Dollar General accelerates expansion, again

A record 700 new Dollar General stores are slated to open in 2014, the company announced Thursday morning after reporting third-quarter results and tempering its full-year sales forecast.

Same-stores sales at Dollar General increased 4.4% and total sales increased 10.5% to $4.38 billion during the third quarter ended Nov. 1. Profits increase 14% to $237 million from $208 million and earnings per share increased 19% to 74 cents from 62 cents.

"Dollar General once again delivered strong results in the third quarter, even in the face of an ongoing challenging consumer environment," said Rick Dreiling, Dollar General's chairman and CEO. "Our merchandising initiatives have continued to be successful in driving traffic and sales. We had solid financial performance across key metrics, including better than anticipated gross margin performance and solid SG&A leverage. As a result, we are now forecasting full year adjusted earnings per share of $3.18 to $3.22.”

The company’s revised profit forecast essentially takes the low end of earlier guidance of $3.15 to $3.22 out of play. Conversely, the company reduced the upper end of its full year sales forecast by indicating it expects full year sales to increase between 10% and 10.5% versus an earlier forecast of 10% to 11%. In addition, the company expects full year same store sales to range from 4% to 4.5% after earlier guidance called for a gain in the 4% to 5% range.

The third-quarter comp increase was driven by a desirable blend of increases in both customer traffic and average transaction size. The company said consumables sales continued to increase at a higher rate than non-consumables with the most significant growth due to strong sales of tobacco products, perishables and candy and snacks. Same-store sales growth was said to be solid in seasonal and home products, while apparel sales were affected by a planned merchandising initiative that reduced apparel inventories in more than 4,000 stores during the 2013 third quarter.

"Looking ahead, while we are cautious on the current macroeconomic trends, we remain excited about the long-term growth prospects for our business,” Dreiling said. “Dollar General is committed to delivering everyday low prices and convenience for our customers, which has proven to be a winning formula given our long track record of success.”

To maintain its momentum in 2014, Dollar General is relying on a familiar strategy of new store expansion and remodeling and relocation activity. During the first nine months of this year, the company opened 577 new stores and remodeled or relocated 534 units as part of a full-year plan to open approximately 650 new stores and remodel or relocate another 550 locations. The company said it operated 11,061 stores as of Nov. 1. As if those figure weren’t large enough, in 2014 Dollar General plans to open 700 new stores and remodel or relocate 525 stores resulting in square footage growth of 6% to 7%.