Dollar General Plans 600 New Stores

Published on February 05, 2010 | Comments: 0
Dollar store retailer Dollar General intends to open 600 new stores in the next 12 months, creating as many as 5,000 jobs. During 2009, Dollar General opened 450 new stores and hired 4,000 new employees. Dollar General has not specified where it will open new stores, but says it will expand in suburban, rural and urban communities. The retailer, which currently operates more than 8,800 stores in 35 states and has about 78,000 employees, plans to add jobs throughout the chain. Dollar General has previously indicated it thinks its current expansion pace is sustainable for the foreseeable future.

Dollar General IPO Supports Growth

In November 2009, the formerly privately-held Dollar General released 34.1 million shares of stock an initial public offering (IPO). The IPO generated $716 million in gross primary and secondary proceeds. Dollar General sold 10% of itself to the public, with 33% of the 34.1 million shares coming from private equity holders. These funds, approximately $236 million, will not go to the company. Dollar General trades as DG on the New York Stock Exchange (NYSE). One of the primary reasons Dollar General went public was to raise capital for growth. In a prospectus filed with the Securities and Exchange Commission (SEC) on September 25, 2009, Dollar General said it has as many as 12,000 opportunities to open new stores, mostly in the 35 states where it already operates.

Dollar General Outlines Growth Strategy

When it launched its IPO, Dollar General outlined a growth strategy that included the following points:
  • Increased sales based on product mix, value proposition, space utilization, in-stock positions, adjusted store hours, and a store relocation/remodeling initiative.
  • Expanding operating profit margins resulting from improved merchandising line review processes, direct sourcing, increased private brand penetration from 17% in 2007 to 21% in the first half of 2009, and shrink and cost reduction programs.
  • Expanding the store base, aided by improved real estate and construction costs as well as the factors mentioned above.

Dollar General Has Strong Q3

Dollar General is planning aggressive expansion as it produces some impressive financial results. In its most recent fiscal quarter, Q3 2009, Dollar General reported $75.6 million of net income, compared to a net loss of $7.3 million during Q3 2008. Quarterly net sales rose 12.7%, from $2.6 billion to $2.93 billion. Same-store sales grew 9.2%, which Dollar General attributed to customer traffic and average transaction amount improvements. On a cash basis, operating profit grew 108%, from $103.7 million to $216.2 million.

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