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Dollar General to open 975 stores, remodel 1,000, this year

Dollar General isn’t backing down from its aggressive store opening and remodeling schedule.

In reporting its fourth quarter results on Thursday, the discounter said it plans to execute approximately 2,075 real estate projects in fiscal 2019, including 975 new store openings (up from 900 in 2018), 1,000 mature store remodels and 100 store relocations. The company estimates capital expenditures in the range of $775 million to $825 million, compared to $734 million last year.

Dollar General posted mixed results for its fourth quarter and also provided a fiscal 2019 profit outlook below analysts’ estimates amid increased spending to enhance its stores. Net income fell to $483.2 million for the quarter ended Feb. 2, from $712.2 million in the year-ago period, with profit pressured by an income tax expense.

The results includes a 4-cent negative impact from disaster-related expenses. Excluding items, the company earned $1.84 per share, missing analysts estimate of $1.88.

Net sales rose 8.5% to $6.65 billion, beating estimates of $6.61 billion. Same-store sales rose 4.0%, beating expectations. The sales gains was driven by increases in average transaction amount and customer traffic, both of which Dollar General credited to the early release of government SNAP assistance. Same-store sales growth saw increases in the consumables, seasonal, and home categories.

Neil Saunders, managing director of GlobalData Retail, said he was impressed by Dollar General’s ability to create a compelling and enhanced shopping experience.

“Admittedly, stores remain fairly basic, but they are well merchandised, have good stock levels, and categories like beauty and healthy food are being enhanced,” he said. “Our data shows that against some mainstream supermarkets, Dollar General is now rated higher for the quality of the general shopping experience – which is both a credit to its own initiatives and an indictment of the lack of investment from those other retailers.” (For more analysis, click here.)

For the full year, net sales increased 9.2% to $25.6 billion. Same-store sales increased 3.2%, driven by an increase in average transaction amount and growth in the consumables, seasonal, and home categories. Net income totaled $1.6 billion, compared to $1.5 billion for fiscal year 2017.

Dollar General plans to spend about $50 million this year to improve distribution of fresh and frozen food, shopping convenience and labor productivity.

“Looking ahead to 2019, we are excited to introduce two new transformational strategic initiatives, DG Fresh and Fast Track. DG Fresh, which is designed to enable self-distribution of fresh and frozen products, is already up and running in approximately 300 stores and Fast Track, which we believe will enhance in-store labor productivity and customer convenience, is launching soon,” said Todd Vasos, CEO, Dollar General. “Our team is very excited about the future, and I believe we remain well-positioned to continue delivering best-in-class value and convenience to our customers and creating long-term shareholder value.”

For fiscal 2019, Dollar General expects 2019 EPS of $6.30 to $6.50, below Street expectations of $6.64, and expects net sales growth of 7%, also below estimates. Same-store sales are projected to rise 2.5%, compared with estimates of a 2.6% increase.

As of Feb. 1, Dollar General operated 15,370 stores in 44 states.
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