Dollar General to slow new store openings amid softening sales

Dollar General reported on Thursday that it is slowing its pace of new store openings amid rising shrink and slowing sales, even in food and beverages, during its third quarter.

For the quarter ended Nov. 3, Dollar General said same-store sales declined 1.3% and operating profit decreased 41.1% to $433.5 million. Net sales increased 2.4% to $9.7 billion. Net income decreased $47.5 to $276.2 million during the third quarter compared to the same period a year ago.

The same-store sales decline was driven by a decrease in average transaction amount, partially offset by a traffic boost. Dollar General is seeing a “significant headwind” from inventory shrink. Same-store sales dropped in each of the home, seasonal, apparel and consumable categories, the retailer said.

CEO Todd Vasos, who returned to the struggling discounter in October after a brief retirement, said he is “not satisfied” with Q3’s financial results, though he is pleased to see an uptick in traffic as well as market share gains in both dollars and units.

“Over the last several weeks, we have spent significant time reviewing all areas of the business, and we have identified key opportunities for improvement both in the near term and over the longer term,” Vasos said in a statement. “Moving forward, our entire team is laser focused and moving with urgency to take the actions we have identified to drive operational excellence for our customers and employees … We continue to believe our model is relevant in all economic cycles, and we are working diligently to further enhance our unique combination of value and convenience.”

Dollar General, which typically opens about 1,000 new stores per year, said it plans to debut about 800 locations in fiscal 2024 as part of 2,385 real estate projects. The Goodlettsvile, Tennessee-based retailer said it is also planning to undertake 1,500 store remodels and 85 relocations. Included in those new stores are about 15 Mi Super Dollar General openings in Mexico. The retailer opened its first store in the country in March.

“This is a modest slow down compared to the number of projects in recent years, which we believe is prudent in this environment,” Vasos said.

Dollar General did not offer a financial prediction for next year. For the remainder of fiscal 2023, though, it said it continues to expect same-store sales to fall about 1% or remain flat, with net sales growth between 1.5% to 2.5%.

The retailer said it expects to complete 3,110 real estate projects in the U.S., including 990 store openings, 2,000 remodels and 120 store relocations.

Dollar General currently operates 19,726 Dollar General, DG Market, DGX and pOpshelf stores in the U.S. and Mi Super Dollar General stores in Mexico.