Dollar General's at ease with living off the crumbs of Wal-Mart. The fast-growing retailer commands a chain of more than 10,000 discount stores in about 40 states, primarily in the southern and eastern US, the Midwest, and the Southwest. (In 2011 Dollar General entered three new states, its first since 2006.) Offering mostly basic household products, such as cleaning supplies and health and beauty aids, it also peddles seasonal items, apparel, and, increasingly, food. Dollar General typically targets low-, middle-, and fixed-income shoppers. The company's no-frills stores are located in small towns that are off the radar of giant discounters. Some 25% of its merchandise is priced at $1 or less.
Sales & Marketing
Because Dollar General's customers typically live in small towns (fewer than 20,000 people), the company doesn't advertise. It only sends out direct mailings to announce new stores. Dollar General caters to customers who find shopping at its small-box stores (typically 7,200 sq. ft.) easier and quicker than at super-sized competitors such as Wal-Mart (which are often much farther away). However, as Wal-Mart grows its retail network and shifts gears to focus on smaller stores -- a move the behemoth made in 2011 -- its presence is being felt in more of Dollar General's markets.
Dollar General's strategy of catering to the value conscious is paying off big, both during and after the recession. The company's fiscal 2012 (ends January) sales increased more than 13%, with same-store sales up 6% vs. the prior year. Profitability increased as well, with net income up 22% over the same period. While more shoppers passed through its doors and spent more while there in fiscal 2012, the big draw was food. Indeed, food drove 85% of the total increase in sales for the year. The addition of food has helped push the chain's net sales per square foot up by about 30% over the past five years.
Some 625 new stores are slated to open during fiscal 2013, including the fast-growing discount retailer's first stores in the vast California market. Indeed, Dollar General plans to open about 50 stores in the Golden State this year. Many of the new locations will be Dollar General Market (DGM) stores, which offer an expanded selection of groceries and perishables, including fresh dairy products, produce, and meats. Currently, there are more than 70 DGM stores in about 10 states. Another 40 are planned in 2012 with a focus on food deserts -- areas not served by supermarkets or nearly grocers. Ultimately, the company believes that the US can support more than twice the number of stores currently in operation. CEO Rick Dreiling has focused on developing the chain's private-label business and tinkering with its pricing and merchandising strategies. Indeed, since 2007 private-label goods, which carry a higher profit margin for retailers, have grown to account for about 22% of consumables sales, up from about 17% in 2007. Dollar General owns several trademarks, including Dollar General, Dollar General Market, Clover Valley, DG, DG Guarantee, Smart & Simple, trueliving, and Sweet Smiles. It also boasts a few licenses, such as Bobbie Brooks and Fisher Price for clothing and Rexall for health and beauty aids.
A limited partnership controlled by KKR named Buck Holdings owns more than 50% of Dollar General's shares. – less