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GOODLETTSVILLE, Tenn. — After wrapping up its 2014 fiscal year with a superlative financial performance, Dollar General Corp. is revving up for accelerated growth in 2016 and beyond.
After wrapping up its 2014 fiscal year with a superlative financial performance, Dollar General Corp. is revving up for accelerated growth in 2016 and beyond.
The company is raising its targets for new square footage as it seeks to maintain and expand market share after Dollar Tree Inc. completes its acquisition of Family Dollar Stores Inc.
Dollar General finished fiscal 2014, which ended on January 30, on a strong note, as fourth quarter sales grew 9.9% to $4.94 billion, just short of the $4.95 billion projected by analysts, although same-store growth of 4.9% was in line with analysts’ average estimate. According to chairman and chief executive officer Rick Dreiling, it was the 28th consecutive quarter in which the retailer achieved increases in both customer traffic and average transaction.
Fourth quarter net income rose 10.3% to $355.4 million, or $1.17 per diluted share, just meeting analysts’ expectations.
Full-year sales rose 8% to $18.19 billion while net income rose 3.9% to $1.07 billion.
"In 2014 momentum built in our business as we moved through the year, marking our 25th year of consecutive same-store sales growth," Dreiling said. "We are pleased with our fourth quarter results, which reflect accelerating same-store sales, and we intend to capitalize on that momentum as we move into 2015."
During fiscal 2014, Dollar General opened 700 stores and closed 43, leaving it with 11,789 stores. The expansion represented a 6.3% increase in square footage. Another 915 stores were remodeled.
This year Dollar General is planning on opening about 730 stores, representing a 6% increase in square footage, while relocating or remodeling another 875. However, because its new stores perform remarkably well, achieving about 85% of the sales of an average store in their first year, and reaching payback within a year or a year and a half, management is confidently targeting 7% square footage growth, or about 900 new stores, in 2016. That would bring it very close to 13,000 stores by the end of 2016.
"Our real estate model is disciplined and focused on financial returns," chief operating officer Todd Vasos told analysts during a conference call. "We’ll continue to look at ways to do more projects as we move forward, but we’re committed to square footage growth in that 6% to 7% [range]."
Despite the continued growth of hard discount grocer Aldi Group and the expected entry of another German discount grocery chain, Lidl Group, the company is not prepared to roll out its own discount grocery format, the Dollar General Market, although the issues may be more operational in nature than otherwise. "Dollar General Market is very much still in the testing stage for us,” said Dreiling. “I’ve grown up selling produce and meat, but teaching somebody to sell produce and meat are two entirely different things, and we continue to work on that concept."
Additionally, Dreiling reminded an analyst that Dollar General represents convenience shopping trips, not destination trips. And since the highly productive 7,500-square-foot general merchandise prototype generates sales of about $223 per square foot, it represents the chain’s best weapon at this point.
Earlier this month the chain entered three new states, Maine, Rhode Island and Oregon, with two new stores in each. With the exception of those states, which will see more openings, the expansion for 2015 and 2016 will be distributed evenly across the United States.
In terms of types of markets, Vasos noted that as the company continues to grow beyond 2016, more and more stores will be opened in suburban and urban locations. To tap into those varied opportunities, the company is developing store footprints of varying size.
