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Sturdy Comps, Better Pricing to Propel Dollar General's Sales

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Dollar General Corporation (DG - Free Report) is committed toward ramping up investments in the wake of rising competition from the likes of Dollar Tree (DLTR - Free Report) , Costco (COST - Free Report) and Ross Stores (ROST - Free Report) . The company’s everyday low-price model is anticipated to continue to drive traffic despite the rising popularity of online retailers. We believe that store expansion initiatives and continued restructuring, as evidenced from steady store openings and the improvement of distribution centers, respectively, should keep driving higher revenues.

This Tennessee-based company’s commitment to better pricing, private label offerings, effective inventory management, and merchandise and operational initiatives has aided it in carving out a niche in the retail space. This is quite evident from Dollar General’s impressive comparable-store sales growth story.

Fiscal 2017 marked the 28th consecutive year of comparable-store sales growth for the company. The trend was maintained in the first and second quarter of fiscal 2018 with comps rising 2.1% and 3.7%, respectively, on increased transactions. Consumables, Seasonal and Apparel categories provided a boost to the comparable-store sales. Management now expects comparable-store sales increase in mid-to-high two percent range during fiscal 2018.

In order to increase traffic, the company has been focusing on both consumables and discretionary categories, and items ranging between $1 and $5. In fact, the roll out of tobacco has been a key factor in pulling foot fall. Additionally, the company is expanding its cooler facilities to enhance the sale of perishable items and is rolling out DG digital coupon program and DG Go app.

The company has adopted a disciplined approach to store openings, expansion and refurbishment. It plans to open 900 stores, remodel 1,000 and relocate approximately 100 in fiscal 2018. In the second quarter of fiscal 2018, Dollar General opened 241 new stores, remodeled 322 stores and relocated 31 stores. Of the remodeled stores, 121 were remodeled in the Dollar General Traditional Plus format. Moreover, the company is focusing on smaller format stores that require less capital expenditure and help cope with space constraint.

Clearly, in spite of a tough retail landscape, Dollar General has been thriving, when many other traditional operators are finding it difficult to cope.

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