Dollar General Eyes California

GOODLETTSVILLE, Tenn. — Dollar General here said last week it plans to expand its operations into New Hampshire, Connecticut and Nevada this year and to use the Nevada expansion as a staging ground to enter California. The West Coast is a little more expensive to operate in than other areas of the country and requires a little bit higher gross margin to offset those operating costs, Rick Dreiling, chairman,

GOODLETTSVILLE, Tenn. — Dollar General [4] here said last week it plans to expand its operations into New Hampshire, Connecticut and Nevada this year and to use the Nevada expansion as a staging ground to enter California.

“The West Coast is a little more expensive to operate in than other areas of the country and requires a little bit higher gross margin to offset those operating costs,” Rick Dreiling, chairman, president and chief executive officer, said during a conference call with analysts. “We are formulating our strategy for Nevada now, [which is] coming together very nicely, and we plan on using that as a launching pad into California.”

During the call, Dreiling said the company plans to “revisit” its Dollar General Market concept this year to explore growth opportunities, “and we anticipate additional expansion in the second half of the year,” he noted.

The company operates 57 Dollar General Markets, which include perishables along with dry goods. Three stores were remodeled last year, he said, “[using] the science and art of category management, which has enabled us to do a much better job aligning the selection and the adjacencies and the flow of the store.

“The numbers we have experienced in the remodels have been very satisfying, and what we're doing now is stepping back and evaluating the future of that concept. We'll have more to say about it as the year unfolds.”

Dollar General plans a 2011 capital budget of $500 million to $600 million, of which approximately half will go to opening 625 new stores and 550 relocations or remodels and $90 million to building a new distribution center in Bessemer, Ala., which is scheduled to open next February.

For the fourth quarter, which ended Jan. 28, Dollar General said adjusted net income, including a favorable tax benefit of $6.8 million, rose 30% to $226 million, while sales rose 9.4% to $3.5 billion and same-store sales rose 3.8%.

For the year, adjusted net income rose 53% to $649 million, while sales climbed 10.5% to $13 billion, and comps increased 4.9%.