Dollar General Profit Rises on Higher Sales
August 27 2015 - 2:09PM
Dow Jones News
By Paul Ziobro
Dollar General Corp.'s second-quarter profit rose 12.3% on
higher sales across all categories as the discounter's low prices
continue to attract more shoppers looking for quick shopping
trips.
The Goodlettsville, Tenn.-based retailer's sales rose 7.9% to
$5.1 billion, helped by hundreds of more stores and a 2.8% sales
increase at existing locations. All categories posted growth, with
the largest increases in area such as candy and snacks, tobacco
products, perishables and seasonal items.
Six years after the Great Recession, Dollar General still finds
itself picking up more customers drawn to lower prices for smaller
sized items that are sold closer to their homes. Dollar General is
continuing adding more items selling for $1 and $5, and says that
half of shoppers are putting at least one $1 item into their
shopping baskets on each trip.
Dollar General Chief Executive Todd Vasos, who replaced longtime
CEO Rick Dreiling in June, said the chain's core of low-income
shoppers is feeling a little better now, bolstered by an improving
job market and lower gas prices. But those shoppers are still
aren't spending more freely.
"It takes a little bit more time for her to let go of the purse
strings a little bit more," Mr. Vasos said on Thursday's earnings
call.
Still, Dollar General is experimenting with a new model in which
it spends more on wages to better stock shelves while also reducing
travel for some district managers so they can have more time with
store managers. Early results of the test are promising and Dollar
General plans to roll out the new labor model to about a third of
the chain's more than 12,000 stores by the end of the fiscal year,
which ends in January.
The investments come as Wal-Mart Stores Inc. and Target Corp.
both have put a priority on improving in-stock levels at their
stores, and are investing more on higher wages. Meanwhile, Dollar
General may also see more competition in the dollar store space as
two of its rivals, Dollar Tree Inc. and Family Dollar Stores Inc.,
have merged, creating a more formidable competitor.
Overall, Dollar General posted a profit of $282.3 million, up
from $251.3 million a year earlier. Gross margin rose to 31.2% from
30.8% a year earlier amid higher inventory markups and lower
transportation costs.
Dollar General backed its financial forecasts for the year,
though said it now expects same-store sales growth to be closer to
the lower end of its range of 3% to 3.5%. Shares fell 3.6% in
recent trading to $73.94, trimming year-to-date gains to just
4.6%.
Chelsey Dulaney contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 27, 2015 13:54 ET (17:54 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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