets and results are positive with 33% more sales than expected. In the tested markets, comparable sales have increased by almost 100 basis points due to tobacco addition. It has plans to make tobacco available at all its stores by the end of the second quarter.