Dive Brief:
- Dollar General expects to self-distribute frozen and refrigerated products chainwide through its DG Fresh initiative by the end of the second quarter of 2021, ahead of its earlier goal of expanding the program to all of its stores by the end of the fiscal year, Chief Operating Officer Jeff Owen said Thursday during the retailer's first-quarter earnings call.
- The discount chain saw comparable store sales decline 4.6% during Q1 compared with the same period in 2020, but were up 17.1% compared with their level during the first quarter of 2019. Net sales decreased 0.6% in Q1 to $8.4 billion on a year-over-year basis.
- Dollar General expects sales improvements during the second half of 2021 as it continues to open new stores at a brisk clip.
Dive Insight:
Dollar General appears to be in a strong position even as the powerful sales bump it saw because of the pandemic fades away.
The discounter saw year-over-year same-store sales decline about 7% between the end of Q1 and May 23, but that decline is less than the 11.2% slide in comp sales it recorded in March, CEO Todd Vasos said during the earnings call. Meanwhile, the two-year same-stores sales comparison the retailer is using to gauge its performance showed greater improvement in Q1, which ended April 30, than it did during the fourth quarter, Vasos said.
In May 2020, when the nation was engulfed by the COVID-19 crisis, Dollar General logged a 21.5% year-over-year sales increase.
Dollar General anticipates a same-store sales decline of 3% to 5% on a year-over-year basis in 2021, but expects sales to be up 11% to 13% this year compared with 2019, Chief Financial Officer John Garratt said during the call. Net sales are expected to be essentially flat this year, Garratt said.
Owen said Dollar General has started seeing visits to its stores increase, a trend he said can be expected to bring average basket sizes down. Visits to Dollar General rose 5% in April compared with the same month in 2020, according to data released on Monday by Placer.ai.
Dollar General is expanding its store fleet at a robust pace as it looks to reach more shoppers. The retailer opened 260 new stores and remodeled 543 other locations during Q1, and is on schedule to debut 1,050 locations and upgrade 1,750 existing stores this year, Owen said.
The retailer now offers produce in more than 1,300 stores and plans to make it available in 1,000 additional stores in 2021, up from a previous target of 700 stores, according to Owen. The expansion of its grocer assortment and corresponding self-distribution comes as competitor Dollar Tree has begun rolling out fresh and frozen items in its stores.
Dollar General is also working to quickly scale up its new Popshelf format, which features non-consumable products priced mostly at $5 or below. Dollar General opened three Popshelf stores based on the new design during Q1, bringing its total to eight, and hopes to push the number of stores based on the new design to 50 by the end of the year, Owen said. In addition, Dollar General plans to add smaller versions of the the Popshelf concept to as many 25 of its larger-format Dollar General Market stores in 2021.
In an indication of the enormous room for growth Dollar General's management team sees, Owen said Dollar General believes the United States could support 3,000 Popshelf stores. The company, which currently runs over 17,000 stores, also believes the market could sustain 13,000 more of its traditional stores and 1,000 more locations based on its DGX urban convenience-store format, which launched in 2017, Owen said.
Dollar General is also doubling down on self-checkout. The service was available at 3,400 stores at the end of Q1, more than twice the number of locations where the automated systems were in place at the conclusion of 2020, according to Owen.
