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DG Markets Sets 2012 Expansion

GOODLETTSVILLE, Tenn. — Dollar General Corp. here said last week it plans to open 40 new Dollar General Markets in 2012 based on the strong performance at the 25 Dollar General Markets it opened this year — the first new DG Markets it opened since 2007.

“We believe we can serve our customers even better with our fresh meat, produce and expanded cooler assortment,” Rick Dreiling, chairman, president and chief executive officer, told analysts last week.

Results at the five DG Markets it opened earlier this year in Las Vegas — its first stores in Nevada — have been “very encouraging,” he noted. The company operates a total of 62 Dollar General Markets.

David M. Tehle, executive vice president and chief financial officer, said Dollar General Markets generate average sales of $4 million to $5 million per unit, compared with $1.4 million at the company’s core stores, “and we have several locations that produced over $9 million in sales last year.

“Because the product mix includes more consumables, the margin percentage is somewhat lower, but the raw dollars from the higher volume are very impressive.”

According to Tehle, the company believes the Dollar General Market format is well positioned for both rural and metro areas. “We think there are opportunities in smaller markets — what we would call food deserts — to add tremendous volume and a lot of market share with DG Markets. So that’s really the way we’re playing with the format.”

Dreiling said the company is pleased with the addition of beer and wine at 3,500 stores. “When beer is in the basket, the stores have a 1% additional comp.”

For the third quarter, which ended Oct. 28, net income rose 33.6% to $171 million, while sales increased 11.5% to $3.6 billion and comps increased 6.3%.

According to Dreiling, consumables are growing at a faster pace than non-consumables, led by salty snacks, carbonated beverages, coffee and milk, along with pet supplies and health care.

To boost consumables sales even more, Dollar General plans to expand its cooler presence in core stores, Dreiling said. “We increased the number of coolers in 500 stores this year, still leaving approximately two-thirds of our stores with eight coolers or fewer. But fresh and refrigerated foods helped us drive customer traffic and increase basket size.

“New stores open with 14 to 16 coolers, and we are installing four additional cooler doors in approximately 1,200 existing locations to better serve our time-conscious customer.”

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