COVID-19 Can't Slow Dollar General's Expansion

COVID-19 Can't Slow Dollar General's Expansion
The addition of frozen and refrigerated coolers are a key element of Dollar General's remodeling efforts that will involve 1,500 stores this year.

Undeterred by COVID-19, Dollar General managed to open 250 stores during a first quarter period that also saw same store sales surge 21.7%.

Dollar General said its first quarter sales increased 27.6% to $8.4 billion with the growth predictably driven by a number of COVID-19 related factors, the company’s ongoing momentum and increased exposure to food and consumable categories.

The overall sales increase was driven by the addition of 250 new stores during the period ended May 1, combined with a 21.7% same stores sales increase. The comp increase was driven by increases in average transaction size and customer traffic with gains evident in each of the consumables, seasonal, home products and apparel categories. Of note, the company reported that the largest percentage increase came in the home products category.

The sales momentum has continued throughout May, with Dollar General disclosing that since the end of the quarter on May 1 through May 26 same store sales increased 22%.

“These are certainly unprecedented times, and our hearts go out to everyone who has been affected by the COVID-19 pandemic,” said Todd Vasos, Dollar General’s CEO. “We are very grateful for those serving on the front lines, and particularly our store associates, distribution center employees and private fleet drivers for their incredible efforts. In the midst of a very challenging operating environment, our team members have been tirelessly committed to fulfilling the Company’s mission of ‘Serving Others,’ and we could not be more proud of how they have responded to the needs of our communities.”

As an essential retailer, and operator of 16,500 stores, Vasos added that “we believe our unique brick-and-mortar footprint positions us well to continue delivering value and convenience for our customers, particularly at a time when they need us most.”

Strong consumer demand enabled the company to expand gross margins to 30.7% of sales from 30.2% as it experienced reduced markdowns and higher initial markups. Those benefits were offset somewhat by higher transportation costs and expenses such as the payment of $60 million in appreciation bonuses.

Meanwhile, the strong sales volumes gave the company great expense leverage as selling, general and administrative costs as a percent of sales declined to 20.5% from 22.5%. The combination of increased margins and reduced expenses allowed Dollar General to increase profitability fairly dramatically.

The company said operating profits increased 69.2% to $866.8 billion, net income increased 68.8% to $650 million and earnings per share increased 73% to $2.56 compared to $1.48 in the first quarter the prior year.

Perhaps more impressive than the financial results which benefited tremendously from COVID-19 driven demand, is the fact that Dollar General’s aggressive store expansion plans were not derailed by the pandemic. The company managed to open 250 new stores and remodel 481 other stores during the period and indicated its full year growth targets are intact.

The company’s full year plan calls for 1,000 new stores and 1,500 remodels which typically involve a major expansion of frozen and refrigerated capacity.

Goodlettsville, Tenn.-based Dollar General operates 16,278 stores in 44 states, and employs approximately 140,000 associates. The company is No. 16 on The PG 100, Progressive Grocer's 2020 list of the top food retailers in North America

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