Dive Brief:

• Dollar General on Thursday reported a 0.1% decline in same-store sales during the second quarter, as customer traffic declined and the discount chain absorbed the impact of lower inflation.
• Net sales grew 3.9% year over year to $9.8 billion, but operating profit skidded 24.2% to $692.3 million.
• The company reduced its expectations for sales and profitability for fiscal year 2023 to account for weakening sales and worsening shrink.

Dive Insight:

Dollar General saw its comparable-store sales worsen as Q2 progressed, with the metric rising in May before falling in June and July, CEO Jeff Owen said Thursday during an earnings call. The trend persisted into August, driven by lower average basket sizes as the retailer continues to lap the “significant price increases” that defined 2022, Owen said.

Owen added that Dollar General is dedicating resources to increasing its ability to stock perishable goods like fresh produce as the company works to return “to the position of operational excellence that we expect of ourselves.”

Dollar General expects to use its larger store format for about 80% of the 990 new stores it is on track to open in 2023, which will allow it to accommodate more coolers and add fresh produce to many locations, Owen said.

Owen added that the company offered produce in more than 4,400 stores as of the end of Q2 and expects to offer those goods to shoppers in over 5,000 locations by the end of the year. Dollar General believes it will be able to eventually bring produce to more than 10,000 locations by leveraging its DG Fresh self-distribution program.

Even as it dealt with difficult conditions in Q2, Dollar General saw its e-commerce business improve during the period. The company posted a more than 20% year-over-year increase in monthly active users on its digital properties and continues to benefit from the delivery tie-up with DoorDash it began in late 2021, according to Owen.

Owen said Dollar General is boosting investments in its workforce as it looks to improve its results. The company now expects to spend $150 million this year on incremental retail labor, up from the $100 million it had earlier projected.

Dollar General has also worked to improve the productivity and efficiency of its distribution centers. The company recently added large-scale automation gear to a facility in South Carolina, making the center the first in Dollar General’s portfolio to be equipped with the technology, according to Owen. The site will ultimately be able to automatically distribute more than half of the SKUs it provides to more than 1,000 locations, he said.

Dollar General has also taken steps to bring health and wellness products to more stores. The company now offers an expanded assortment of healthcare-related goods in almost 6,000 stores and plans to push that number to above 7,000 by the end of 2023, Owen said. The retailer also intends to allow customers to use supplemental benefits from health plans to purchase certain items in all of its stores by the conclusion of the year, he added.