Dollar General to open 1,050 stores this year; expand two new formats
Dollar General reported strong sales in its fourth quarter and revealed aggressive expansion plans that include opening larger stores and expanding its more upscale Popshelf concept.
The discounter's plans for its current fiscal year include opening 1,050 stores, remodeling 1,750 sites and relocating 100 stores. Included in the expansion is the rollout of two larger-sized formats, both of which it began testing last year. The first has approximately 8,500 sq. ft. of selling space compared to about 7,300 sq. ft. in a traditional Dollar General. The second is even larger with approximately 9,500 sq. ft. of selling space. It will be deployed opportunistically across new store relocation and remodel opportunities, the company said.
Dollar General's plans also call for the expansion of its upscale store concept, Popshelf, which debuted in 2020. The format combines continually updated merchandise, a differentiated in-store experience and value, with about 95% of the items priced at $5 or less.
"We are now targeting to have a total of up to 50 Popshelf stores opened by year-end compared to our previous goal of about 30 total locations," Dollar General COO Jeff Owen told analysts on the company's earnings call. "In addition, we also plan to incorporate this concept in up to 25 Dollar General stores in 2021."
The in-store Popshelf concept will be prominently positioned in the center of the store, which will display both Dollar General and Popshelf branding on exterior entrances to build and maximize awareness, Owen said.
Looking further out, Dollar General estimates it could add a total of as many as 17,000 stores across the country, which would roughly double its current footprint. The company estimates there are now approximately 13,000 additional small-box store opportunities in the Continental United States that are are available for a Dollar General store, compared to its prior estimate of nearly 12,000 opportunities.
In addition, Popshelf could add approximately 3,000 new locations, and there are about 1,000 opportunities available for its 8,500-sq.ft. format.
"When taken together, we estimate there are a total of approximately 17,000 new store opportunities available across our format types which we believe represents a long runway for new unit growth," Owen said.
Overall, Dollar General's real estate pipeline remains robust," Owen said, "and we are excited about the significant new store opportunities ahead."
Dollar General’s net income rose 24.75% $642.7 million, or $2.62 per share, in the quarter ended Jan. 29, up from $535.4 million, or $2.10 per share, last year. Analysts had expected earnings per share of $2.72.
Net sales increased 17.6% to $8.30 billion. Same-store sales rose a better-than-expected 12.7%, driven by an increase in average transaction amount, partially offset by a decline in customer traffic. Same-store sales increased in each of the consumables, seasonal, home products and apparel categories, with the largest increase in home products. The retailer cited consumer behavior driven by COVID-19 as having a significant positive effect on net sales and same-store sales during the quarter (and the full year).
Dollar General noted that same-store sales were down in recent weeks as the nation’s economy starts to slowly re-open from the pandemic. It said same-store sales from February 27 to March 16 were down 16% from the same period last year.
For the full year, net sales increased 21.6% to $33.7 billion. Net income increased 55% to $2.7 billion.
“Our full-year results were highlighted by significant growth on both the top and bottom lines, including a net sales increase of 28.1% in our non-consumables business,” said Todd Vasos, CEO.
Vasos added that the chain completed 2,780 real estate projects last year, including the opening of its 17,000th location and launch of Popshelf, while delivering its 31st consecutive year of same-store sales growth.
“We continue to operate from a position of strength, and are excited about our plans for 2021 to continue delivering value and convenience for our customers, along with long-term sustainable growth and value for our shareholders,” he said.
Dollar General said it remain cautious in its 2021 sales outlook “given the significant uncertainty that still exists.” Its guidance calls 2021 net sales in the range of flat to a 2% decline, a same-store sales decline of 4% to 6% and EPS in the range of $8.80 to $9.50.
The company also hiked its quarterly dividend by 17% and set a new $2 billion stock buyback program.