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Dollar General's Better Pricing, Sturdy Comps to Propel 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 drive traffic despite the rising popularity of online retailers. We believe that store expansion initiatives and continued restructuring as evident from steady store openings, and the improvement of distribution centers will continue to drive revenues.

This Tennessee-based company’s commitment toward 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.

The company’s impressive same-store sales growth story is testament to the same. Fiscal 2018 marked the 29th consecutive year of same-store sales growth for the company. The trend persisted in the second quarter of fiscal 2019 as well, wherein same-store sales improved 4% year over year. This follows an increase of 3.8% in the preceding quarter. Management now expects net sales growth of 8%, while same-store sales are anticipated to increase in the low-to-mid 3% range.

In order to increase traffic, Dollar General is focusing on both consumables and non-consumables categories. The company is also offering better-for-you products at affordable prices. Additionally, the company is expanding cooler facilities to enhance the sale of perishable items and rolling out DG digital coupon program and DG Go app. Management introduced two transformational strategic initiatives — DG Fresh, designed to enable self-distribution of fresh and frozen products, and Fast Track, an in-store labor productivity and customer convenience initiative.

The company has adopted a disciplined approach to store openings, expansion and refurbishment. It plans to open about 975 new stores, remodel 1,000 stores and relocate 100 stores in fiscal 2019. Of the planned remodeling, the company plans to convert approximately 500 stores to the Dollar General traditional (DGTP) plus format. During the first half, the company opened 489 new stores, remodeled 653 stores (including 254 DGTP remodels), and remodeled and relocated 46 stores.

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

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