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Here's Why Dollar General Marching Ahead of the Industry

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With consumers in good shape courtesy of a sturdy labor market and rising income levels, the retail-discount industry has been benefiting. Further, the strategy to sell products at discounted prices has helped industry players expand their customer base. Moreover, the companies are enriching consumers’ shopping experience by offering differentiated product range in sync with their spending habits. Dollar General Corporation’s DG initiatives in these aspects are worth mentioning.

Notably, the company’s concerted efforts in these directions have led the shares of this Goodlettsville, TN-based company to outperform the industry. In the past three months, the Zacks Rank #2 (Buy) stock has gained 13.7% compared with the industry’s rally of 12.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s Take an Insight

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

Notably, same-store sales improved 4.6% in third-quarter fiscal 2019, following an increase of 4% and 3.8% in the preceding two quarters. Consumables, Seasonal, Apparel and Home categories favorably impacted the same. Management expects fiscal 2019 net sales growth in the low 8% range with same-store sales expected to increase in the mid-to-high 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 consolidating DG GO app into primary Dollar General app.

Management’s 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 bode well. As part of its non-consumable initiative, the company is now focusing on categories of home, domestics, housewares, party and occasion. The company has adopted a disciplined approach to store openings, expansion and refurbishment.

Wrapping Up

Clearly, in spite of a tough retail landscape, the company has been thriving, when many other traditional operators are finding it difficult to cope. Better pricing, private label offerings, effective inventory management, and merchandise initiatives have aided the company in carving out a niche in the retail space.

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